You can form a limited liability company in any of the 50 states or Washington, D.C., no matter where you live. That freedom leads many first-time founders to ask the same question: which state is best for my LLC?
The honest answer is that for most small businesses, the best state is the one where you live and operate. But there are good reasons some owners choose Wyoming, Delaware, Nevada, or another state. This guide explains the trade-offs so you can decide with confidence.
Start with the most important rule
If your LLC does business in a state, for example by having an office, employees, or a physical presence there, it generally has to be registered in that state. If you form your LLC somewhere else, you’ll usually need to:
- Register your LLC as a foreign LLC in your home state
- Pay formation and annual fees in both states
- Keep a registered agent in both states
- File annual reports and stay in good standing in both states
That’s why, for a local business such as a consultancy, restaurant, contractor, or online store run from home, forming in your home state is usually the simplest and least expensive option.
What to compare when choosing a state
Formation and annual costs
States charge a one-time filing fee to form an LLC and, in most cases, a recurring annual or biennial fee. Some also charge franchise taxes or minimum taxes that can make a state expensive over time.
State taxes
LLCs are pass-through entities by default, so income is usually taxed where the owners live and where the business earns it. Forming in a state with no income tax doesn’t help if you live and work in a state that does.
Privacy
Some states don’t require you to list members or managers in public filings, which can keep owners’ names out of public records.
Business-friendly courts and laws
Delaware is known for its Court of Chancery and well-developed business law, which matters most to companies that plan to raise venture capital.
Ongoing paperwork
Annual reports, publication requirements, and franchise tax filings all take time. Some states have very light requirements; others ask for more.
The most popular states for LLCs
Wyoming
Wyoming is a favorite for small businesses and online entrepreneurs because of its low fees, strong privacy, and no state income tax. The filing fee is about $100, and the annual report fee starts at $60. Member names aren’t required in the formation filing.
Delaware
Delaware is the default choice for startups planning to raise venture capital or eventually convert to a corporation. Investors and attorneys are familiar with its laws and courts. The downside is cost: formation is about $110, and every Delaware LLC pays a $300 annual tax.
Nevada
Nevada has no state income tax and offers good privacy, but it’s one of the more expensive states. Between the Articles of Organization, initial list of managers or members, and state business license, startup costs are about $425, with roughly $350 a year to stay compliant.
New Mexico
New Mexico is one of the least expensive states. Formation costs about $50, there’s no annual report requirement for LLCs, and member names aren’t required in public filings.
Texas
Texas has no personal income tax and doesn’t charge an annual report fee to most small LLCs, although every LLC must file franchise tax reports. The formation fee of $300 is on the higher side.
Florida
Florida has no personal income tax and a large, business-friendly economy. Formation is about $125, and the annual report fee is about $139.
Quick comparison
| State | Approx. formation fee | Approx. annual cost | Notable for |
|---|---|---|---|
| Wyoming | $100 | $60+ | Low cost, privacy |
| Delaware | $110 | $300 | Investor-friendly law |
| Nevada | $425 | $350 | No income tax, privacy |
| New Mexico | $50 | $0 | Lowest ongoing cost |
| Texas | $300 | $0 (franchise report required) | No personal income tax |
| Florida | $125 | $139 | No personal income tax |
When forming outside your home state makes sense
- You plan to raise venture capital. Many investors prefer, or require, a Delaware entity.
- You don’t live in the US. International founders often choose Wyoming, Delaware, or New Mexico for low cost and simple compliance.
- Your business has no physical presence anywhere. Some online businesses with no office or employees choose a low-cost state.
- You’re creating a holding company. Owners sometimes use Wyoming or Delaware for holding companies that own other entities or assets.
When your home state is the better choice
- You work from home or have a local office, store, or employees
- You want to avoid paying fees and filing reports in two states
- You don’t plan to raise outside investment
- You want the simplest possible compliance
Our recommendation
For most small businesses, forming in the state where you live and work is the most practical choice. If you have a specific reason to look elsewhere, Wyoming and Delaware are the most common alternatives. Whichever state you choose, Verisly can form your LLC, act as your registered agent, and register your LLC in another state if you need to.
Frequently asked questions
Can I form an LLC in a state where I don’t live?
Yes. You can form an LLC in any state. If your business operates in your home state, you’ll usually also need to register there as a foreign LLC.
What is the cheapest state to form an LLC?
New Mexico, Kentucky, and Montana are among the least expensive states to form an LLC, and New Mexico has no annual report fee.
Does forming in Wyoming or Nevada avoid state taxes?
Not if you live or do business in a state with income tax. Your income is generally taxed where you live and where the business operates.
Is Delaware the best state for startups?
For startups that plan to raise venture capital, Delaware is often preferred because investors are familiar with its laws. Many founders form a Delaware corporation rather than an LLC for this reason.
This article is for general informational purposes only and is not legal or tax advice. State requirements and fees change; confirm current rules with the state or a qualified professional.