I run a small Etsy shop selling handmade candles from my home in Ohio. I want to form an LLC mainly for liability protection and to separate personal/business finances. My question: can I form the LLC in a state where I never do business, like Wyoming or Delaware, because their fees are lower? I keep seeing mixed answers online. I don't plan to have any physical presence or employees outside Ohio. Would that work, or do I have to register in Ohio anyway? I'm trying to keep costs down since I'm just starting out.
LLC formation
Can I form an LLC in a state where I never do business?
You can form an LLC in any state. The The problem is if you operate in Ohio, you'll likely need to register as a foreign LLC there too. That means paying fees in both states.
What silentkettle said. The state where you actually do business is called your home state. Most people just form there to avoid double fees. Wyoming isn't some magic loophole for a one-person candle shop.
So even if I have no warehouse or storefront in Ohio, just making candles at my kitchen table counts as doing business there? That seems like a lot.
Yes. Having an office or physical location in Ohio is one factor, but if you're managing the the business from Ohio, that typically counts. You'd likely need to foreign qualify in Ohio. This is a common mistake pepole make. The low filing fee in Wyoming gets eaten up by the Ohio registration and annual report fees.
Also think about taxes. If you form in Wyoming but live in Ohio, you're still on the hook for Ohio state taxes on your income. And some states have franchise taxes or minimum fees that apply even if you have no revenue.
And if you ever get sued, you'd probably have to deal with courts in Ohio anyway since that's where you live and work. Having a Wyoming LLC doesn't automatically put you in Wyoming court.
I looked into this for my consulting business. The consensus I found was: form in your home state unless you have a specific reason to be elsewhere (like investors requiring Delaware). For a small Etsy shop, Ohio is almost certainly the right call.
Okay, that makes sense. I was hoping to avoid Ohio's annual report fee but it sounds like I'd just be adding more paperwork. I'll look into Ohio's requirements. Thanks everyone.
Good luck. One more thing: check if your city or county requires a local business license for home-based food or candle makingg. That's separate from the LLC.