Should You Form Your LLC in California or Another State?
When starting an LLC, one of the very first and most common questions that new business owners often ask is:
“Can I form my LLC in another state, like Delaware, Nevada, or Arizona, even though I live in California?”
It’s a fair question that many new business owners ask. You may have heard that other states offer “better” business laws, lower fees, or special tax advantages that seem very appealing. But here’s the truth: if you live in California and operate your business here, those out-of-state advantages usually don’t apply to you. Staying local often means smoother compliance and fewer surprises down the road.
Doing Business in California = California Rules
California law is clear: if you live here and generate income here, your business is considered to be doing business in California.
That means even if you form your LLC in Delaware, Nevada, or Arizona, you’ll still be required to:
Register your LLC as a foreign LLC in California
Pay California’s $800 annual franchise tax
File and maintain compliance documents with the California Secretary of State
In short, you don’t escape California requirements — you just add another state to your to-do list.
Why California Formation Is Usually the Smarter Choice
By forming your LLC directly in California, you:
File once with the California Secretary of State
Pay once — just the California franchise tax
Stay compliant with only one state’s ongoing rules
It’s simpler, cleaner, and more cost-effective for entrepreneurs who live and operate in California.
When Forming Out of State Can Make Sense
There are limited situations where forming your LLC outside of California might be the right move:
You’re relocating operations — for example, you’re moving your headquarters and employees to another state.
You have multi-state operations — your business earns revenue and maintains offices in more than one state.
You’re pursuing specialized advantages — like Delaware’s court system for venture-backed startups, or Nevada’s privacy laws.
But keep in mind: if you live and work in California, you’ll still be on the hook for California filings and taxes — even if your LLC is registered elsewhere.
Bottom Line
For California entrepreneurs, forming your LLC in another state rarely saves money or hassle. Most of the time, it just means double the paperwork and double the fees.
That’s why for the majority of small business owners, forming in California is the right call. It keeps things simple and ensures you’re compliant from the start.
Ready to Form Your LLC the Right Way?
At SimpleCorp, we handle California LLC formation from start to finish — so you don’t have to stress over state rules or hidden requirements.