Best State to Form an LLC (2026 Guide)

Best State to Form an LLC in 2026

Choosing where to form your LLC is one of the first decisions every new business owner faces. While you can legally form an LLC in any of the 50 states, the best choice depends on where you do business, how much you want to spend on filing and maintenance, and whether your business has specific needs like strong privacy protections or a well-developed body of business law.

For most small business owners, the answer is straightforward: form your LLC in the state where you live and operate. But there are situations where forming in a different state makes sense. This guide breaks down the best states for LLCs based on cost, legal protections, tax advantages, and business-friendliness, so you can make the right choice for your situation.

The Short Answer: Form in Your Home State

If you run a local business, work from home, have a physical office or storefront, or serve clients primarily in one state, form your LLC in that state. Here is why.

When you form an LLC in one state but do business in another, you must register as a foreign LLC in the state where you actually operate. Foreign LLC registration means paying filing fees and annual reports in both states. You are doubling your costs and paperwork for no practical benefit.

For example, if you live in Ohio and form your LLC in Wyoming to save on taxes, you will still need to register as a foreign LLC in Ohio. You will pay Wyoming’s $100 filing fee plus $60 annual report, Ohio’s $99 filing fee, and you will need a registered agent in both states. Your total cost is significantly higher than if you had just filed in Ohio alone (which has no annual report requirement).

The only business owners who should seriously consider forming in a different state are those with no physical presence in any particular state (online businesses with distributed teams), companies expecting significant litigation or investor activity, or businesses with multi-state operations that need to choose a “home base” strategically.

Best States to Form an LLC

Wyoming: Best Overall for Privacy and Low Cost

Wyoming is widely regarded as one of the most business-friendly states in the country. It was the first state to create the LLC structure in 1977, and its laws have been refined over decades to favor business owners.

Why Wyoming stands out:

• No state income tax on personal or corporate income
• Strong privacy protections: Members and managers are not required to be listed on the Articles of Organization
• Low costs: $100 filing fee and $60 minimum annual report
• Asset protection: Wyoming offers strong charging order protection, making it difficult for a member’s personal creditors to seize LLC assets
• No franchise tax
• Fast processing: Same-day to 3 business days

Best for: Online businesses, investors, holding companies, and anyone who values privacy and low ongoing costs without needing a physical presence in a specific state.

Filing fee: $100 | Annual report: $60 | Start an LLC in Wyoming

Delaware: Best for Raising Investment Capital

Delaware is the most popular state for large corporations and venture-backed startups. Over 60% of Fortune 500 companies are incorporated in Delaware, and its Court of Chancery, which handles business disputes without juries, has produced a deep and predictable body of business law.

Why Delaware stands out:

• Court of Chancery: Specialized business court with expert judges (no jury trials) that resolves disputes faster and more predictably
• Established legal precedent: Decades of case law provide clarity on nearly every business question
• Investor familiarity: Venture capital firms and angel investors overwhelmingly prefer Delaware entities
• Privacy: Members and managers are not listed in public filings
• No sales tax

The catch: Delaware’s $300 annual franchise tax and $90 filing fee make it more expensive than many other states. If you are not raising outside investment or expecting complex business litigation, Delaware’s advantages may not justify the extra cost.

Best for: Startups seeking venture capital, businesses expecting complex commercial disputes, and companies with sophisticated investor structures.

Filing fee: $90 | Annual franchise tax: $300 | Start an LLC in Delaware

Nevada: Best for Asset Protection (But Watch the Costs)

Nevada markets itself aggressively as a business-friendly state, and it does offer genuine advantages. But the costs are higher than most people expect.

Why Nevada stands out:

• No state income tax on personal or corporate income
• Strong asset protection: Charging order is the sole remedy for creditors against LLC membership interests
• No information sharing with the IRS (though the IRS has its own reporting requirements)
• Privacy: Operating agreement members are not public record

The catch: Nevada’s annual costs are steep. You must pay a $150 Annual List of Managers/Members and a $200 State Business License renewal every year, totaling $350 per year in recurring fees alone. The initial filing also requires these fees on top of the $75 formation cost, bringing the true first-year cost to $425. For a small business, these annual fees can outweigh the tax benefits, especially if you also need to register as a foreign LLC in your home state.

Best for: Business owners who live in Nevada or have no physical presence in another state and want strong asset protection.

Filing fee: $75 (+ $350 initial list/license) | Annual fees: $350 | Start an LLC in Nevada

New Mexico: Best for Low-Cost Privacy

New Mexico is an under-the-radar choice that offers a combination of low costs and strong privacy that rivals Wyoming.

Why New Mexico stands out:

• $50 filing fee: One of the lowest in the nation
• No annual report: Zero recurring state fees after formation
• No franchise tax
• Privacy: Member and manager names are not required in the Articles of Organization
• Fast processing: 1-3 business days online

The catch: New Mexico does not have the deep body of business case law that Delaware offers, and it is not as well-known among investors. But for a small business owner who wants minimal costs and maximum privacy, it is hard to beat.

Best for: Budget-conscious entrepreneurs, single-member LLCs, and businesses that prioritize minimal maintenance.

Filing fee: $50 | Annual report: None | Start an LLC in New Mexico

Cheapest States to Form an LLC

If keeping costs low is your top priority, these states offer the most affordable LLC formation and maintenance:

Note that the “cheapest” state is not necessarily the best choice. Arizona, Mississippi, Missouri, and New Mexico all have $50 filing fees and no annual reports, making them the most affordable states for long-term LLC maintenance at just $50 total. But if you live in New York and form in Arizona, you will still need to register as a foreign LLC in New York and pay those fees too.

Most Expensive States to Form an LLC

Some states have significantly higher LLC costs, either in formation fees, annual requirements, or additional taxes:

Key Factors When Choosing a State

Where You Do Business

This is the most important factor. If you have a physical office, meet clients in person, store inventory, or have employees in a specific state, that state will consider you to be “doing business” there. You will need to register in that state regardless of where your LLC is formed. For most people, forming in your home state eliminates the need for dual registrations.

State Taxes

Forming in a “no income tax” state like Wyoming, Nevada, Texas, or Florida does not eliminate your tax obligations. If you live in a state with income tax, you still owe that state income tax on money you earn, regardless of where your LLC is formed. The LLC’s formation state only affects state-level taxes in limited circumstances, such as when the LLC has operations or income sources in multiple states.

Annual Maintenance Costs

Look beyond the filing fee. Some states have low filing fees but expensive annual requirements. Others charge more upfront but have minimal ongoing costs. Over a 5-year period, a state with a $100 filing fee and $0 annual report (Ohio) costs less than a state with a $50 filing fee and $150 annual report (Arkansas: $800 total over 5 years).

Privacy Protections

If keeping your name off public records matters to you, states like Wyoming, New Mexico, and Delaware allow you to form an LLC without listing members or managers in public filings. In contrast, states like California, New York, and Florida require more public disclosure. Note that while state records may be private, federal tax filings still require disclosure to the IRS.

Legal Protections

Some states offer stronger liability protections than others. Wyoming and Nevada, for example, provide robust charging order protections that make it harder for a member’s personal creditors to access LLC assets. Delaware’s Court of Chancery provides predictable business litigation outcomes. For most small businesses, the differences in legal protections between states are unlikely to be relevant, but they matter for businesses with significant assets or litigation risk.

Frequently Asked Questions

Is Delaware really the best state for an LLC?

Delaware is the best state for LLCs that are raising venture capital or expect complex business litigation. Its Court of Chancery and deep body of business law provide advantages that no other state matches in those areas. For a typical small business, however, Delaware’s $300 annual franchise tax and the need to also register in your home state make it an unnecessarily expensive choice. Most small business owners are better served by forming in their home state.

Should I form my LLC in Wyoming even if I live in another state?

Only if you do not do business in your home state. If you operate a purely online business with no physical presence in your state, Wyoming can be a great choice for its low costs and strong protections. But if you have a home office, meet clients locally, or have employees in your state, you will need to register as a foreign LLC there anyway, which doubles your costs. Wyoming makes the most sense for holding companies, real estate LLCs for out-of-state properties, or truly location-independent online businesses.

What is the cheapest state to maintain an LLC long-term?

Arizona, Mississippi, Missouri, New Mexico, Ohio, and South Carolina all have no annual report requirements, making them the cheapest states for long-term LLC maintenance. Among these, Arizona and New Mexico stand out: Arizona charges $50 to file with no annual fees and offers expedited processing, while New Mexico charges $50 with strong privacy protections and no recurring costs. Ohio charges $99 to file but also has zero ongoing fees.

Can I move my LLC to a different state later?

Yes. You can either domesticate your LLC (formally transfer it to a new state, if both states allow domestication) or dissolve the LLC in the original state and form a new one in the target state. Many states now support LLC domestication, which lets you keep your EIN, contracts, and legal history intact. The process typically costs $100 to $300 in filing fees. If you think you might relocate your business, forming in your current home state and domesticating later is usually simpler than trying to pick the “perfect” state upfront.