I have been noticing Many beginners have been struggling to know the rates, pros and cons of LLC in different states. I am just clarifying all the questions here.
Why do we need an LLC?
We need an LLC to get resale certificates to get brand approvals and tax exemption. LLC is necessary for wholesale but optional for PL and OA.
Which State to choose?
Among 50 states in the USA, There are 3 states where there is “NO INCOME TAX”.
Will we have to pay any tax in these states?
Yes you are bound to pay “GENERAL SATES TAX” in these states BUT if you are doing an ecommerce business then Amazon, Ebay itself deducts GST from customers and pays to the state on your behalf. You just need to do the filing of the tax and not to pay the amount.
How much is GST in these states.
Texas: 8.2% (state+county)
Florida: 7% (state+county)
Wyoming: 5.5% (state+county)
What are formation costs in these states:
Texas: 300$ state fees +50$-100$ registered agent, no annual renewal
Florida: 125$ state fees+ 50$-100$ registered agent, 138$ annual renewal
Wyoming: 102$ state fees+ 50$-100$. 62$ annual renewal.
Wyoming is cheap so you will be thinking about forming an LLC here but WAIT, if you are doing wholesale/OA Wyoming is not the best state to form an LLC.
Reasons are here.
Brands mostly prefer Texas and Florida LLCs.
There are few authentic 3PL warehouses in wyoming. Also again brands prefer the warehouse location to be in the same state as the LLC. Means if your LLC is in wyoming and you found a warehouse in Florida it’s most likely that brand will cancel your approval/order.
You changed your mind to Texas. right? Wait, you have to submit $500 security for getting a resale certificate.
Information is provided, decision is yours. Choose wisely its the lifetime decision.
If you have any other query I am here to help you.
Thanks & Regards
(WS, PL expert)