Whether you’re an independent consultant, part of an unofficial network, or an owner of a small firm, you probably already thought of bringing your business to the next level. Forming an LLC is a wise move and will give you the leverage of personal asset protection.
Through this post, our team will run a series of evaluations and help you determine the best state to form LLC for consulting businesses.
Best States to Form an LLC for Your Consulting Business
You might think that your home state is the best choice to incorporate your business, but every state offers different perks that can be advantageous to LLCs. We advise weighing on these options before proceeding with your registration.
Delaware is one of the most popular states when it comes to incorporating any type of business. Besides having over 1 million registered business entities, 66% of companies in Fortune 500 list also consider this state as their legal home.
As a new consulting business, our team is sure that you’ll find absolute delight with Delaware’s simplified filing process which allows companies to set up operations without any delays. Aside from their low-cost filing fees and franchise taxes, this state also doesn’t put tariffs on the out-of-state income, even for foreign LLCs.
In the case of disputes which happens quite often when running a business, you can count on their Chancery Court, specifically designed to handle business-related issues. Not only does it resolve disputes faster, but this court also has highly-experienced judges.
Budding companies tend to have many responsibilities on their plates, making it hard for them to comply with certain legal obligations. In terms of dealing with minimal requirements, Wyoming is one of the best states to form LLC for consulting businesses.
This business-friendly state allows owners to remain anonymous through a lifetime proxy. This policy means that you can appoint a representative to manage your shares or stock in your stead without the need to reveal your identity.
Wyoming also won’t charge you for corporate income, personal income, or franchise taxes. On top of that, this state is known for its low sales tax rates, so we highly recommend incorporating in this state for newly-built companies with limited operations.
Similar to the state of Wyoming, your consulting business won’t need to pay taxes for personal income, corporate income, or franchise, should you decide to register in Nevada.
Unlike other states, Nevada does not require LLCs under its jurisdiction to curate an operating agreement or arrange annual meetings. With the absence of these requirements, most companies can focus more on running their business.
LLC owners may also remain anonymous while operating in this state as Nevada doesn’t have an information-sharing agreement with the IRS. You can choose not to reveal your identity even in public registration filings.
4. South Dakota
Although not as popular as Delaware when it comes to business incorporation, South Dakota actually has great programs specifically designed for new companies. They offer several financial schemes to help you sustain operations.
Through this state, businesses may also take advantage of certain business incentives from the Reinvestment Payment Program. Should you intend to expand or relocate your operations within South Dakota, they will agree to offset upfront costs and expenses.
Aside from its reasonably low registration fees, forming in this state gives you the leverage of asset protection strategies through Dynasty Trusts and Domestic Asset Protection Trusts. South Dakota also limits what personal creditors can get out of your business.
Like most of the states listed in this article, Alaska offers LLC owners a variety of tax credits depending on the nature of their operations. They also offer different loan programs for qualified start-ups to help their businesses flourish in the long run.
The state also doesn’t levy individual income taxes, similar to the policy implemented in states like Wyoming, Washington, Nevada, Florida, Texas, and South Dakota. Aside from that, Alaska is known for its friendlier regulatory environment that gives small businesses an equal voice.
If you’re an LLC with two or more members, you’ll be treated under Partnerships, which means you’re not required to file a state income tax return . Although Alaska doesn’t specifically impose sales and use tax, the policy depends on cities, municipalities, and boroughs.
Important Factors to Consider
As a new business owner, you must always consider the registration requirements when choosing the best state to form LLC for consulting companies. Putting aside the benefits each state can offer, they also vary on specific demands like operating agreements and annual meetings.
And since you’re transforming into a more formal business entity, our team suggests keeping tabs on required expenses aside from taxes such as state filing fees and reporting fees. Forming an LLC will also strengthen client trust and allow you to expand your market reach.
It’s also crucial to consider organizational complications because an LLC may cease existence if one of the members drops out voluntarily from the business entity. Discuss the management structure thoroughly to avoid such issues in the middle of your operations.
Should you find difficulties in legal filings and tracking all the compliances in the different states mentioned above, there are many incorporation services and registered agent services that can assist you along the way. These providers can do all the legwork for your company accurately and efficiently so that you can focus on managing your operations.
Our Top Pick For a State to Form an LLC for a Consulting Business: Delaware
As a company thriving to establish your brand in an industry full of competitors, you’ll face certain disputes and issues like any other business out there. With that being said, our team of experts was unanimously convinced that Delaware is the best state to form LLC for consulting companies.
No other state has introduced a system like the Chancery Court, designed with the betterment of business owners in mind. Not only does it take care of issues faster, but it also showcased great integrity with highly experienced judges on board.