Best State to Form an LLC & Complete State-by-State Requirements

Starting a limited liability company (LLC) involves choosing which state to form it in. What is the best state to start an LLC? The answer depends on your business’s needs and location. Many entrepreneurs have heard about states like Delaware, Wyoming, and Nevada being business-friendly. Others consider states with no income tax such as Texas or Florida. In this comprehensive guide, we’ll explore the top states to create an LLC, compare their benefits, and discuss whether forming an LLC outside your home state is truly advantageous.

Home State vs. Forming an LLC in Another State (Domestic vs. Foreign LLC)

Before jumping into the best states, it’s crucial to understand domestic vs. foreign LLCs. A domestic LLC is one formed in the state where you primarily operate your business. Once you register in that state, you can do business there freely. If you form an LLC in one state but actually run the business in another, your LLC becomes foreign in the state where you conduct operations. You would need to register as a foreign LLC in your home state (and possibly any other state where you do business). This means extra fees, paperwork, and compliance in two states instead of one.

For most small businesses and startups, forming the LLC in your home state is usually the simplest and most cost-effective choice. Why? Because even if you file your LLC in a state with no taxes or low fees, you still must pay taxes and follow regulations where the money is made and business is done. For example, if you live and run your business in California but form the LLC in Delaware, you’ll likely end up paying California taxes and also have to register the Delaware LLC in California as a foreign entity. This results in double filing fees, two annual reports, two registered agents, and more complexity. In short, any perceived savings from forming out-of-state can be wiped out by the cost and hassle of maintaining an LLC in two places.

Exceptions: There are scenarios where forming in another state makes sense. If you operate in multiple states or have no physical presence (for example, an online business with no single “home” state), you might choose a state known for business-friendly laws. Also, non-US residents who want a US LLC (but don’t live in any state) can essentially choose any state – in that case, picking a state with low fees and simple requirements can be beneficial. (We’ll note below which states are popular for international entrepreneurs.) Additionally, if your company plans to seek venture capital or investors, Delaware is often preferred by investors regardless of where you are located. But for the vast majority of small business owners in the US, the best state to form an LLC is their home state. It avoids the complications of foreign registration and keeps things straightforward.

Key Factors for Choosing the Best State

When deciding which state to form an LLC in, consider these key factors:

• Where You Do Business: If your business has a physical office, store, employees, or significant operations in a state, that state is usually the best choice. You’ll have to comply with local laws and taxes there anyway. Forming your LLC where you already operate simplifies compliance.
• State Taxes: Tax obligations vary by state. Some states have no personal income tax (e.g. Texas, Florida, Nevada, Wyoming, South Dakota, Alaska), which can be attractive for LLC owners. Others have no corporate income tax on businesses that operate out-of-state (for example, Delaware doesn’t tax Delaware-registered LLCs on income earned elsewhere). Consider how state income tax, sales tax, and any special business taxes (like franchise taxes) will affect your LLC.
• Formation and Annual Fees: Every state charges a fee to form an LLC (one-time filing fee) and usually a recurring fee to maintain it (annual report fee or franchise tax). These costs range widely. For instance, New Mexico charges only about $50 to form an LLC and has no annual fee, making it one of the cheapest states. Meanwhile, a state like California imposes an $800 annual franchise tax regardless of income (one of the highest). Look at both the upfront cost to create an LLC and the ongoing fees in each state.
• Legal and Regulatory Environment: States like Delaware and Nevada are famous for their business-friendly laws and courts. Delaware’s Court of Chancery and extensive history of business case law provide predictability and stability for companies. Wyoming was the first state to allow LLCs and offers strong legal protections for business owners. A supportive legal environment can be a plus, especially if you expect complex ownership structures or legal disputes.
• Privacy: If owner privacy is important, note that some states allow anonymous LLCs or at least don’t require member names on public record. Wyoming and Nevada are well known for not requiring disclosure of LLC owners in public filings. Delaware also keeps member information off public records. On the other hand, many states (like California, Texas, Florida, etc.) require manager or member names in formation documents, which become public. Privacy-focused entrepreneurs often favor states that offer more anonymity.
• Investor and Business Needs: If you plan to raise money from venture capitalists or go public eventually, Delaware is often the top choice. Many investors and startups prefer Delaware LLCs or corporations due to the familiarity and favorable corporate laws. Also consider if the state allows structures like Series LLCs (Delaware, Nevada, Illinois, Tennessee, Texas, and a few others allow a series LLC structure). For example, Delaware and Florida both allow series LLCs, which can be useful for holding multiple assets or lines of business under one umbrella LLC.
• Future Expansion: If you anticipate expanding your business into many states, you might start in a state that doesn’t penalize out-of-state income and has easy foreign qualification processes. However, no matter where you form, expanding operations will likely mean registering in those new states anyway. In general, pick the state that best fits your initial operations and strategic needs.
• Special State Requirements: Be aware of any unusual requirements in certain states. For example, New York and some others require a costly publication of LLC formation in newspapers (which can add hundreds of dollars). States like Alabama or Arizona also have (or had) publication requirements. Such rules can make forming an LLC more cumbersome in those states, especially if you don’t live there. Also, some states have fast or entirely online formation processes (Wyoming, Delaware are very quick online; whereas a few states might be slower or require mail-in forms).

