The Best State To Start A Business: Wyoming
A new study directed by Venture Smarter, a small business advice company, is revealing the best and the worst states to open an LLC, (which is short for Limited Liability Corporation) and Wyoming tops the list.
The study was designed to study, index and gauge all of the 50 states, and rank each of them for how well they perform each of the six most important factors necessary for starting up an LLC. The total score was out of 100. Some of the factors that the states were tested for included LLC annual fees, filing fees, average agreement bid costs, advertising and publishing costs, tax climate index scores, and the number of small businesses per 100k people living in the state.
Wyoming is ranked number one with a score of 96.12 out of 100. It is the least expensive state to start an LLC, thanks to total startup costs being only $160.
Wyoming’s tax climate is also quite business-friendly, receiving a 78.33 out of 100. That makes it the highest score on the list. The annual LLC fee is $60 and the LLC filing fee is $100. Currently, there are approximately 12,340 small businesses in the Cowboy State.
Additionally, those looking to open a new LLC in Wyoming would not have to pay LLC Agreement bid costs or advertising fees for certificate of publication and publishing rights.
“Forming a limited liability company (LLC) in Wyoming can be a great way to protect your assets,” so says a spokesperson for Venture Smarter. “The state is one of the most business-friendly states in America, and forming a limited liability company is relatively easy.” But what is an LLC? How does that benefit a person who wants to start a business? “An LLC is a business entity designed to protect its owners from being held personally liable for business-related debts and LLCs have gained popularity because they offer a lot of flexibility for their owners,” so says Venture Smarter.
Another benefit of having an LLC is that income and losses from the business can “pass through” to individual owners. The individual’s personal assets won’t (in most cases) be touched is the business goes bankrupt or is sued by a third party or customer. Also, the LLC itself does not pay any federal taxes on its income. Instead, the business income and losses are passed on to the individual owners which is very beneficial to the sole individual.
“Pass-through taxation is a type of taxation in which the taxpayer does not make payments directly to the government but instead pays taxes on LLC income that has already been redistributed across society either as wages or other forms of investment return,” so says Venture Smarter.
The Worst State To Start A Business: California
California is the worst state to set up an LLC. Scoring 18.46 out of 100, the total cost for the first year for an LLC in California is $1,950. California has 10,870 small businesses per 100K residents and a tax climate index score of 36.85. In their evaluation, Venture Smarter discovered that the total cost for an LLC’s first year in California is $1,950, resulting in the popular state scoring a 18.46 out of 100. California only has a tax climate score of 36.85 and roughly 10,870 small businesses per 100k people.
If you want to start your own business, Venture Smarter offers these tips:
- Choose A Unique Name for Your LLC
It is important to select a name that does not have a current patent or is not taken by other professional entities in the state you intend to register in. To find out, search for the name on the intended state’s business name database, as well as the U.S. Patent and Trademark Office’s database. Further, be sure to choose a name that accurately reflects your business’s products or services. It helps to have a name that is easy to pronounce.
Also, make sure that you check that your business name isn’t prohibited by the law from being registered.
Additionally, using any variation of words such as “Enterprises,” Inc., and Co. is prohibited, and you can’t use any name resembling government entities like State Department, IRS, etc.
- Choose the State for your LLC
The next step after selecting a name is to choose the state where you want to form your limited liability company. The obvious and local choice would be the great state of Wyoming because the state you have chosen will affect the cost to start an LLC. If you’re planning to do business in multiple states, you may look for a state with more reasonable tax laws and business regulations.
There are also different requirements for registering your LLC in different states. You will normally need to file Articles of Organization and pay a filing fee to register your LLC with the state. Some states may require you to publish a notice of your LLC formation in a local newspaper.
- Nominate a registered agent
Anyone looking to start an LLC must find a registered agent. A registered agent will be the representative of your company who is in charge of handling legal and administrative documents on the behalf of your LLC. This includes important documents like tax forms and lawsuits. Your registered agent must have a physical address in the state where your LLC is formed and be available during regular business hours.
- Get articles of organization for your LLC
There are some legal documents you must file with the state agency in order for your LLC to become a legal business entity. One of those documents is called Articles of Organization, which are one of two documents filed with the SOS or other designated persons for an LLC to become legal and recognized by law as a separate entity from its members and managers. To file the Articles of Organization, you’ll be required to provide a filing fee and submit the document to the Secretary of State’s office in the state where your LLC is formed.
- Create an LLC Operating Agreement
Operating agreements are documents that govern the operations and management of an LLC. Having an operating agreement is not a requirement by law, but it is recommended that LLCs create one. These agreements contain operating rules for the LLC members or owners, capital contributions, and buy-sell arrangements, and more. Having an operating agreement can help avoid conflicts and misunderstandings between members because it clearly defines expectations and responsibilities. Operating agreements also protect your LLC’s limited liability status by demonstrating that your LLC is a separate legal entity from small business owners. It is a good idea to consult an attorney before making any final decisions so they have to advise you on how to set up your business and inform you of all law requirements.
Once everything is approved, your LLC is officially established and that means you’re in business!
