Forming your LLC in another state

Sam writes software for clients from a condo in San Diego. A friend tells him to form his LLC in Wyoming, because it only costs $100 there. That part checks out. What the friend left out is that California will still want its money, and Sam will end up filing in two states for as long as the LLC exists.

Where the LLC is formed vs where it does business

Form in one state, work in another, and the second state calls you a "foreign" LLC, which here just means out of state. California's Secretary of State says an out-of-state LLC has to register before transacting intrastate business there, which it describes as "repeated and successive transactions of its business in this state." Sam doing client work from his living room every week is pretty much exactly that.

Taxes are a separate question, and California's tax people cast a wider net than its Secretary of State. The Franchise Tax Board wants $800 a year from every LLC "doing business or organized in California." Its doing business page lists what counts: being commercially domiciled in the state is enough on its own, and so is crossing a sales, property or payroll line (for 2025, $757,070 of California sales, or $75,707 of property or of payroll). Sam's LLC is run day to day from his condo in San Diego. Whatever Wyoming's records say, that looks a lot like a California domicile.

What each state charges

Here's the formation-state side, from each Secretary of State's own fee schedule:

A few notes on those. Delaware's Division of Corporations lists the LLC tax at $400, flat and not prorated, with no annual report and a $200 penalty plus 1.5% a month if you pay late. Wyoming's yearly charge is $60 or two-tenths of a mill per dollar of assets located in Wyoming, whichever is more, so for Sam it's $60. Nevada's numbers come from its formation and annual list instructions.

Then there's the registered agent. Delaware's LLC Act (section 18-104) makes every Delaware LLC keep a registered office and agent inside Delaware, and Sam doesn't know anyone in Dover. So he'd hire a company to do it, at whatever price it charges, every year. No state fee schedule covers that, which is why it's left out of the totals below.

Sam's two-state bill

Registering back home means Form LLC-5 with the California Secretary of State, a $70 filing, plus a certificate of good standing from wherever the LLC was formed. Wyoming gives those out online at no charge. Delaware charges $50. California then wants a $20 Statement of Information within 90 days and every two years after.

First-year cost for each route, counting Delaware's $400 tax for year one (paid the next June) and leaving out agent fees:

Year two looks similar. The California LLC pays $800. The Wyoming version pays $860 plus a registered agent. The Delaware version pays $1,200 plus an agent, every year, for the same California business with the same California tax bill. And if Sam has a big year, say $300,000 of California income, the extra LLC fee of $900 lands on him no matter which route he took.

When another state does make sense

It makes sense when the business is actually there. If Sam moved to Cheyenne, a Wyoming LLC would just be his home-state LLC.

It can also work when the owner and the business aren't in any one state in a way that triggers registration, for example a business with no office, staff or regular in-state activity anywhere. Those cases are rarer than the ads suggest, and California's rules show how little it takes to count as doing business. Its Secretary of State won't tell you whether you must register, and suggests asking a lawyer.

For a one-person service business like Sam's, forming at home and skipping the second state is usually the cheaper call. The yearly totals are on the LLC cost by state page. Full fee lists live on the Delaware, Wyoming and Nevada pages, the franchise tax guide has the states that add entity taxes, and if you're ready to file, start with how to form an LLC.