Living & Business based in CA - Which State is best for LLC?

Question

Hi all,

Here is my information pertaining to my question of which state is the best to start an LLC in:

• The business will be selling dried fruit.
• The location of preparation, packaging and shipping of the product is in California (at least initially, run from out of my house).
• I will be the only employee (most likely for several years anyway).
• Business will be conducted online only, selling to anyone living in the U.S., Canada or Mexico (initially limited to these county's due to shipping scales of economy, to be expanded elsewhere if I can get shipping costs down).

I ask this question for the purposes of:

• Paying the lowest LLC start up and recurring costs related to the LLC.
• Having the least amount of paperwork required to start, and maintain the LLC.
• Having the most comprehensive protection for such a business (& of course, for me the individual owner of the LLC).

Aside from the LLC, I will get a CA class a cottage food permit and of course pay CA taxes. This question isn't regarding trying to get out of paying those.

With that in mind, would filling the LLC in Wyoming, Delaware or Nevada be more advantageous to filing in California?

Eamonn McElroy · Answer

Regardless of which state you organize the LLC in, if you're doing business in California (which based on the fact pattern laid out above you would be), you'd be required to register with the California Secretary of State as a foreign LLC and pay annual filing fees. So now you're paying annual business filing fees in at least two states and have two annual reports.

Unless there is a legal reason for you to organize the LLC in another state, based on your facts and circumstances its best to organize the LLC in California from an administrative and compliance perspective, as you're not going to be able to avoid the CA $800 annual LLC tax, nor the CA Form 568 obligation either way.

Katie L. · Answer

@Gary Theisen

I second what @Eamonn McElroy said that you will be required to file in CA and pay the $800 minimum tax to California no matter what state you originally file in (since you are doing business in CA), so it may make the most sense to just create a CA LLC, especially since you seem to be fee-conscious. You also will want to look into sales and use tax requirements for each of the states in which you are selling and find a way to track sales into each state based on the new Supreme Court decision in Wayfair v. South Dakota that came out this summer. You also may want to look into an S-corp instead of an LLC. And business licenses. These are things you will want to consult with a professional about. The free forums are great for idea gathering (and yes, this website is supposed to be solely for real estate), but the forum is no replacement for a good professional who knows the full scope of your situation.

*This post does not create an attorney-client nor a CPA-client relationship. It is provided for informational purposes only and readers should seek professional advice.

Gary Theisen · Answer

LOL, i didn't realized it was 100% about real estate only. I saw a similar question about LLC's, and several of the responses wondered what kind of business the person was running, which wasn't answered, so I thought it was probably about something other than real estate:

https://www.biggerpockets.com/forums/51/topics/238263-living-in-california-should-i-form-my-llc-in-wyoming

Matt K. · Answer

You realize this is a site for real estate investment, not how to set up LLC for small business selling dried fruits....

With that said, no matter where you have your LLC it's going to be 800 min payment to the FTB in CA.

Living & Business based in CA - Which State is best for LLC?

Living & Business based in CA - Which State is best for LLC?

Most Popular Reply

5 Replies