Creating a LLCYou should always investigate what the rules are for forming a LLC in your own state - and then the tax issues involved in forming one in another state. Different states have far different filing requirements. Some cost $90 a year - others cost $500 a year. Some require no bank account, others require a bank account with $1000 or more in it. Some require a month or more of newspaper notices before filing. Some keep the owners anonymous, others publicize the owners information. Some require a physical presence in state, others do not. It is well worth investigating.
Most states require a LLC filing to include an "agent" that actually lives in that state to be the contact point - to handle legal questions and such. There are entire groups of people - especially in Delaware - that act as agents for out of state businesses. You pay the agent a fee to do the filing for you, and to handle the questions and issues. This agent fee can range from $50 to $500 or more.
Delaware is hugely popular as a filing location because of their low fees ($90 to create a LLC) and easy to use website interfaces. They have no requirement for a bank account. There is no state income tax on money if you are out of state (i.e. you only pay taxes to your own state, you are not double taxed). You do not need an office in Delaware - as long as you have an agent in Delaware, you're all set.
Note that the state you decide to register your business in is called your "domestic registration" - whether or not you live there or work there does not matter. It is the "home" of your business. Any other state you then decide to also register your business in for business activity reasons will be your "foreign registration" - even if it ends up being the state you actually live in.
I don't have any personal knowledge of reliability of the below listings, but here are some Delaware agents I have researched. The price listed are valid as of Dec 2004 and include the $90 state filing fee.
Harvard Business Services $140
The Delaware Company $299
Legal Issues for Home Businesses
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