What is the Best Jurisdiction for an LLC in the USA?
I get this question a lot:
What is the best jurisdiction for forming a company in the USA? (or perhaps “Is [BLANK STATE] the best jurisdiction to set up an LLC?”).
I find this question very difficult to answer, but I can start out in the negative: “What are the worst jurisdictions for forming a company in the USA?”
This is easy.
The worst jurisdictions in the USA: California, New York and Illinois are the worst jurisdictions. Just don’t even think about it unless you live in those states and are doing business in those states. There are some other really bad jurisdictions, but none come close to the negative aspect of these three jurisdictions.
What about the “famous” states like Delaware, Nevada, and Wyoming? I ‘used’ to be a big fan of Delaware (more on this later) for the obvious fact it has the best corporate case law as well as statutory law, and provides outstanding asset protection benefits. I have never liked Nevada or Wyoming for a philosophical reason and for a practical reason.
- Philosophical: unless you do business in those jurisdictions, having a company from either state actually raises alarms and attracts negative attention. Both Nevada and Wyoming have a very negative reputation regarding their use in regards to tax fraud and money laundering. This reputation may be untrue and baseless, but why expose yourself to such negative perception when there are equally good if not better options elsewhere?
- Practical: Neither Nevada or Wyoming have a broad deep base of legal decisions like Delaware. As such when an issue is raised that has never come up in a state court before, both look to their neighbors for possible legal precedent. In Nevada, the state courts almost always look to California — this should worry anyone who is even considering Nevada.
What about Delaware? As I said, it used to be my favorite state, but beginning in late 2015 Delaware became targeted by the Federal government as a ‘suspect jurisdiction’ being used by unsavory elements. Banks outside of the state were discouraged from opening or maintaining bank accounts for Delaware companies. I personally had many of my clients’ accounts closed down because of this. At the same time it became much more difficult to open a bank account inside the state; Delaware banks were forced to enact increased scrutiny on existing and new clients far above the requirements of banks in other states. So sadly I stopped using Delaware companies, and I am in the process of closing down my registered agent business there.
What of the remaining states? I am sure there are many states that are very good, but I have decided to use Texas. Texas is still a relatively low tax and low regulation state; the vast majority of most companies do not pay any Texas franchise tax and Texas requires only limited disclosure of company information. Texas banks are good and easy to work with. Asset protection laws are top-notch in Texas. Texas itself is a large state with a huge number of existing companies. This means that your company does not stand out as unusual. Also, I am a Texas attorney with a Texas law license, and I have a residence in Texas and many business contacts that make things easy to deal with.
So that is my answer: Texas.
For more information on this and other topics see: http://www.bank-in-america.com/