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1. Delaware is business-owner friendly.
2. It’s favorable to buy shares as investors.
3. You’ll save a ton of money on taxes.
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Piggybacking on this. If I'm a non-resident alien looking to incorporate the cheapest US-based company so that I can open a business bank account for credit card churning, would a Colorado LLC still be the the best choice for me?
You’ll need an SSN to open most credit cards, it’s very difficult to get a credit card without residency. The business banks that specifically cater to overseas founders (like Mercury) make banking easy but that doesn’t extend to churning credit cards. Edit: put simply, it’s very unlikely that opening an LLC will help you in obtaining credit cards as a non-resident.
These visas don’t authorize you to work for a company other than the one officially sponsoring the visa, but you are allowed to own your own business. Perhaps that is the motivation for wanting to open an LLC, but I’m not sure what an LLC gets you in this situation that simply declaring yourself a sole proprietor doesn’t.
Earlier quoted context omitted.
I looked into this a while back and came to the conclusion I maybe/probably didn't need to do it upfront but it was cheap enough that it was probably worth going ahead and doing. As it turns out, my timeframes for doing anything with the business slid out but a don't really regret having put the LLC un place.
YAGNI…without customers and forming an LLC can happen as contracts are being written…but if you think your first potential customer is likely to sue before there’s a contract, walk away and find a different first customer. It seems like what Paul Graham called “playing house.” Forming an LLC feels like progress but it’s not. http://www.paulgraham.com/before.html What I mean is as I have been thinking about my opinion…
It probably doesn't really matter for small-time stuff. It may also be worth spending a small amount of money in advance to put some structure in place. I agree that involving lawyers and thousands of dollars in advance a lot of the time is probably not worth it in many/most cases.
If you choose Delaware, make sure to look at the costs in year 2 and beyond. I did a Delaware C Corp as a bootstrapper. The first year cost $1,000 in total incorporating cost and the second year was going to be several hundred just to stay in good standing. This is compared to an LLC costing $100 one time in South Carolina. If you’re bootstrapping, it’s worth thinking about the costs.
More to OP's question, I created a similar corporate entity for a similar low to no revenue business venture — and absolutely would not recommend doing so without very specific purpose.
As smart as you might be, the tax/codes/law/system are designed to need/require expert navigation of this intentionally-complex legal system we choose to allow.
It probably matters most what your aims are for forming the company. Since you are proposing it will have low to no revenue, what is driving you to (think about) incorporating?
The real reason to incorporate surely is the limit on liability and the ability to treat assets and actions of the project as distinct from your own. Accidentally infringe a copyright it is probably 1000x harder to cause the owner of a company grief tan it would be to devistate the life of a sole-trader.
My basic take has been that incorporation costs are a rounding error, and why would I do anything more exotic than Delaware?
But if you're doing an open source project that isn't going to take any money in and is unlikely to ever go out for funding, costs and admin headaches might dominate the decision.
Once you have more than one client willing to spend $x,xxx for your services, you’ll know where to best incorporate and the best structure for you.
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If your corporation will be deemed to operate in the state you live in, which it might, then it'll need to register there as well as its home state. The least hassle path is often to make the corporate home the same as your home, then you don't have to register in two different states, and you don't need to pay a registered agent, because you can do that, etc. It's certainly a different question if you're likely to g…
I agree with the first paragraph and strongly disagree with the second. If you are a US citizen and live in the US, for any pass-through entity, you will likely be taxed and need to register as a foreign entity in your home state. Probably easiest to just incorporate where you reside, unless you're looking to raise capital, in which case you should just go straight to DE. Conversion costs and/or re-incorporation comp…
In some cases, depending on the originating state and business structure, there may not even be a way to accomplish that without selling your old business to your new business. Even if that’s “just on paper”, it becomes an entirely different (and sometimes much more costly) beast.
Earlier quoted context omitted.
You’ll need an SSN to open most credit cards, it’s very difficult to get a credit card without residency. The business banks that specifically cater to overseas founders (like Mercury) make banking easy but that doesn’t extend to churning credit cards. Edit: put simply, it’s very unlikely that opening an LLC will help you in obtaining credit cards as a non-resident.
I assume ”non-resident” in this context means not a permanent resident, but still a SSN-holding resident otherwise. For example a TN or H1-B visa. These visas don’t authorize you to work for a company other than the one officially sponsoring the visa, but you are allowed to own your own business. Perhaps that is the motivation for wanting to open an LLC, but I’m not sure what an LLC gets you in this situation that si…