Quick Answer — What is the best state to file an LLC? For most people, it is the state where you live and do business. That is the short, unglamorous answer — and it is the answer most formation-service websites bury, because a home-state filing does not need their upsell. There are real exceptions. Wyoming is the best out-of-state choice for most location-independent online businesses and non-US founders: $100 to file, $60 a year to maintain, no state income tax, and member names are not listed on the public filing. Delaware is the best choice if you plan to raise venture capital or bring in institutional investors, thanks to its Court of Chancery and the legal predictability investors trust. New Mexico is the cheapest state to keep long-term: $50 to file and no annual report or annual fee at all. The trap to avoid is forming in a famous low-fee state while you actually operate somewhere else. In that case you usually must also register as a foreign LLC in your home state — paying two filing fees, two annual fees, and two registered agents. The “cheap” state then costs more than filing at home in the first place. California founders get no escape at all: California’s $800 minimum franchise tax applies to any LLC doing business in California, wherever it was formed. This guide gives you the decision in order: the home-state rule, a worked total-cost comparison, a state-by-state table, and the special cases where Wyoming, Delaware, New Mexico, or Nevada genuinely win.
The Home-State Rule: Why Most People Should File at Home
An LLC is not a passport. Forming it in Wyoming does not move your business to Wyoming. Your LLC must be registered in every state where it is “doing business,” and working from your home, hiring there, holding property there, or having an office there all count. So if you live in Ohio and run your business from Ohio, a Wyoming LLC normally needs a second registration in Ohio as a foreign LLC. Count what that means: you pay Wyoming’s filing fee and Ohio’s foreign registration fee; you need a registered agent in Wyoming and a registered agent in Ohio; you file Wyoming’s annual report and Ohio’s filings, and pay both states’ yearly charges; Ohio still taxes the income you earn in Ohio. Wyoming’s lack of a state income tax saves you nothing on Ohio-earned income. Skipping the home-state registration is not a saving either. States can fine an unregistered LLC, and an unregistered LLC can lose the right to bring a lawsuit in that state’s courts until it registers. The home-state rule has one more practical benefit: simplicity. One registration, one set of deadlines, one registered agent, and no confusion about which state’s rules govern your day-to-day business. For a consultant working from home, a local service business, a shop with a physical location, and most one-person online businesses run from one place, home is cheaper and simpler.
The Foreign LLC Trap, With Real Numbers
Let us make the trap concrete with an Ohio founder choosing between an Ohio LLC and a Wyoming LLC.
| Cost | Ohio LLC only | Wyoming LLC + Ohio foreign registration |
|---|---|---|
| Formation filing | $99 (Ohio) | $100 (Wyoming) + $99 (Ohio foreign) = $199 |
| Registered agent, per year | One agent, roughly $100–$125 | Two agents, roughly $200–$250 |
| Annual state fees | $0 (Ohio has no annual report for LLCs) | $60 (Wyoming) + $0 (Ohio) = $60 |
| Year-one total, state fees + agents | Roughly $199–$224 | Roughly $459–$509 |
| Every year after | Roughly $100–$125 (agent only) | Roughly $260–$310 (agents + Wyoming report) |
The Wyoming route costs about twice as much in year one and every year after — for a founder who never leaves Ohio. The only thing the extra money buys is a Wyoming filing that does no work, because the business is still taxed and regulated in Ohio. Now flip the example. A founder with no US presence at all — say, a freelancer in another country selling digital services to US customers, with no office, employees, or property in any US state — has no home state to register in. For that founder, Wyoming’s single $100 filing and $60 annual report is genuinely the cheapest clean option, and there is no second registration to pay for. That is why “Wyoming is best” and “your home state is best” are both true: they answer different situations.
State-by-State Comparison: The States People Actually Ask About
Fees change, so check the Secretary of State’s site before you file. The figures below are the widely published state fees as of 2026 guides, excluding registered-agent and service fees.