Now that we’ve covered what to think about, let’s look at some of the best states to form an LLC and why they’re often recommended. We will also compare their key features in a quick-reference table.

Top States to Start an LLC

Many lists of “best states to start an LLC” include the following states due to their favorable conditions for businesses. Each has its advantages and a few potential downsides:

Delaware

Delaware is often the first state mentioned for LLC or corporation formation. It has built a reputation as the gold standard for business law. Key benefits of forming an LLC in Delaware include:

• Business-Friendly Laws: Delaware has an advanced legal system for businesses, including the renowned Court of Chancery that specializes in business cases. This means if your company ever faces legal disputes, Delaware’s courts are experienced and efficient in handling them.
• No Delaware Taxes for Out-of-State Income: Delaware does not impose state corporate income tax on LLCs that don’t operate in Delaware (and there’s no sales tax either). If your LLC’s business is conducted entirely outside Delaware, you won’t pay Delaware income tax on those earnings. (Do note, however, that you might still owe taxes in the state where you actually do business or reside.)
• Reasonable Formation Cost: Delaware’s LLC formation fee is around $90–$110, which is relatively moderate.
• Annual Franchise Tax: Delaware LLCs pay a flat annual franchise tax of $300. There is no separate annual report filing required for LLCs (unlike some states). The $300 fee is a cost to consider in your budget every year.
• Privacy: Delaware does not require listing LLC member or owner names on public records. You can form an LLC with only the registered agent and an organizer’s name on the formation documents. This provides a level of privacy for owners.
• Series LLC: Delaware allows series LLCs, a structure where one LLC can have separate “series” divisions inside it, each with its own assets or members. This can be useful for certain businesses (for example, real estate investors holding multiple properties).

Drawbacks/Considerations: If you don’t have a real business presence in Delaware, you will still need to register your Delaware LLC in your actual home state (as a foreign LLC) to legally do business there – incurring extra fees and paperwork. Also, the $300 annual tax is higher than the ongoing fees in many other states. Bottom line: Delaware is ideal for companies that plan to seek outside investors or operate in multiple states, and for non-US residents who want a widely-recognized jurisdiction. Small local businesses, however, might not gain much advantage by using Delaware and could be better off in their home state.

Wyoming

Wyoming is frequently cited as one of the best states to form an LLC, and with good reason. Wyoming was the first state to create the LLC (in 1977) and has remained on the cutting edge of LLC-friendly legislation. Key benefits of a Wyoming LLC:

• No State Income Tax: Wyoming has no personal or corporate state income tax at all. This is a big draw for anyone who wants to minimize state tax obligations.
• Low Fees: Wyoming’s state filing fee to create an LLC is about $100 (one of the lower fees in the US). Its ongoing costs are minimal: there is no separate franchise tax, only a small annual report fee which is typically $50 (or $60 minimum, based on assets, for most small businesses). This is much cheaper than Delaware’s $300 annual fee, for example.
• Privacy and Asset Protection: Wyoming offers strong privacy. You do not need to disclose LLC owners publicly in Wyoming. It’s possible to form an anonymous LLC there, often by using a third-party organizer or trust to keep member names off record. In addition, Wyoming law provides strong asset protection for LLC owners, such as charging order protection (which limits creditors from taking over your LLC interests).
• Simple Online Formation: The entire process can be done online quickly. In fact, for non-US residents and others, Wyoming’s system is very efficient – you can often form an LLC online in one day, and have your documents immediately.

