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A general PSA for those finding this later on: Unless you expect to close a round of VC funding within 3-5 months (i.e. you already have investors lined up) you

A general PSA for those finding this later on: Unless you expect to close a round of VC funding within 3-5 months (i.e. you already have investors lined up) you should generally save yourself the hassle and form a Delaware LLC instead. The process of converting a DE LLC to a DE C Corp is far easier than the paperwork involved in properly running a DE C Corp when you're bootstrapping. Remember that as a solo founder without investors, you are effectively being double taxed with a C-corp because it pays taxes on its income and then you pay taxes on your income.

gamblor956 4y ago
As a tax lawyer, I am compelled to point out that Delaware is probably the worst place to organize an LLC. Delaware has a great volume of corporate tax law but most of it does not apply to the LLC form, which negates the only reason to go with Delaware versus another state. If you are going the LLC route, either organize it in Wyoming or else in the state where you will actually be doing business. Wyoming LLCs have the greatest flexibility in terms of organizational requirements and capital structure (and the lowest tax/compliance costs for keeping it alive). But no matter where you choose to organize your LLC you will need to register for business and file tax returns in the state in/from which you physically do business. You can't avoid that by organizing in another state or country; state of organization only determines what set of law applies to addressing conflicts between different owners in an LLC. If it's just going to be you, then your home state is almost always the best place to organize your LLC. And if you are a solo founder, and you intend to run a lifestyle business (meaning, enough to replace your day job), the S-Corp is a better option than an LLC. It's not as organizationally flexible as the LLC but it's easier to understand, easier to maintain, usually much cheaper to maintain, and there are some tax benefits you can get that you don't get with an LLC.
- giantg2 4y ago
  "Wyoming LLCs have the greatest flexibility in terms of organizational requirements and capital structure (and the lowest tax/compliance costs for keeping it alive)." PA has been extremely easy and is actually cheaper (vs a WY LLC in PA given youd still need to pay PA income taxes) since the report is only due every 10 years with a renewal of $70 vs $50 every year. So it's definitely worth looking at your home/operating state prior to defaulting to WY.
- itake 4y ago
  +1. I always just organize in the state I reside, because managing multiple LLC registrations (LLC state and the franchise state) is too much work for an almost non-existent business.
- HWR_14 4y ago
  I thought a Nevada LLC is (was?) the most popular choice. The reasons I heard were anonymity of members and low fees. I know Wyoming is popular for crypto projects, but was curious if someone had looked at the difference between the two? Or maybe I'm thinking of a Nevada S-Corp. gamblor, you don't have a "for idiots" blog with a quick comparison do you?
encoderer 4y ago
The counterpoint to this is QSBS. Also, the tax situation is complicated. The tax delta between the two is not that wide as long you run break even, though it does still favor the llc, until exit.

gamblor956 4y ago

As a tax lawyer, I am compelled to point out that Delaware is probably the worst place to organize an LLC. Delaware has a great volume of corporate tax law but most of it does not apply to the LLC form, which negates the only reason to go with Delaware versus another state. If you are going the LLC route, either organize it in Wyoming or else in the state where you will actually be doing business. Wyoming LLCs have the greatest flexibility in terms of organizational requirements and capital structure (and the lowest tax/compliance costs for keeping it alive). But no matter where you choose to organize your LLC you will need to register for business and file tax returns in the state in/from which you physically do business. You can't avoid that by organizing in another state or country; state of organization only determines what set of law applies to addressing conflicts between different owners in an LLC. If it's just going to be you, then your home state is almost always the best place to organize your LLC. And if you are a solo founder, and you intend to run a lifestyle business (meaning, enough to replace your day job), the S-Corp is a better option than an LLC. It's not as organizationally flexible as the LLC but it's easier to understand, easier to maintain, usually much cheaper to maintain, and there are some tax benefits you can get that you don't get with an LLC.

giantg2 4y ago
"Wyoming LLCs have the greatest flexibility in terms of organizational requirements and capital structure (and the lowest tax/compliance costs for keeping it alive)." PA has been extremely easy and is actually cheaper (vs a WY LLC in PA given youd still need to pay PA income taxes) since the report is only due every 10 years with a renewal of $70 vs $50 every year. So it's definitely worth looking at your home/operating state prior to defaulting to WY.
itake 4y ago
+1. I always just organize in the state I reside, because managing multiple LLC registrations (LLC state and the franchise state) is too much work for an almost non-existent business.
HWR_14 4y ago
I thought a Nevada LLC is (was?) the most popular choice. The reasons I heard were anonymity of members and low fees. I know Wyoming is popular for crypto projects, but was curious if someone had looked at the difference between the two? Or maybe I'm thinking of a Nevada S-Corp. gamblor, you don't have a "for idiots" blog with a quick comparison do you?

encoderer 4y ago

The counterpoint to this is QSBS. Also, the tax situation is complicated. The tax delta between the two is not that wide as long you run break even, though it does still favor the llc, until exit.