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Forming An LLC: Making The Right Choice For Your Remote Business

April 18, 2023 | By Preethi Jathanna
Forming An LLC: Making The Right Choice For Your Remote Business
Around 36 million Americans are expected to be working remotely by 2025 – a 417% increase from pre-pandemic levels, Forbes reports. From an employer perspective, remote work generates cost savings and boosts productivity, while employees can benefit from improved work/life balance. If you’re starting a remote business, incorporation is an important step indicating your business has officially become a separate legal entity. Although there are a few different options to choose from, a limited liability company (LLC) is a particularly advantageous business structure for remote businesses – they can be formed in any state regardless of your location, with some states offering notable financial benefits. Why form an LLC? Personal liability protection is a key benefit of forming an LLC; this means your personal assets and business assets are kept separate. So, if your business ever has to default on a loan, goes bankrupt, or gets sued, for example, your personal belongings (like your home, car, and bank account) can’t be touched. LLCs are also popular for their flexible methods of taxation – something called pass-through taxation. Instead of paying corporate taxes, your profits are passed through to your personal income. As a result, savings are made thanks to the avoidance of double taxation. And, lastly, LLCs are also straightforward and relatively cost-effective to form – usually costing no more than $1,000 – although the exact cost and process depend on your chosen state.  How to incorporate: choose a business name First off, you’ll need to choose a name for your remote business. Above all, your business name must be easy to pronounce, memorable, and unique – ensuring your name is unique means you’ll avoid infringing on another business’ existing brand and trademark. So, search online business directories to see if a potential name’s already been taken. In fact, some states give business owners the opportunity to file a name reservation valid for around 60-120 days for a fee (the exact amount of time varies from state to state). The reservation temporarily protects your right to that specific name – no other business will be able to claim it for that period of time.   Choose a Registered Agent  Once you have your name, you’re ready to choose a registered agent for your LLC: a business or individual who accepts all official documents on behalf of your business. A registered agent essentially provides a reliable way for people (such as the government, law, or general public) to get in touch with you, and your registered agent information will be made public record. Although you can nominate yourself to act as your own registered agent, you can alternatively choose an online legal service or your company’s business attorney, for example. You’ll find using a legal service or attorney is a worthwhile investment; these professionals can take care of the paperwork for you, while you’re free to focus on growing your remote business.   Best states for LLC formation Although your remote business can operate from any location, you’ll need to form your LLC in a specific state. Usually, your home state is the most convenient, yet you needn’t limit yourself to this. Texas, for example, is a particularly attractive state for LLC formation. In addition to personal liability protection and pass-through taxation, a Texas LLC also offers the benefit of streamlined formalities: there’s no need to hold in-depth, recorded annual meetings, as there is with a corporation, for example. When it comes to choosing a Texas Registered Agent, you can expect to pay anywhere between $100-$300 yearly for most services. Using a registered agent service also means your address is kept private, and off the public record – an added bonus for anyone who values privacy. Alternatively, Delaware has long been known as one of the most business-friendly states in the country. As such, over 60% of Fortune 500 companies are incorporated there. Delaware offers low filing fees and franchise taxes in contrast to other states and also doesn’t impose taxes on out-of-state income. Moreover, Delaware is also home to the Chancery Court, which is reserved for business cases. This means business-related legal cases are resolved much faster in Delaware. Nevada is also another worthwhile option for LLC formation as it offers plenty of tax advantages. Specifically, Nevada doesn’t tax personal or corporate income, and you also don’t have to pay annual license fees or annual filing fees, either. You may also be attracted to the fact Nevada (along with Texas) doesn’t have any information-sharing arrangements in place with the IRS. Offering personal liability protection and tax benefits, an LLC can be the ideal legal structure for your remote business. By taking the time to choose the best state to form your LLC in, you can set your remote business up for the best chances of long-term success.  

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