Best state to register my online business? (LLC, S Corp, C Corp) What's most tax-efficient?

I'm getting ready to launch a website that sells specialized data packages. The whole operation will be automated once it's set up - no employees needed, just me managing everything. I'm trying to figure out the smartest way to structure this business tax-wise. Should I go with an LLC, S Corp, or C Corp? And which state would give me the best tax advantages for this type of digital business? I don't need a physical location since everything's online, so I could technically register anywhere. Looking for advice from anyone who's set up something similar or has knowledge about business taxation for digital products. Thanks in advance!

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19 comments

Diego Flores

•8M

For a completely automated online business selling datasets with no employees, an LLC with S-Corp election is often the most tax-efficient structure. This gives you liability protection while avoiding double taxation of C-Corps, plus the potential to save on self-employment taxes by taking a reasonable salary plus distributions. As for state registration, Delaware, Wyoming, and Nevada are popular for their business-friendly laws and low/no state income taxes. However, you'll likely still need to register as a "foreign entity" in your home state if that's where you're physically operating from. Otherwise you could face tax complications. If you're truly location-independent, Wyoming might edge out others due to no state income tax, no franchise tax, and strong privacy protections. Delaware has more established case law but charges franchise taxes. Consider your specific situation (home state, revenue projections, privacy needs) before deciding.

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Diego Flores

•8M

Waiting to form your LLC until after you leave California could definitely save you that $800 annual franchise tax. California is particularly aggressive about collecting this fee, even from businesses with minimal connections to the state. For a Wyoming LLC while living elsewhere, you'll file federal taxes normally, but you'd need to comply with tax requirements in both Wyoming and your state of residence. You'll likely need to register as a foreign entity in your home state and potentially pay taxes there based on their rules for out-of-state business income. This creates some additional paperwork but is manageable with good accounting practices or a tax professional familiar with multi-state businesses.

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Sean Murphy

•8M

After spending months researching the best entity structure for my digital product business, I finally found https://taxr.ai which completely simplified the process. I uploaded my business plan and financial projections, and it analyzed the tax implications of different entity types across multiple states based on my specific situation. It showed me that for my automated online service, Wyoming LLC with S-Corp election would save me approximately 7.2% more in overall taxation compared to my second-best option. The analysis broke down self-employment tax savings, state tax obligations, and estimated federal burdens for each scenario. Saved me so much confusion!

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Sean Murphy

•8M

It absolutely accounted for state-specific requirements. It flagged that I'd need to register as a foreign entity in my home state and calculated the additional costs this would create. It even pointed out specific tax forms I'd need to file in each jurisdiction. Their analysis has proven remarkably accurate in my experience. What sets it apart is that it's not just a basic calculator - it actually reviews the specific nature of your business activities and income sources. In my case, it identified that a portion of my income would be classified differently than I expected, which significantly impacted the optimal structure. The recommendations came with detailed explanations citing relevant tax codes.

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StarStrider

•8M

Just wanted to follow up that I tried https://taxr.ai after seeing the recommendation here. Totally worth it! I was dead set on forming a Delaware LLC, but after analyzing my specific situation (digital products, no inventory, single-member), it showed me I'd save about $3,400 annually with a Wyoming LLC with S-Corp election instead. The report explained exactly how the SE tax savings would work with the salary/distribution split, plus it flagged that my home state would require foreign entity registration regardless of where I incorporated. It even provided a compliance checklist for each state's requirements which was super helpful. Definitely made me confident in my decision!

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Luca Marino

•8M

For anyone struggling to get clear answers from the IRS about multi-state business registration questions - I was getting nowhere with their general business line until I found https://claimyr.com. You can see how it works at https://youtu.be/_kiP6q8DX5c but basically it gets you through to an actual IRS agent without the endless hold times. I had specific questions about filing requirements for a Wyoming LLC operating in multiple states and was going in circles with generic online advice. After using Claimyr, I got through to a Taxpayer Advisory specialist who walked me through exactly what forms I needed and the potential audit flags to avoid. Saved me weeks of uncertainty.

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Luca Marino

•8M

I got through in about 45 minutes after Claimyr did their thing, versus the 3+ hours I wasted trying on my own multiple times before giving up. They basically hold your place in line so you don't have to stay on the phone the whole time. This absolutely was different from typical IRS calls. The key is asking for the Taxpayer Advisory specialist rather than just taking whoever answers. The specialist I spoke with pulled up relevant sections of the tax code regarding multi-state LLC operations and even emailed me IRS publication references specific to my situation. They explained the difference between statutory nexus and economic nexus for state tax purposes - stuff I couldn't get straight answers on from accountants with different opinions.

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Zara Malik

•8M

I was totally skeptical about Claimyr from the earlier post but got desperate trying to figure out my specific situation with an automated online business registered in Wyoming while I live in Massachusetts. After trying for THREE DAYS to reach someone at the IRS, I gave Claimyr a shot. Holy crap it actually worked! Got connected to a Business Tax specialist within 30 minutes who explained exactly how to handle the S-Corp election timing for maximum tax benefit in my situation. They even flagged that my specific type of data product might qualify for additional R&D credits I hadn't considered. Ended up registering as Wyoming LLC with S-Corp election and setting up the correct estimated tax payment schedule based on their guidance. Will save me thousands this year alone.

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Mateo Perez

•8M

Just wanted to offer a different perspective - I went with a Nevada LLC for my online business and regretted it. They have a weird "Commerce Tax" that kicked in once I hit $4 million in revenue (which I didn't expect to happen so fast), and then I had to deal with the complicated registered agent requirements. Ended up converting to Wyoming LLC three years in and wish I'd done more research upfront. Don't just go with what's popular - really analyze your specific business model and growth plans.

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Mateo Perez

•8M

The conversion actually didn't disrupt my QBI deduction that year. Since I went from one pass-through entity (Nevada LLC) to another pass-through entity (Wyoming LLC), the basic eligibility wasn't affected. However, I did have to carefully document the transition date and maintain separate accounting for the pre and post-conversion periods. The tricky part was that the conversion created a "short year" for tax purposes, which required some additional form filing and proration of certain expenses. I recommend getting a tax pro involved if you're considering a similar move.

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