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This topic has probably been beaten to death, but just want to double check with you guys.

I'm currently in NYC, although I do not plan on living here (my parents are here tho). I have a web business, where no physical goods are sold, and my virtual wares are sold to customers all over the world.

I need to operate as a business for privacy reasons and also prefer to have limited liability protection, so thus LLC.

I do not want to form it in NY because of the crazy $1000+ fees, along with the fact that I won't be living here. I might spend the next year in a foreign country or different state, etc.

So probably the best approach would be to form it in the cheapest US state (NV, DE, etc). Are there any issues with doing this?

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No, there are no issues. When you form the corp in DE, you pick a business there to serve as your "agent" (essentially someone who knows to get in contact with you). The "agent" will notify you about taxes and any mail you get, but besides the fee they charge you for being the agent, you should file all the taxes directly with DE (franchise tax is easy to file on the web) instead of going through the agent and paying a surcharge.

When your LLC files taxes, you'll do so in DE and then the LLC will issue you a federal and state K1. You'll file taxes where you reside and use the federal K1, but I think you might have to file DE state taxes (unsure about this part, feel free to edit or comment and I'll correct).

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  • Thanks, that clarifies a lot. Follow up question: would I need to open a bank account in DE as well?
    – James
    Jan 11, 2011 at 17:49
  • No. You can open a bank account anywhere. You'll need your certificate of incorporation and lots of ID.
    – Michael Pryor
    Jan 11, 2011 at 17:51
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This is an older question but I thought I'd give the correct response for anyone else that might look.

Yes there definitely could be issues. You can form in friendly states such as Delaware and Nevada without having a physical location in the state but you can't run a business from another state without having to 'qualify' to do business in that State.

To give a bit more clarification. Lets say you open a Delaware LLC. But you answer the phone when it rings on your New York phone and money comes into your New York bank account and your suppliers and vendors all use your New York address to send invoices and correspondence. Well you can pretty much count that you fall into the definition of doing business in New York and expected to pay New York taxes and qualify to do business in the state.

The solution would be to set up your business to truly 'operate' from the state you would rather be in.

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