Choosing the state in which to form your LLC is one of the most important decisions for your business. But there are 50 states in the USA (+ a federal district) where you can register your LLC... So how do you know which one to register your LLC in?
If you're a US resident, the answer is usually quite simple: it's generally recommended to open your LLC in the state where you live.
If you want to form your LLC as a non-US resident, the decision can be a bit more complicated. So let's look at how to choose the right state to register your LLC!
The most popular states to open an LLC
If you don't plan to have a physical presence in the United States and you sell products or services online, these are the states our clients usually choose to register their LLC:
Delaware
- The most popular state
- Favorable legislation
- Anonymity
- No Sales Tax
- Filing Fee: $90
- Annual Report: $300
Wyoming
- No Income Tax
- Legal protections
- Anonymity
- Low costs
- Filing Fee: $102
- Annual Report: $60
New Mexico
- Top pick for freelancers
- Easy maintenance
- Anonymity
- The most affordable
- Filing Fee: $50
- No annual report
How to choose the state for your LLC?
These are the points you should consider when choosing the state for your Limited Liability Company (LLC) in the United States.
Will your business have a physical presence in the United States?
If your business has a physical presence in the United States, it's generally recommended that you open your LLC in the state where it operates.
By physical presence, we mean:
- One of the partners is a US resident
- There is a physical location where the LLC carries out operations (offices, stores, warehouses...).
- There are dependent agents in the US, meaning employees or companies that work almost exclusively for the LLC.
Although you can open an LLC in a state other than the one where it operates, doing so may require a lot of complicated paperwork and legal advice:
- You'll need to qualify your LLC as "Foreign" in the state where you have a physical presence
- You'll have to hire a registered agent and renew it every year, which can mean an additional cost.
- You'll have to file documents to avoid double taxation between your LLC's state and your state of residence
- You'll have to pay the annual obligations of both states
- Etc..
Each state's regulations
Since it's a federal country, some agencies apply their rules across all states and others apply them at the state level.
When it comes to LLCs, IRS (Internal Revenue Service) rules apply the same way in every state, while each secretary of state has its own regulations.
Each state's LLC regulations are set out in what's called a "Limited Liability Company Act". Although it doesn't vary much from state to state, it's advisable to learn about the rules imposed by each secretary of state before making a decision.
It's also important to note that through an operating agreement, the LLC itself can override certain state rules about how it operates.
The Filing Fee
The filing fee is the price each state charges to register your LLC. Amounts usually range from $40 to $500, with an average of $123 and a median of $100.
If you're very price-sensitive, it's a point to keep in mind.
Annual renewal costs
Depending on the state you choose, you may have to file an annual report (it may go by other names, such as "Franchise Tax" or "biennial report"). This type of report is a recurring obligation needed to renew the LLC and show that it's in compliance with the secretary of state.
The annual report is essential to renew the LLC and keep operating, and it usually costs between $0 and $800, with an average of $89 (see the breakdown for each state).
The good news is that some states don't require an annual report, and others require it but charge a $0 fee.
States that don't require an annual report
- South Carolina
- Ohio
- New Mexico
- Missouri
- Arizona.
States with no annual report fee
- Idaho
- Mississippi
- Minnesota
- Texas
It's essential not to forget to file the annual report, since this can lead to significant fines or even the automatic closure of your LLC.
Anonymity
Some states allow you to create "anonymous LLCs". This means you can form an LLC there and the secretary of state doesn't require the owners or managers of the LLC to disclose their identity. They will only require the name of the registered agent or an organizer (the person who files the LLC).
As a result, the names of the LLC's members are not available to the public, and the LLC can't easily be linked to a specific person. This way, you can protect your privacy and avoid your name being publicly associated with the company.
Be aware that registering as an anonymous LLC doesn't guarantee complete anonymity with your bank or the Internal Revenue Service (IRS). Nor does it exempt the company from paying taxes.
The states that allow anonymous LLCs are: Delaware, Nevada, New Mexico and Wyoming.
Legislation
Each state's legislation is another point to consider when choosing which state is best for opening your LLC.
When you open an LLC in the United States, if your business faces lawsuits, they may have to be resolved in the state where your LLC is registered.
Certain states, such as Delaware or Wyoming, have legislation and extensive case law that are favorable to business entities. This way, you can make sure your LLC has an extra layer of protection against potential legal disputes.
LLC costs and obligations by state
| State | Filing Fee | Filing | State fee | Frequency | Due date | Late penalty |
|---|---|---|---|---|---|---|
| Alabama | $200 | Annual Report | $100 (may vary) | Annual | Extendable to 2.5 months after formation | State tax penalty |
| Alaska | $250 | Biennial Report | $100 | Biennial | January | $37.50 |
| Arizona | $50 (+ $299 for publication) | None | $0 | - | - | - |
| Arkansas | $45 online, $50 by mail | Annual Report | $150 | Annual | May 1 | $25 |
| California | $70 | Franchise Tax and Biennial Report | $800 + $20 | Annual (Tax) and Biennial (Report) | 3 months after the LLC's formation (Tax) and anniversary date (Report) | $250 |
| Colorado | $50 | Annual Report | $10 | Annual | Last day of the anniversary month | $40; $100 if more than 3 months late |
| Connecticut | $120 | Annual Report | $80 | Annual | March 31 | - |
| Delaware | $90 | Annual Report | $300 | Annual | June 1 | $200 + 1.5% each additional month |
| Florida | $125 | Annual Report | $138.75 | Annual | May 1 | $400 |
| Georgia | $100 | Annual Report | $50 | Annual | April 1 | $25 |
| Hawaii | $50 | Annual Report | $15 | Annual | 3 months after the anniversary date | $10 |
| Idaho | $100 | Annual Report | $0 | Annual | Last day of the anniversary month | - |
| Illinois | $150 | Annual Report | $75 | Annual | First day of the anniversary month | $100 |
| Indiana | $95 online, $100 by mail | Annual Report (Business Entity Report) | $31 | Biennial | Last day of the anniversary month | - |
| Iowa | $50 | Biennial Report | $45 | Biennial | April 1 of every odd-numbered year | - |
| Kansas | $160 online, $165 by mail | Annual Report | $50 | Annual | 15th day of the fourth month after the end of the fiscal year | - |
| Kentucky | $40 | Annual Report | $15 | Annual | June 30 | - |
| Louisiana | $100 | Annual Report | $35 | Annual | Anniversary date | - |
| Maine | $175 | Annual Report | $85 | Annual | June 1 | $50 |
| Maryland | $100 | Annual Report, Personal Propert, Tax Return (if you own property in the state) | $309 | Annual | April 15 | - if no property is owned |
| Massachusetts | $500 | Annual Report | $520 | Annual | Anniversary date | - |
| Michigan | $50 | Annual Report (Annual Statement) | $25 | Annual | February 15 | - |
| Minnesota | $155 online, $135 by mail | Annual Report (Annual Renewal) | $0 | Annual | December 31 | - |
| Mississippi | $50 | Annual Report (Annual Renewal) | $0 | Annual | April 15 | - |
| Missouri | $50 (online), $105 (mail) | None | $0 | – | – | – |
| Montana | $70 | Annual Report | $20 | Annual | April 15 | $15 |
| Nebraska | $105 | Biennial Report | $13 | Biennial | April 1 of odd-numbered years | - |
| Nevada | $75 + $150 | Annual List of Managers or Managing Members and State Business Licence Renewal | $150 + $200 | Annual | Last day of the anniversary month | $75 + $100 |
| New Hampshire | $100 | Annual Report | $102 | Annual | April 1 | $50 |
| New Jersey | $125 | Annual Report | $78 | Annual | Last day of the anniversary month | - |
| New Mexico | $50 | None | $0 | - | - | - |
| New York | $200 + publication costs | Biennial Report | $9 | Biennial | Last day of the anniversary month | - |
| North Carolina | $125 | Annual Report | $202 | Annual | April 15 | - |
| North Dakota | $135 | Annual Report | $50 | Annual | November 15 | $50 |
| Ohio | $99 | None | $0 | - | - | - |
| Oklahoma | $100 | Annual Report | $25 | Annual | Anniversary date | - |
| Oregon | $100 | Annual Report | $100 | Annual | Anniversary date | - |
| Pennsylvania | $125 + publication costs | Decennial Report | $70 | 10 years | Last day of years ending in 1 | - |
| Rhode Island | $150 | Annual Report | $50 | Annual | November 1 | $25 for each month late |
| South Carolina | $110 | None (unless the LLC is taxed as a Corp) | $0 | - | - | - |
| South Dakota | $150 | Annual Report | $50 | Annual | Last day of the anniversary month | $50 |
| Tennessee | $300 (minimum) | Annual Report | $300 minimum ($50/member) | Annual | First day of the fourth month after the end of the LLC's fiscal year | - |
| Texas | $300 | Annual Report | $0 if revenue < $1,180,000 | Annual | May 15 | $50 + 5% interest on the fee + an additional 5% interest if more than 30 days late |
| Utah | $70 | Annual Report | $15 | Annual | Anniversary date | $10 |
| Vermont | $125 | Annual Report | $35 | Annual | 2.5 months after the fiscal year | $25 |
| Virginia | $100 | Annual Report | $50 | Annual | Last day of the anniversary month | $25 |
| Washington | $200 | Annual Report | $60 | Annual | Last day of the anniversary month | $25 |
| West Virginia | $100 | Annual Report | $25 | Annual | June 30 | $100 |
| Wisconsin | $130 (online), $170 (mail) | Annual Report | $25 | Annual | Last day of the anniversary quarter | - |
| Wyoming | $100 (mail), $102 (online) | Annual Report | $62 | Annual | First day of the anniversary month | - |
Conclusion
The best state to open your LLC in will depend entirely on your business's needs and operations. It may be worth consulting a legal expert before making a decision.
In general, if you plan to have a physical presence in the United States, it's usually advisable to open your LLC in that state.
If you're going to offer services or products online, the most common states for opening an LLC as a non-US resident are usually Delaware, New Mexico and Wyoming.
If you want to learn more about the features of each state, check out our guides:
To dissolve an LLC, you must meet federal, state and local requirements. You must formally dissolve the company in its state by filing specific legal documents, which differ from state to state. You must also notify your state's tax authority for income tax and sales tax purposes. You must also notify the IRS.What is the best state to open an LLC as a freelancer?
If you work freelance and want to easily export your services while getting paid in dollars, opening a single-member LLC can be a great option. The most common states among freelancers are usually Delaware, Wyoming and New Mexico. Personally, I opened my LLC in New Mexico, since it has a low filing fee and no annual report is required.
What is the best state to open an LLC?
There is no single best state to open an LLC in general. Each state has its advantages and disadvantages depending on the business. As a general rule, if you have a physical presence, it's usually advisable to open it in the state where your business is present. If you're a non-resident and your business won't have a physical presence, Delaware, New Mexico and Wyoming can be good options.
Can I easily change states after registering my LLC?
Once you register your LLC, you can't change its state. What you can do is dissolve your current LLC and create another one in the state that suits you.
Is it easy to create an LLC?
Creating an LLC is not a complicated process. It can be done entirely online on the secretary of state websites. However, there are several services that can do all the work for you, which makes it even easier.
Written by
Ignacio Navarro
Ignacio Navarro is a Certified Public Accountant, founder of Start Companies and a specialist in U.S. companies for entrepreneurs, freelancers and digital businesses in Latin America. With training in international taxation and studies at UCEMA, he advises non-resident clients on forming and maintaining LLCs, opening bank accounts, invoicing, accounting and taxes. His experience combines tax strategy, compliance and practical vision for operating in the U.S. in a simple, organized and professional way.