| State | Filing fee | Annual state cost | State income tax | Privacy | Best for |
|---|---|---|---|---|---|
| Your home state | Varies ($40–$500) | Varies | Taxed where you earn | Varies | Almost everyone with a physical base |
| Wyoming | $100 | $60 annual report (minimum license tax) | None | Members not listed publicly | Online businesses, non-US founders, asset protection |
| Delaware | About $90–$110 | $300 franchise tax, due June 1 | None on income earned outside Delaware | Members not listed publicly | Startups raising venture capital |
| Nevada | $425 in year one ($75 articles + $150 initial list + $200 business licence) | $350 a year ($150 annual list + $200 licence) | None | Managers/managing members are listed — privacy is weaker than marketed | Founders with a real Nevada connection |
| New Mexico | $50 | $0 — no annual report or annual fee | Taxed on New Mexico income | Members not listed publicly | Cheapest long-term holding, privacy on a budget |
| Montana | $35 | $0 annual report fee when filed on time (Jan 1–Apr 15) | Taxed on Montana income | Standard | Cheapest filing fee in the US |
| California | $70 + $20 statement of information | $800 minimum franchise tax every year | Yes | Standard | Only if you actually operate in California |
Wyoming: The Best Out-of-State Default
Wyoming invented the modern LLC in 1977, and it still offers the strongest package for a founder with no fixed US base. No state income tax, no franchise tax, a $100 filing fee, and a $60 annual report make it the cheapest famous state to maintain. Member and manager names do not appear on the public Articles of Organization, which is real privacy, not a marketing claim. Wyoming also has strong charging-order protection: if a creditor wins a lawsuit against you personally, it generally cannot seize your LLC or force a sale of it — it can only claim distributions if and when you choose to make them. That protection is especially strong for single-member LLCs, where some other states are weaker. Wyoming’s one weakness is investor familiarity. Venture capital firms know Delaware law cold and often require it. If you never plan to raise institutional money, that weakness does not matter.
Delaware: The Investor Standard, Not the Cheap Standard
Delaware is the most popular state for companies that shop around, and for one specific reason: investors. Its Court of Chancery is a specialised business court with centuries of case law, no juries, and judges who decide business disputes full-time. That predictability is why venture-backed startups, companies issuing equity to investors, and businesses planning to go public overwhelmingly choose Delaware — and why investors often insist on it. For an ordinary small business, Delaware is expensive upkeep: about $90–$110 to file plus a $300 annual franchise tax, every year, regardless of revenue. Some 2026 guides list a higher Delaware figure, so verify the current tax before filing. If you are not raising capital, you are paying a premium for a court system you will probably never use.
Nevada: The Most Over-Marketed Option
Nevada is sold as a privacy and tax haven, but the numbers tell a colder story. Year one costs $425 in state fees alone, and $350 every year after — more than Wyoming, Delaware, or New Mexico. And the privacy claim is weaker than advertised: Nevada requires the names and addresses of managers or managing members on public filings, so passive investors can stay anonymous but the people running the company cannot. Unless you have a genuine Nevada connection — existing business there, property there, or a specific legal reason — Nevada is the worst value of the three famous states.
New Mexico and Montana: The Quiet Cheap Options
New Mexico charges $50 to file and then nothing, ever, in annual state fees — there is no annual report at all. That makes it the cheapest state to keep over five or ten years, and it offers real member privacy too. Its catch is the same as Wyoming’s: if you operate elsewhere, you still need a foreign registration at home, and New Mexico’s foreign registration fee ($100) is double its domestic fee. Montana has the lowest filing fee in the country at $35, and no annual report fee when the report is filed on time. Neither state has Delaware’s investor prestige or Wyoming’s charging-order reputation, but for a founder who simply wants a low-cost, low-paperwork entity — and who genuinely operates there or nowhere — they beat the famous names on price.
The Tax Myth: Forming Elsewhere Does Not Cut Your Tax Bill
This is the misunderstanding that costs founders the most money. An LLC is usually a pass-through entity for federal tax purposes: the business itself does not pay federal income tax, and profits flow through to the owners’ personal tax returns. Your state income tax then depends on where you live and where the income is earned — not on where the LLC’s paperwork was filed. Forming in Wyoming does not reduce your state income tax if you live in New York or California and do your work there. California will still want its $800 minimum franchise tax from any LLC doing business in California, wherever it was formed. New York will still tax a New York resident’s income. The no-income-tax benefit of Wyoming or Nevada only helps income that is genuinely earned in Wyoming or Nevada, or income of a non-US founder with no US state tax home. What state choice can change is narrower: entity-level taxes and fees (like California’s $800 or Delaware’s $300), the cost of compliance, privacy, and the legal framework for disputes and investors. Those are real differences — just not the “pay zero tax by filing in Wyoming” promise that formation ads imply. Talk to a CPA about your own situation before choosing a state for tax reasons; this article is general information, not tax advice.
When Out-of-State Formation Genuinely Makes Sense
Use this checklist. If none of these apply, file at home.
- You have no US operating base. You are a non-US founder, or a fully location-independent online business with no office, employees, or property in any state. Wyoming is usually the pick; New Mexico is the budget alternative.
- You are raising venture capital or issuing equity to investors. Delaware is the standard investors expect, and fighting that expectation costs more than the $300 annual tax.
- Your home state is unusually expensive or hostile. California’s $800 annual tax is the classic example — but remember it follows you anyway if you keep doing business in California, so this reason alone rarely justifies moving.
- You want maximum privacy or asset protection and have no home-state anchor. Wyoming’s combination of privacy and charging-order protection is the strongest of the cheap states.
- You hold assets in multiple states. A holding-company structure — for example, a Delaware holding LLC owning operating LLCs in the states where property or business sits — can make sense, but that is a structure to design with a lawyer, not a single filing.
And three situations where out-of-state formation is the wrong move even if the fees look tempting: You have a physical location. A store, office, or warehouse creates a registration duty in that state regardless of where you formed. You hold a professional licence. Attorneys, doctors, real estate agents, and contractors licensed in a state generally must form their professional LLC in that state to keep the licence valid. Your LLC owns real property. A real estate LLC must register in the state where the property is located, not just the formation state.
How to File, Step by Step
Once you have picked a state, the process is the same everywhere, with different forms and fees.
- Check the name. Search the Secretary of State’s business database to make sure your LLC name is available and includes “LLC” or “Limited Liability Company” as your state requires.
- Appoint a registered agent. This is a person or company with a street address in the formation state who can receive legal papers. You cannot use a PO box, and if you form out of state, you need an agent there — typically $100–$150 a year.
- File the formation document. Usually called Articles of Organization (or a Certificate of Formation in Delaware). This is the filing fee in the table above.
- Sign an operating agreement. Even single-member LLCs should have one. It sets out ownership, management, and what happens if a member leaves or dies, and banks and courts take it seriously.
- Get an EIN from the IRS. Free, online, and needed to open a business bank account and file taxes. Non-US founders without a Social Security number can apply by fax or mail instead.
- Register as a foreign LLC at home, if needed. If you formed out of state but do business in your home state, file the foreign registration there before you start operating.
- Open a separate business bank account. Mixing personal and business money is the fastest way to weaken the liability protection you formed the LLC to get.
- Calendar your compliance. Annual reports, franchise taxes, and registered-agent renewals all have deadlines, and missed filings can dissolve your LLC or cost late fees.
The Compliance Calendar Nobody Shows You
Formation is the easy part. Staying in good standing is where founders slip, because every state has a different rhythm.
| State | Annual filing | Typical due date | Miss it and… |
|---|---|---|---|
| Wyoming | Annual report | Anniversary month of formation | Late fees, then administrative dissolution |
| Delaware | Franchise tax | June 1 | $200 late penalty plus interest, then void status |
| Nevada | Annual list + business licence renewal | Last day of the anniversary month | $75 late fee on the list, $100 on the licence |
| New Mexico | None | None | Still lose good standing if your registered agent lapses — with no annual filing to warn you |
| Montana | Annual report | January 1–April 15 (free on time) | $35 late fee after April 15 |
| California | Statement of information + franchise tax | Varies by formation date | $250 penalty on the statement, plus the $800 tax keeps running |
New Mexico’s “no annual report” is a double-edged sword: with no yearly filing to remind you, an LLC can quietly lose its registered agent and be administratively revoked with no missed deadline to warn you. Put your own calendar reminder in place if you choose a no-report state.
Common Mistakes That Undo the Whole Point
- Forming in Wyoming and operating at home without a foreign registration. You pay twice and still risk fines and losing court access at home.
- Using your home address as the registered office in a privacy state. The privacy benefit disappears the moment your own address is on the filing. Use a registered agent’s address if privacy matters to you.
- Filing in a no-tax state and assuming you owe no tax. You owe tax where you live and earn. The filing state is not a tax shelter for domestic income.
- Skipping the operating agreement. Banks ask for it, courts respect it, and multi-member LLCs without one fall back on default state rules that may not match what the members actually agreed.
- Letting the annual report lapse. A dissolved LLC offers no liability protection. The cheapest state is the one whose deadlines you actually meet.
- Choosing Delaware for a business that will never raise money. You pay $300 a year for investor prestige you never use, when Wyoming or your home state would cost a fraction.
The Decision, in One Flow
Ask these questions in order, and stop at the first yes.
- Are you raising venture capital or bringing in institutional investors? Yes → Delaware.
- Do you operate from one US state with a physical base there? Yes → that state.
- Are you a non-US founder, or fully location-independent with no US base? Yes → Wyoming (or New Mexico if lowest long-term cost matters most).
- Do you hold property or a licence in a specific state? Yes → that state, for that LLC.
- None of the above? File where you live. It is the cheapest, simplest, and most defensible answer — and it is the answer most “best state” lists are paid not to give you.
Frequently Asked Questions
What is the best state to file an LLC for a small business?
Your home state, in most cases. You avoid a second foreign registration, a second registered agent, and a second set of annual fees, and you are taxed where you actually earn the income anyway. Wyoming is the best out-of-state alternative for location-independent businesses, and Delaware is the best for venture-backed startups.
Is Wyoming or Delaware better for an LLC?
Wyoming is better for most small businesses: $100 to file and $60 a year to maintain, no state income tax, real member privacy, and strong charging-order protection. Delaware is better if you are raising venture capital, because investors expect Delaware law and its Court of Chancery. For a business that will never raise institutional money, Wyoming wins on cost.
What is the cheapest state to file an LLC?
Montana has the lowest filing fee at $35. New Mexico is the cheapest to keep: $50 to file and no annual report or annual fee. Over five years, New Mexico’s state cost is just $50, against $340 for Wyoming ($100 + four years at $60) and far more for Delaware or Nevada — before registered-agent fees, which apply everywhere.
Can I form an LLC in a state where I do not live?
Yes. You can form an LLC in any US state regardless of where you live. But if you do business in your home state, you must usually also register there as a foreign LLC, which erases most of the savings. Non-US founders with no US base face no such second registration, which is why Wyoming and New Mexico are popular with them.
Does forming an LLC in Wyoming save taxes?
Not on income you earn in another state. Your state income tax follows where you live and where the income is earned, not where the LLC was filed. Wyoming’s lack of a state income tax helps only income genuinely earned in Wyoming, or founders with no US state tax home. California’s $800 franchise tax applies to any LLC doing business in California, wherever it was formed.
Do I need a registered agent in the state where I form?
Yes, every state requires an LLC to have a registered agent with a street address in that state. If you form out of state, you need an agent there, and usually another one at home if you register as a foreign LLC. Budget roughly $100–$150 per agent per year.
What happens if I do not register my out-of-state LLC at home?
Your home state can fine you, and in many states an unregistered foreign LLC cannot bring a lawsuit in state courts until it registers and pays back fees and penalties. Operating unregistered also creates tax and compliance exposure that wipes out any filing-fee saving.
Is Nevada a good state for LLC privacy?
Less good than marketed. Nevada requires managers or managing members to be named on public filings, so the people running the company are not anonymous. Wyoming and New Mexico do not list member names on the public formation filing, which is stronger privacy at a much lower price.
How long does it take to form an LLC?
Most states process online filings in a few business days to two weeks. Montana advertises about five business days standard; Delaware and Wyoming commonly take up to two weeks without expedited service, which costs extra. Your EIN from the IRS is usually issued immediately online for US founders.
Should I use a formation service or file directly with the state?
Filing directly with the Secretary of State costs only the state fee, and the forms are short. A formation service adds convenience and a registered agent, typically $100–$300 a year on top of state fees. If privacy matters, a service acting as organiser and agent also keeps your name off the public filing in states like Wyoming. Either way, verify the current fee on the state’s own site before paying.
Bottom Line
The best state to file an LLC is usually the least exciting answer: the state where you live and work. Wyoming earns its reputation for founders with no US base, Delaware earns it for founders chasing venture capital, and New Mexico earns it for founders who want the lowest long-term cost. Nevada, for most people, earns its fees but not its hype. Pick the state that matches your actual business — where you operate, who is investing, and what protection you genuinely need — and then protect that choice with the unglamorous work: an operating agreement, a separate bank account, and a compliance calendar you actually follow. That is what keeps an LLC working long after the filing fee is forgotten.
This article is general information, not legal or tax advice. LLC fees, taxes, and filing rules change, and they vary by state and situation. Verify current fees on the Secretary of State’s website and talk to a licensed attorney or CPA before forming your LLC.
