Best States to Start an LLC — 2026 Guide

Why the State You Choose Matters

Choosing where to form your LLC affects more than just paperwork. It impacts how much you'll pay in taxes, what you'll spend on annual fees, and how much time you'll spend on compliance.

Depending on the state, annual minimum fees can be as high as $800. Other states have no income tax and minimal fees. The difference can add up to thousands of dollars over the life of your business.

The best state isn't the same for everyone. An e-commerce business has different needs than a real estate investor. A tech startup seeking venture capital has different priorities than a solo consultant. And we're here to break it down for you, so you, as a business owner, can make the best decision for your business.

This guide breaks down the most popular states for LLC formation, explains when it makes sense to form outside your home state, and helps you choose based on your specific business type. You'll get practical comparisons without the marketing hype, so you can make the right decision for your situation.

How to Choose the Best State for Your LLC

Start by asking yourself these five questions about your business:

How much protection and privacy does your business need?

Different states offer stronger asset protection and better privacy laws than others. If you're in a lawsuit-prone industry or want to keep ownership information private, this matters.

Will your business operate only in one state, or can it expand nationwide?

A restaurant is tied to a physical location, so it usually makes the most sense to form (and register) the LLC in the state where the restaurant actually operates. An online business, on the other hand, can be based in one state while selling to customers nationwide—so the "best" state to form in depends more on where the owner is located and where the business is truly run. Physical presence changes how you make your decision.

Do you plan to do business internationally?

If you're expanding globally or working with international clients, certain states offer better legal frameworks and investor confidence.

What are your revenue projections and tax implications?

States with no income tax look great as a tax benefit, until you factor in franchise taxes or other fees. Run the numbers based on your expected revenue, not just your current situation.

Are you bootstrapping or seeking outside investment?

Venture capitalists and angel investors often prefer Delaware LLCs because of established case law and familiar legal structures. If you're self-funding a current or new business, you have more flexibility.

These questions will help you narrow down what actually matters for your business instead of chasing generic advice.

Should You Form an LLC Outside Your Home State?

You can form an LLC in any state, even if you don't live or operate there. But should you?

Understanding that nexus is the key.

Nexus means you have a significant business presence in a state. If you have nexus in a state, you'll need to register there regardless of where you originally formed. That means paying fees in all the different states that you operate in and paying fees more than once.

You'll establish a nexus if you have a physical office, store inventory, employ people, or conduct substantial business in that state. Rules vary, but most states are aggressive about collecting revenue from businesses operating within their borders.

When forming out-of-state makes sense

Forming out-of-state isn't automatically "better," but it can make strategic sense depending on how your business operates. It's most common for fully remote businesses with no office or storefront, for holding companies that own assets or subsidiaries in multiple states, and for startups that expect to raise venture capital. Many investors prefer Delaware entities due to their familiar legal framework.

When it creates double compliance

If you run a physical business like a restaurant, retail shop, or local service company, forming in another state often doesn't help with cost saving. For example, setting up in Wyoming or Delaware won't let you avoid your home state's rules. You'll still need to foreign qualify in the state where you actually operate, which usually means paying two sets of fees. These fees include formation fees in Wyoming/Delaware and registration (plus ongoing compliance) in your home state. In other words, you're adding costs and paperwork.

Real examples: Forming in Wyoming can work for remote businesses, but if you're actually operating from Colorado (home office, employees, inventory/3PL, etc.), you may still need Colorado registration and compliance. Whereas, a consultant working with local Texas government agencies should form in Texas because being perceived as a local business matters for credibility and contract eligibility.

Simple decision checklist

If your business requires a local presence to operate or build trust with customers, it's best to form your LLC where you operate. If you're truly location-independent, you have options.

Most Popular States to Start an LLC (State-by-State Breakdown)

Here's how the top LLC formation states compare across the factors that actually matter:

Wyoming

Wyoming built its economy around attracting LLC formations, and it shows. You get strong privacy protection (owner names aren't public record), solid asset protection through charging order protections, and minimal costs. The $60 annual fee is one of the lowest in the country.

The state also offers perpetual existence by default and allows single-member LLCs to maintain charging order protection, which isn't guaranteed everywhere. Learn more about forming an LLC in Wyoming.

