Where Serial Entrepreneur Daniel Javor Thinks You Should File Your LLC

For most people starting a new company, incorporating is the biggest step to establishing credibility and separating the business from its owners. Of the types of organizations available, more than a third of small businesses in America are incorporated as LLCs.

"For people just starting out, LLC is the way to go," says Daniel Javor, CEO of Deep Blue Ventures. "If you only have one member, the taxes pass through to your regular income tax anyway, but you get the liability protection you wouldn't as a sole proprietor."

Daniel Javor would know, he's been a serial entrepreneur since he started one of the biggest trading card companies on eBay in the late 90s. The 50-person full-time staff of his digital media holding company manages 9 verticals that reaches more than 60 million people annually. His latest venture, launched during the pandemic, is a free online manual for building over 500 business ideas.

In the last few years of the pandemic, Javor has watched traffic for stepbystepbusiness.com multiply (to the tune of 500x year-over-year) as millions of people lost their jobs and many turned to entrepreneurship.

"Six million people made unemployment claims in 2020," Javor says. "And four million new businesses were formed. That's almost a million more new businesses than in 2019."

Entrepreneurs looking to form an LLC are often advised to do it in Delaware. "The conventional wisdom taught in business schools is that you should incorporate in Delaware," Javor says. "There are less restrictions overall, low corporate taxes, simplified structure, and they have the Chancery Court to move things along if you get sued."

It explains why the second smallest state in America is home to 68% of Fortune 500 companies including Amazon, Disney, Google and Walmart. Other states often recommended include Wyoming, Nevada, and New Mexico for having lower taxes and more privacy options.

"If privacy is important to you, of course Delaware, Nevada, New Mexico, and Wyoming are the top choices to form an LLC," Daniel Javor says. "There are some differences between them, too. For example, Nevada has no taxes on capital gains, inheritance, or franchises. Wyoming also has lower taxes, and they allow anonymous owners with a lifetime proxy."

Despite the advantages offered in these four states, Daniel Javor believes that the best place to register your LLC is always where your business plans to operate. Not doing so can be expensive. "If you're registered in Delaware but doing business in Florida, you will still have to register as a foreign LLC in Florida and pay taxes there, but now you're paying twice the filing fee," he says.

"Foreign" LLCs may also be required to pay an out-of-state business tax, which can easily eat up any tax savings. Operating out of multiple states also opens businesses up to conflicting laws, regulations, and reporting requirements, which means more work and confusion. Those eyeing Delaware because of the Chancery Court System should know that if a corporate lawsuit were to happen, the case must be handled in-person in Delaware by a Delaware-licensed attorney, which can add even more expense to running your business.

"Are there exceptions to forming in your home state? Absolutely," Javor says. "If you are a start-up looking to take money from angel investors of venture capitalists, Delaware is the way to go." That's because the state has clear and long-established laws for protecting investors. "But then you would likely be looking to form a C-corp, not an LLC."