If you form an LLC in your state of residence (also known as your “home state”), it is known as a Domestic LLC.
If you form an LLC outside of your home state, you register that out-of-state LLC as a Foreign LLC in your home state.
For example, if you live in Florida and form an LLC in Delaware, you must register that Delaware LLC in your home state (as a Foreign LLC) in order to do business in your state.
Delaware has the advantage, Wyoming has the advantage, etc. Here's what happens when you unknowingly form an LLC outside of your state based on hearsay;
- You now have 2 LLC companies (one in Delaware and the other in your home state).
- For 2 LLCs you incur 2 state filing costs
- You will incur a Registered Agent expense for business address purposes for your Delaware LLC
- You must submit annual reports (pay fees) to 2 separate places
- You pay your income tax in your home state