Drawbacks/Considerations: There are very few downsides to Wyoming itself – it’s low-cost, and business-friendly. The main consideration, again, is if you are not actually living or operating in Wyoming, you will have to register your LLC as foreign in the state where you do business. That could negate some advantages. Also, Wyoming’s popularity means some banks or institutions are very familiar with it (which is good), but always ensure your business needs (like opening a bank account) can be met easily when forming out-of-state. Overall, Wyoming is often the top choice for entrepreneurs who want a low-cost, no-tax, high-privacy jurisdiction for their LLC, especially if they don’t need to base it in their home state.

Nevada

Nevada is another state that often competes with Wyoming in discussions of business-friendly environments. Many features are similar to Wyoming:

• No State Taxes: Nevada has no state income tax (personal or corporate) and no franchise tax on income. This makes it tax-friendly for businesses.
• Strong Privacy: Nevada does not require listing the members or owners of an LLC in the public filings, providing anonymity if structured correctly. This means owners can keep their names off state records (typically, the annual list of managers is filed, but one can use nominee managers if needed for privacy).
• Business-Friendly Climate: Nevada’s laws are considered pro-business and flexible for management and ownership structures. There are few restrictions on how you manage your LLC.

However, Nevada’s costs are higher than many other states. The initial LLC filing in Nevada is around $425 (this includes state filing fee plus mandatory business license and initial list fees). Ongoing, Nevada LLCs must file an Annual List and Business License renewal, costing about $350 each year (as of 2025). These fees are significantly more than Wyoming’s or Delaware’s ongoing costs. Essentially, you pay a premium in Nevada for the tax-free, privacy-focused benefits.

Drawbacks/Considerations: The higher annual cost is the biggest drawback. If you’re a small business on a tight budget, paying $350 every year to Nevada (plus a registered agent if you don’t live there) can add up. Like Delaware and Wyoming, if you don’t actually operate in Nevada, you’ll still need to register in your home state, doubling your costs. Nevada can be a great choice if you value its privacy and tax advantages and are prepared to handle the fees. Many people who choose Nevada do so because they either plan to eventually do business there (Las Vegas is a growing market) or they want the combination of no taxes but prefer Nevada over Wyoming for personal reasons (e.g. they might travel there often, etc.). For purely online or out-of-state operations, Nevada is beneficial but often the high fees make Wyoming a more cost-effective alternative with similar benefits.

Texas

Texas is the second largest state economy in the US and often ranks as one of the most business-friendly states. It’s a popular state not just for incorporation but also as a place to do business due to its large market and growth. Here’s why Texas makes the list:

• No Personal Income Tax: Texas is one of the states with no state personal income tax, which means LLC owners who reside in Texas pay no state tax on pass-through income from the LLC. (Texas does have a statewide sales tax and property taxes, but no tax on income.)
• Business-Friendly Environment: Texas offers a robust economy, diverse industries, and various incentives for businesses and startups. The regulatory burden is moderate and there’s no requirement to publish any formation notice. Texas also allows LLCs to be member-managed or manager-managed without special filings, giving flexibility in how you run your company..
• Moderate Fees: The Texas LLC formation fee is about $300 (the filing fee for a Certificate of Formation). Texas does not charge a traditional annual report fee or franchise tax for most small LLCs; however, it does have a “franchise tax” (margin tax) on businesses with revenues above a certain threshold (around $1.3 million as of recent years). Small businesses under the threshold effectively pay $0 in franchise tax, only needing to file a simple no-tax-due report each year. This makes maintaining a Texas LLC relatively low cost for most startups.
• Large Market Presence: If your business plans involve operating in Texas or targeting customers there, forming your LLC in Texas makes a lot of sense. You’ll be ready to operate in one of the nation’s biggest markets without additional foreign registration.

Drawbacks/Considerations: Texas doesn’t offer the same anonymity as Wyoming or Delaware – you will have to list a managing member or manager name and address in the formation documents, which are public. Also, if you live elsewhere and form an LLC in Texas without a real business reason, you’ll have to deal with foreign qualifications back home. For non-resident business owners, Texas might not be as easy to handle remotely as Delaware or Wyoming (for example, opening a bank account may require a visit). But for anyone in Texas or eyeing the Texas market, it is certainly one of the best states to start an LLC because of the zero income tax and strong economy.