When to avoid Wyoming: You operate a physical business in another state and would need to foreign qualify anyway. You're seeking venture capital and investors specifically want Delaware (though many don't actually care). You need series LLC functionality (Wyoming does offer this, so this isn't a dealbreaker).

Delaware

Delaware is famous for forming corporations, but also for the formation of LLC's. The state has 200+ years of business case law, which means predictable outcomes when legal issues arise. Investors and acquirers are familiar with Delaware entities, which can smooth due diligence.

The franchise tax is $300 annually, which is higher than Wyoming but reasonable compared to other states. Delaware also offers strong charging order protections and well-established LLC statutes.

Who Delaware is right for: Tech startups planning to raise venture capital or go public eventually. Companies that will likely be acquired by larger corporations. Businesses with complex ownership structures that benefit from extensive case law.

Who Delaware isn't right for: Most small businesses, solo entrepreneurs, and bootstrapped companies. The "Delaware advantage" is real for certain business paths but oversold for everyday LLCs.

Texas

Texas has no state income tax and no annual LLC filing fees. You file a Public Information Report to confirm your registered agent, but there's no fee attached. This makes Texas extremely cost-effective for high-revenue businesses.

The $300 formation fee is higher upfront, but you'll save money within the first year if you're comparing this to states with annual franchise taxes. Texas LLC's may be subject to franchise tax if their annual gross receipts is above the $2.65 million threshold (as of 2026). Texas also has a strong economy, business-friendly regulations, and a deep talent pool.

Ideal for: Service businesses, consultants, and any high-revenue LLC that would pay substantial franchise taxes in other states. Real estate investors with Texas properties. Businesses that value the perception of being Texas-based.

Florida

Florida combines no state income tax with straightforward formation processes and reasonable fees. The $138.75 annual report fee is predictable, and the state has no franchise tax on LLCs.

Florida's large economy means good access to banking, talent, and business services. The state also offers charging order protection for multi-member LLCs.

Clear-fit scenarios: Retirees starting businesses who already live in Florida. E-commerce businesses that want no state income tax without the higher Nevada fees. Online service providers who want a U.S. business address in a major state.

Nevada

Nevada markets itself as the "Delaware of the West" with strong privacy protections and no state income tax. Nevada is known for its strong privacy as beneficial owner information isn't public, and Nevada has strong charging order protections.

The reality is that in Nevada formation costs $425 and annual fees total $350. That's significantly more than Wyoming, which offers similar privacy and asset protection.

Nevada made sense before Wyoming strengthened its LLC statutes. Now it's mainly useful if you specifically need Nevada jurisdiction for legal strategy or you're already doing substantial business there.

Niche use cases: Businesses with Nevada nexus anyway. Specific legal structures that benefit from Nevada case law. Companies that process Nevada-based payments or licensing.

California

California charges an $800 minimum franchise tax annually, even if your LLC makes no income or is inactive, you'll pay this tax starting your first year of operation.

The state also has complex compliance requirements, up to 13.3% personal income tax, and the LLC Gross Receipts Fee (up to $11,790 annually for LLCs earning over $5 million).

Why forming elsewhere usually doesn't help: If you live in California or operate your business there, you'll owe California taxes regardless of where you formed. Forming in Wyoming means paying Wyoming's fees and California's taxes. You've made your life more complicated and expensive, not simpler.

The exception: True holding companies that don't conduct business in California can form elsewhere and potentially avoid the franchise tax, however it is advised to get professional advice first because California is aggressive about claiming nexus.

Best State By Use Case

The right state depends on what you're actually building. Here's what works for different business types.

Best State for Tech Startups

Delaware wins if you're planning to raise venture capital, bring on angel investors, or eventually IPO. Investors see hundreds of Delaware entities and they know the legal framework. This familiarity speeds up due diligence and reduces friction during fundraising.

You're not forming in Delaware because the laws are objectively better. You're forming there because it's what investors expect and prefer. Fighting that preference costs you time and credibility during raises.

California leads in venture capital access and tech talent, but you don't need a California entity to build there. Many successful tech companies are Delaware C-corps or LLCs with California operations.

