State Registrations - which state do I register in?
Are you confused on what state to register your entities in? This article summarizes for you in a simple way.
There are 2 aspects to this discussion
- Formation state - which state rules apply to the entity
- Operating state - which state are you operating in and regulated by
Formation State
The state you form the fund entity and the manager entity is the state rules that apply. So if you form your LLC in Delaware, then Delaware state rules apply to that entity. One of the key times the formation state matters is during litigation. Delaware is well known for business case law and setting precedents which is why many entities choose Delaware as their formation state. Avestor also recommends Wyoming as a low cost alternative for fund managers.
All LLCs must have a registered agent. If you physically live in the formation state, then you can set yourself up as the registered agent. If not, then you must pay for Registered Agent services in the formation state to receive due process notices.
Operating State
You must also register in the state that you are operating in. For example, if you live in Texas or operate your business in Texas, you must register your entity with the state.
If your formation state is different from your operating state, then you must still do a foreign entity registration in the state you are operating in. This is very important since you cannot operate a business in a state without registering in that state.
