I’m starting a new business and want to register an LLC.
I wondered: Where is the best place to register my new company, and how should I do it?
I think Northwest Registered Agent is the best option for small businesses.
Here are my notes from my June 2020 research and why I picked Northwest.
Everyone: “Use Stripe Atlas!”
Several of my smart friends told me to use Stripe Atlas to set up my LLC.
First, I want to say: Stripe Atlas is a very good product.
But you need to know: it is totally overkill for small business owners.
Stripe Atlas was designed for Silicon Valley-type companies who expect outside investors and multiple shareholders.
It is not meant for small businesses or single-owner LLCs.
Good things about Stripe Atlas
- Inexpensive ($500)
- Easy: get started in 10 minutes
- Incredible documentation
- Thousands of customers
- Trusted by top VCs
Bad things about Stripe Atlas
- Overkill for most
- Only Delaware registration
What’s wrong with Delaware registration?
Having a Delaware LLC or C Corp is not necessary for most small businesses. (source)
The benefits of forming a company in Delaware mainly apply to big multi-million dollar organizations.
Delaware companies and courts are certainly helpful, but only if you expect to get involved in lots of lawsuits or have lots of investors.
- Who should do a Delaware registration?
Do it if you plan to go public, raise lots of money, have multiple investors, hire an investor relations firm, or intend to get involved in many lawsuits.
- Who should not do a Delaware registration?
Small business owners, some medium-sized business owners, and definitely not sole proprietors.
I’m not an expert in this topic, but this guy at LLC University is, so I’ll link to his page where you can read more:
I Will Use This Company Instead
Now, I think that Northwest Registered Agent is the best option for small businesses.
A CPA that I trust recommended Northwest to me.
Northwest is also the preferred provider for LLC University (great resource and seems legit).
My friends Tasia and Michael used Northwest to form a business. They were happy with it.
Related post: How Tasia and Michael bought Museum Hack for $0 down.
Another option for slightly larger businesses, like with multiple founders or shareholders, is FirstBase. But they limit you to Wyoming or Delaware state registrations only… in which case, you might as well consider Stripe Atlas.
But I’m a solo founder. I plan to register my LLC with Northwest.
Now, your next question is probably:
What state should you register your small business LLC in?
Register your business in the state you live, which is probably also the state you’ll do business in.
There are a few rare exceptions, like for Wyoming, where you might want increased privacy or real estate protections.
When you register your LLC in a different state from where you work or live, you’ll have to register the LLC in your home state as a Foreign or Out-of-State Entity.
This article on LLC University, which I deem as a trustworthy source, explains it in more detail: What’s the Best State to Form Your LLC in?
Who should use Stripe Atlas?
Stripe Atlas could be a great solution if you intend to create a large company.
If you have multiple founders who will each get shares in the company, use Stripe Atlas. It is probably also good for a solo founder who might want to raise money or give away stock at a later date.
Stripe will help you with issuing stock to owners (in a C Corp) or units to members (in an LLC) immediately after you form the company.
It is an excellent asset to the startup and VC community. They have documented and provided tons of free legal frameworks with Stripe Atlas.
But do you really need all of those features?
Definitely not if you’re a solo founder starting a bootstrapped small business.
Restaurants, retail locations, home businesses, and most new companies that are owned by one or two people probably don’t need the complexity of Stripe Atlas, either.
You can just do a simple LLC or C Corp in your home state.
Keep your new company formation and registration simple.
If you’re a single owner, register the LLC in the state you live.
Or in the state you do business.
I plan to use Northwest Registered Agent to register my LLC.
If you want to save money, you could register the LLC yourself on your state’s website.
If you want to waste money, you could use LegalZoom 😂.
If I was starting my company with a co-founder, I would consider using FirstBase and setting up in Wyoming. But then you also need to register in your home state. I don’t know enough about Wyoming businesses to recommend it.
Talk to a CPA or poke around on the LLC University website to learn more about your options.
What did you do for your company, or what do you plan to do?
Leave a comment or email me to say Hello.
If you live and work in New York City and New York State, ask your accountant if you really need a C Corp or S Corp treatment. You might be better off, as I was with Museum Hack, in just having a single-owner LLC which is treated as a passthrough entity on your tax return.
Credits and shoutouts from my friends:
- Ryan Schellhous at IndigoSpire: “Our CPA firm registers LLCs regularly for clients. For the reasons mentioned above, we do these at cost since it really is simple. A couple of comments here: (1) if you’re in California, the mere presence of an LLC is a minimum of $800/year (owed at the beginning of the year) and is rife with penalties even if you have an out of state LLC. If you have other owners, are reliably profitable, or plan to raise money, an LLC makes sense. If it’s just you, you’re still operating at a loss, and your product isn’t likely to get you sued, consider operating as a DBA. As others have mentions, switching later is pretty easy. (2) If your business is reasonably profitable, use an LLC but elect to treat it as an S Corp. (3) Wyoming privacy protections and using LLCs for most smaller real estate investors is overkill. Determined plaintiffs will still find out who you are and can make life hell.”
- Scotty Candler: “Registering with the Secretary of State is easy and cheap, but you might want to consult an attorney to figure out what information they will need as their websites are usually cumbersome and unhelpful. It’s the documentation after formation (like an Operating Agreement) that you should get help with. Too many people underestimate the importance of this document. ESPECIALLY with multi-member LLCs or ones that deal with real estate or other complex contracting.”
- Scott Kidder likes Delaware: “I don’t entirely disagree with your arguments against Delaware, but it’s also generally the easiest! There’s a reason so many companies domicile in DE.”
- Taylor McKnight: “I used LegalZoom to set up my new company, Emamo.”
- Derek Delconte: “Don’t forget to ask your CPA about where you have nexus.”
You might also like my research about business development companies (BDCs).