I run a small online store selling handmade goods and I'm getting ready to formally register the business. I live in Michigan and plan to keep operating from here, but my customers are spread all over the country. Is forming a Michigan LLC a good idea for that situation, or should I be looking at Wyoming, Delaware, or something else? I want to keep things simple and not create unnecessary complications.
LLC
Is a Michigan LLC a good choice for a business with customers nationwide?
Generally yes, a Michigan LLC can work fine for nationwide customers. The state where you form the LLC is usually your home state. Registering in Wyoming or Delaware doesn't automatically let you skip registering in Michigan if you're physically operating there.
I agree with plainsight42. I looked into Wyoming for my consulting business and realized I would have had to file as a foreign LLC in Michigan anyway. That meant two setss of fees and two annual reports. Not worth it for a small operation.
What kind of handmade goods? If you're shipping physical products, sales tax registration might be a bigger issue than the LLC state. Michigan LLC is probably fine but you'll need to watch economic nexus rules in other states.
Jewelry and small leather items, mostly through my own site and occasionally craft fairs. I hadn't thought much about sales tax across state lines yet. That sounds like a separate headache.
Honestly the whole Delaware thing is overblown for most small businesses. Unless you're chasing investors or have a complicated corp structure, a hoome-state LLC is the sensible default. Michigan fees aren't terrible either.
One nuance: if you ever have a physical preseence in another state, like storing inventory in a fulfillment center, that state may require you to register as a foreign LLC there. It's not about customers being nationwide, it's about where you actually operate.
I've had a Michigan LLC for four years. Annual statement is straightforward and the state filing site is tolerable. No complaints. My customers are all over the country too.
northwood_nina how do you hancle the registered agent requirement? Do you just use your own address?
Yeah, I use my home address. It shows up in public records though, which is the one downside. Some people pay for a commercial registered agent to keep their address private.
The privacy angle is worth considering. If you use your home address and sell nationwide, your address is on the state's public database. Not a dealbreaker but something to weigh.
Also worth noti ng Michigan has an annual statement fee but no franchise tax for most LLCs. Some states are cheaper up front but nickle and dime you later.
Agreed with grumpycactus. And if you're the only owner, a single-member LLC is disregarded for federal taxes by default, which keeps bookkeeping simpler. That's true regardless of which state you pick.
One last thing to check: some payment processors and marketplaces ask for your state of formation. Having a Michigan LLC when you're in Michigan tends to raise fewer questions than an out-of-state one.