Florida

Florida is another state that often comes up for its favorable tax situation and booming business climate. Here are Florida’s main attractions for LLC formation:

• No Personal Income Tax: Like Texas, Florida has no state personal income tax on individuals. So if you live in Florida, your LLC’s pass-through income isn’t taxed at the state level. This is a big draw for entrepreneurs moving from high-tax states up north. (Florida does have a corporate income tax, but LLCs are not taxed at the entity level unless they elect to be treated as a corporation.)
• Affordable and Simple Formation: Florida’s LLC filing fee is around $125, and the state has an annual report fee of about $139 (as of recent figures). There’s no outrageous franchise tax or extra business license fee beyond that annual report. The formation process is straightforward and can be done online.
• Business Growth and Popularity: Florida’s economy is large and growing, with many new businesses starting there each year. It’s particularly popular for industries like real estate, tourism, and e-commerce. Florida law provides charging order protection for single-member LLCs (which not all states do), giving owners an extra layer of protection from personal creditors. The state also allows Series LLCs, similar to Delaware, which can be useful for certain types of businesses with multiple ventures under one umbrella.
• No Residency Requirement: You don’t have to reside in Florida to form an LLC there, which is true for all states. But Florida is often chosen by retirees or snowbird entrepreneurs who spend part of their time in-state, or by online business owners drawn by the tax advantages.

Drawbacks/Considerations: If your business isn’t actually in the state, forming an LLC in Florida means you’ll face foreign registration at home as usual. Florida’s annual report, while not too expensive, is an extra task to remember each year (due by May 1, and the fee increases if late). Florida also doesn’t particularly offer anonymity – your LLC’s manager or authorized member names and addresses will be public in the annual report. Additionally, if you are outside the US, Florida might not be as commonly recommended as Delaware or Wyoming, but it’s still quite manageable. In summary, Florida is one of the best states to form an LLC if you want no state income tax and plan to take advantage of its growing business environment or live in the region.

Other Notably Business-Friendly States

Beyond the five popular states above, a few others deserve an honorable mention in the context of “best state to start an LLC”:

• New Mexico: Known for its ultra-low costs, New Mexico has the lowest LLC formation fee ($50) and no annual report or franchise tax for LLCs. It also provides anonymity (owners are not listed publicly). These factors make it extremely appealing to cost-conscious entrepreneurs. However, New Mexico does have a state income tax (a relatively low flat rate for LLC income, around 4.8% up to a certain amount). If you’re not a resident, that may not matter unless you have income sourced from New Mexico. One caveat: some business services (like certain banks or payment processors) have been known to be cautious with New Mexico LLCs due to their anonymity. Still, for a cheap and private LLC, New Mexico is top-tier.
• South Dakota: South Dakota is often cited for having no state income tax and no corporate tax, similar to Wyoming. It has very minimal regulations and is considered extremely business-friendly. The costs to start and maintain an LLC in South Dakota are low (formation fee is about $150, and the annual report fee is around $50). South Dakota also has strong privacy laws and even is known for robust trust laws (attracting wealth management businesses). It’s a bit off the radar, but a very solid choice if those factors matter to you.
• Alaska: Alaska might not be the first place you think of for forming an LLC, but it has no state sales tax and no personal income tax, which can benefit certain business models. The formation fee is a bit higher (around $250), and Alaska has a biennial (every two years) report fee of $100. Alaska could be advantageous for businesses related to natural resources or those planning to operate there, but for most people, the distance and lack of immediate benefit compared to states like Wyoming or Florida makes it a less common choice.
• Others: We’ve already covered Texas and Florida, which also fall into the no-income-tax category. Nevada and Wyoming were covered as well (no-tax, privacy havens). Delaware remains king for corporate law. Each state has its nuances, but the ones discussed above are the leaders in favorable LLC conditions.

Conversely, it’s worth noting states that are generally not advantageous for out-of-state LLC formation: California, with its high $800 annual tax and strict rules, is usually only chosen if you actually do business there (or have to, as a resident). New York can be expensive due to its publication requirement. So if you’re purely shopping for the best state to form an LLC, you’d typically avoid those high-cost states unless they are your home base.

Comparison Table: Best States for LLC Formation

To summarize the key differences, here is a comparison of some of the best states to start an LLC and their features: