State of LLC registration for online business

February 25, 2023

by a searcher from The University of Chicago - Booth School of Business in New York, NY, USA

Hi all, first time business acquirer here. I have a question relating to state of LLC registration that I hope to get some clarity on.

If I were looking to close on an online e-commerce or content business via asset sale, which state is best to set up my business LLC? I plan to live and operate out of my NY residence but have been hearing a lot about the benefits of Delaware/Wyoming/etc LLCs. If I register my LLC out of my home state (NY) and acquire the online business under that LLC, would I still end up needing to register a 2nd LLC in NY?

Thanks in advance!

Reply by a professional
from Villanova University in West Chester, PA, USA

Hi ^redacted‌! I look forward to discussing this further. There's a bit of a complex legal consideration here that we can discuss further on our call - the state of formation can be any state, however each state has different taxes, corporate laws, and regulations. Then, if there is a substantial connection with another state, the business will also need to register to do business in that state as well. Each state defines what that substantial nexus is - owning real estate almost always requires registration, paying employees can, receiving sales over a certain amount can also trigger it. When you file in the state of formation, you don't have to then register as well. So, it's a mixture of considering those different factors and weighing it with cost of administration and benefit.

Reply by an investor
from University of Wisconsin in Galena, IL 61036, USA

Hardy is saying that if you do any activity in NY with your LLC you will need to register it as a foreign LLC in that state. Paying yourself would count. It's not a big deal; we have LLCs in 3 different states doing business across states; a bit more admin work but nothing egregious (usually; YMMV with NY).

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