Wyoming and Nevada work well for bootstrapped tech companies that don't plan to raise institutional capital. You get business-friendly policies, privacy protections, and lower costs. These states compete directly for LLC formations and make it easy.

Best State for E-Commerce

Delaware gives you investor-friendly corporate law, easy formation and conversion options if you scale, and broad privacy for owners. If you're building an e-commerce brand you might sell later, Delaware creates a clean structure for acquirers.

Wyoming offers low fees, zero state income tax, strong owner privacy, and minimal ongoing compliance. If you're running a solo e-commerce operation or small team without outside investors, Wyoming lets you keep more of what you earn.

Florida means no personal income tax, access to a large consumer market, and good banking and logistics infrastructure for online sellers. If you're fulfilling business from Florida or targeting East Coast customers, it's a practical choice.

Best State for Real Estate Investors and Holding Companies

Form where the property sits. This is the most important rule for real estate LLCs. Forming in Wyoming for a Texas property means you'll still need to foreign qualify in Texas, pay Texas fees, and deal with Texas recording requirements. You're adding complexity without benefit. Read our complete guide to LLCs for real estate for more details.

Wyoming works perfectly for holding company LLCs that own multiple property LLCs. You get strong privacy, low fees, and excellent charging order protections that shield assets from personal creditors.

Delaware and Nevada both have mature case law and favorable creditor protections. Delaware offers predictable LLC law and court decisions. Nevada provides strong privacy and anti-creditor statutes. Both states work for sophisticated asset protection structures.

A Series LLC is a single LLC that can be divided into separate "series," where each series can hold its own assets and take on its own obligations. This is helpful when you want legal separation between different properties, brands, or ventures. If this setup is important for your business, states such as Delaware, Texas, Utah, and Wyoming are common examples that recognize Series LLCs.

Best State for Franchise Businesses

Delaware remains preferred for franchisor formation because franchise agreements and investor expectations favor predictable legal frameworks. Courts, lawyers, and franchisors all understand Delaware entities.

California has the largest consumer market and specific franchise protections and regulations. If you're operating franchises in California, you'll deal with California law regardless of where you formed.

Florida offers a business-friendly environment, no personal income tax, and a strong multi-location market for franchise growth. Many national franchises expand heavily in Florida because of the population and business climate.

Best State for Fully Remote/Virtual Businesses

Wyoming gives you low fees ($100 formation, $60 annual), no state income tax on LLC income, strong owner privacy, and simple ongoing compliance. If you're running a virtual assistant business, online coaching, or digital products from anywhere, Wyoming is hard to beat.

Delaware provides predictable business law and courts. If you plan to raise funding or add outside investors to your remote business, Delaware keeps your structure familiar to potential partners.

Florida means no personal income tax, a large economy with banking options, and favorable treatment for remote owners serving U.S. customers.

Texas combines no state income tax with a large talent pool, business infrastructure, and business-friendly regulations. If you're building a remote team, Texas gives you access to major metro areas like Austin, Houston, and Dallas.

What to Do After You've Chosen Your State

Once you know where to form your LLC, you need to actually create it. You've got three main routes that you can follow.

Ways to Form an LLC

DIY formation means filing directly with the state yourself. You'll save money on service fees but you're responsible for getting every form right, following up on filings, and tracking deadlines. This works if you're comfortable with legal paperwork and have time to research your state's specific requirements.

Online formation services like LegalZoom and ZenBusiness offer package pricing that handles the basic filing. You fill out forms on their website, they submit to the state, and you get your LLC documents. Prices typically range from $0 to $300 plus state fees.

The tradeoff is that these are DIY tools with some hand-holding. You're still making the decisions about structure, you just have someone filing the paperwork. If you mess up the operating agreement or choose the wrong tax election, that's on you.

Full-service platforms with attorney access like LLC Attorney and Wyoming LLC Attorney provide formation plus ongoing support. With LLC Attorney, you get Business Success Advisors available anytime, access to experienced attorneys for guidance, and same-day or 24-hour formation instead of waiting weeks.

This matters if you're not confident about LLC compliance, need to ask questions as you grow, or want the peace of mind that comes with professional support. You're paying for expertise and speed, not just paperwork filing.

