Starting a company in a State different than my own?

July 12, 2007 9:51 AM

Starting a company (LLC) in a State different than my own?

I have just another one of those websites that has members that can communicate with one another, post stuff, etc., so I assume it's a good idea to register officially as an LLC to protect myself a bit legally.

I was looking into local rates and we're talking $500 in Illinois, but while I was browsing, I noticed that it's possible to register in another state. Some sites suggested Delaware because of it's cheap registration AND because Delaware has good corporate law. Because it's a web-based endeavor, and because there's no "primary place of business," this could be a good idea, right?

Is there any reason not to form a business in another State?

posted by stance to law & government (4 comments total)

At least in NV (and after a quick search it looks like DE too), you are required to appoint someone who is located within the state as your "resident agent", who can be served with process should you get sued.

Now, if you are already a resident in the state, you can appoint yourself. But if you're out of state, you'll need to pay someone a nominal yearly fee to do this for you.

That's not a reason not to incorporate in another state, but it is a kind of hidden cost you should be aware of if money is an issue.
posted by falconred at 10:06 AM on July 12, 2007

You really, really need to have a lawyer make this determination. Illinois, if I recall correctly, considers just about anything as "doing business" for the purposes of qualification/registration. You wouldn't want to find out, five years from now, that you've technically been "doing business" because you could owe back taxes. You could form the LLC in Delaware, but you may still need to register it as a foreign LLC in Illinois. I don't know for sure; I'm not an attorney. I strongly suggest you consult with one.
posted by MrFongGoesToLunch at 10:08 AM on July 12, 2007

See previous.

The primary place of business is your house. You'll be operating a multi-state corporation that does business in both Delaware and your state, you'll have to apportion income between the states and file returns in both, etc. etc.

If you incorporate in Delaware, you're going to end up filing documents in multiple states for no tangible benefit. Incorporation is a state matter, it is much to your benefit to incorporate in the state in which you reside, and the alleged benefits for Delaware incorporation may exist for IBM but do not exist for you, while the detriments exist for both IBM and you.
posted by jellicle at 10:32 AM on July 12, 2007

Ah, thanks for the advice and link. My MetaSearching didn't work out and I missed that one.
posted by stance at 10:50 AM on July 12, 2007