For a detailed comparison of formation service options, pricing, and features, check out our comprehensive guide comparing LLC formation services.

Common Mistakes to Avoid

Ignoring foreign qualification requirements. Forming in Wyoming doesn't replace your home state's rules. If you operate in California, you'll still need to register (foreign qualification) in California too. That usually means two sets of filings, two sets of fees, and more ongoing paperwork.

Underestimating annual costs. A low upfront Wyoming filing can get pricey once you add recurring expenses like a registered agent (often around $200/year), annual report fees, and any required registration or renewals in your home state. Instead of looking only at year one, estimate the true cost over the next five years.

Poor financial separation. An LLC protects you best when it's treated as a separate business. Mixing personal and business money, skipping basic records, or paying business expenses from a personal account can weaken that protection and increase the risk of "piercing the corporate veil."

Losing good standing. If you miss an annual report deadline or let your registered agent lapse, the state can mark your LLC as not in good standing or even administratively dissolve it. Reinstatement is usually possible, but it often comes with penalties, and you may be exposed during the period your LLC wasn't compliant.

Choosing the Right State with Confidence

The best state for your LLC depends on where you operate, whether you need privacy, your revenue level, and your growth plans. Don't form somewhere just because someone you know gave you advice, or you saw it on the internet. Speak to qualified professionals that can give you the right guidance that suits your business needs.

Most small businesses should form where they operate. Online businesses have flexibility and can save money in Wyoming or Florida. Tech startups raising capital should seriously consider Delaware.

Calculate the real costs over five years, not just the formation fee. Factor in annual fees, registered agent costs, and potential foreign qualification. The cheapest upfront option often isn't the cheapest long-term choice.

Once you've chosen your state, focus on actually forming the LLC correctly and maintaining good standing. The state matters less than having a properly structured, compliant business.

Frequently Asked Questions

What is the cheapest state to form an LLC?

The cheapest states to form an LLC in, are Kentucky ($40-$50) and New Mexico ($50). However, the "cheapest" depends on whether you'll need to foreign qualify in your home state, which doubles the costs. Calculate the real five-year total including registered agent fees.

Do I need to form my LLC in the state where I live?

Not legally, but practically yes for most businesses. If you operate physically in your home state (office, store, employees), you'll need to register there anyway. Forming elsewhere means paying fees in two states. Online businesses without physical presence have genuine flexibility.

Is Delaware really better for LLCs?

Delaware is better for corporations and startups seeking venture capital because of extensive case law and investor familiarity. For most small business LLCs, Delaware offers no meaningful advantage over Wyoming or your home state. You're paying more for benefits you won't use.

Can I form an LLC in one state and operate in another?

Yes, but you'll likely need to foreign qualify (register) in the state where you operate. This means filing fees, annual reports, and compliance in both states. It makes sense for online businesses or holding companies, but not for businesses with physical operations.

What happens if I form in the wrong state?

You can dissolve your LLC in one state and form in another, though this takes time and costs money. Some states allow you to merge or convert LLCs across state lines. The bigger issue is ongoing costs: if you're paying fees in two states because you didn't understand nexus, fix it sooner rather than later.

Does forming in Wyoming really provide asset protection?

Wyoming has strong charging order protections, which limit what creditors can claim from your LLC ownership. But asset protection comes primarily from how you structure and operate your LLC, not just where you form. Mixing personal and business funds destroys protection regardless of state.

Do I need a registered agent, and do I need one in every state?

Yes. Every LLC needs a registered agent in its formation state. If you foreign qualify, you'll need a registered agent in each state where you're registered.

References

This guide draws on official state government sources and authoritative business formation resources to ensure accuracy:

State Government Sources:

• Wyoming Secretary of State Business Division
• Delaware Division of Corporations
• Texas Secretary of State Business Organizations
• Florida Department of State Division of Corporations
• California Franchise Tax Board
• Nevada Secretary of State Business Center

Tax and Compliance Resources:

• Internal Revenue Service (IRS)
• Small Business Administration

All state fees, tax rates, and legal requirements referenced in this guide are current as of the publication date. State laws and fees change periodically - always verify current requirements with the appropriate state agency before forming your LLC.