Best State to Form LLC

Several states actively compete for the best business laws. They are Wyoming, Delaware, Nevada and New Mexico. The best state, and type of entity, depend upon your personal situation and industry. Do you have investors? Are you in real estate? Do you care more about cost, asset protection or privacy? Answering these questions will help you determine the best state to form an LLC.

No matter what you choose, we form LLCs in all 50 states and help you open a free business checking account. Our criteria for choosing a formation state, in no particular order, are:

• Initial & Renewal Cost;
• Asset Protection;
• Easy of Running & Maintaining;
• Privacy; and
• Taxes

Most people mistakenly think that you can only form a limited liability company (LLC) in the state they reside. This is not true. You can form your LLC in any state you choose, and if you have multiple companies you should consider a holding company as well.

Many also ask the best state for LLC taxes, but all LLCs are taxed as pass-through entities, so the taxes are determined by where the owners live rather than where the paperwork is filed.

As mentioned above, Wyoming, Delaware, Nevada and New Mexico are most popular, followed by your home state. Many simply choose their home state for the ease of doing business, but it may not be best in other respects.

• Cost: When considering your home state ask what the costs are to form an LLC and maintain the LLC, e.g. in California the fee is $800 to renew at a minimum. Texas has a $300 state fee to initially file, etc. but Colorado is only $50 to file and $10 to renew. Every state will differ.
• Privacy: Does your state require owners to be listed, what about your home address? Is that something you're comfortable with? Do you care if family, friends, coworkers and the public know you're the owner?
• Simplicity: New Mexico has no required annual filing. Wyoming DBAs are renewed every 10 years, and Colorado's every year. Nevada has a business license and statement of information, Florida doesn't. The point is... what you are doing, and whether you have help can determine whether the requirements are worth it.
• Asset Protection: Are you in a risky industry? Do you have valuable assets? Do you have a risky profession, e.g. a Doctor, or kids who drive your car (and may make a costly mistake)? These help determine whether seeking asset protection is worth the effort. Some won't ever get sued and are happy with minimal insurance, others prefer to place many barriers to their assets.

With the above framework in mind, you can consider whether forming in the traditional corporate havens make sense for you. Every jurisdiction has its time and place, let us help you find yours.

• Wyoming LLCsWyoming is best known for low fees, privacy and asset protection. It is the best state for small businesses and non-residents who are cost conscious. The initial filing fee is $100 and the company is formed immediately, the renewal fee is only $60. Both Corporations and LLCs are anonymous with your information never made public.
• Delaware LLCsDelaware is prestigious because most Fortune 500 companies and start-ups are there. It's the ideal place for raising capital and growing your company. Founders and investors often prefer a Delaware Corporation rather than an LLC though. Fees are higher, e.g. $300 for annual tax for an LLC, with expedited service costing an extra $50 for a 24-hour turnaround, and $100 for the same day.
• New Mexico LLCsNew Mexico has a popular niche for being extremely inexpensive while allowing anonymity. The state fee is $50 for the first year and there are no annual reports. The only requirement is you maintain a registered agent in the state to avoid being dissolved. The Corporations are not private and have a state tax. So they are not popular with out-of-state business owners.
• Nevada LLCsNevada's time has largely passed due to large fee and tax increases. They are more expensive than Delaware, but provide less asset protection than Wyoming. They also require a list of owners to be sent to the state for their database. A decade ago they were popular, but ultimately they raised fees and changed their laws, losing their prestige in the end

Online companies are a good example because they are the paradigmatic location independent company. There are generally no employees or warehouses, just a website and one or several owners. For this reason they have the flexibility to form an LLC in any state as they don't meet the traditional requirements for "doing business" anywhere.

It's important to note Delaware does not have a sales tax and so cannot provide a sales tax permit or resale license that many dropshippers, ecom, fba, etc. companies need to provide suppliers. We generally advise either Wyoming for the asset protection or New Mexico for the low cost.

Wyoming is the best state. It's the only state which says Single-Member LLCs must be treated the same as Multi-Member LLCs. This applies to the corporate veil and charging order protection. They also have a "close LLC" which is not required to hold regular or annual meetings for added simplicity.

A foreign LLC is any limited liability company which is formed in one state and then files to do business in a second state. You can foreign file in as many states as you want or need. Foreign registration is generally needed when you have employees or a physical location in that state as you are deemed to be doing business there. A foreign LLC is not an LLC owned by non-residents.

When considering a foreign filing you should consider whether it's more beneficial to have a child or subsidiary company instead. This provides a double corporate veil and the ability to manage assets and liabilities more effectively.

Wyoming is often considered the best state in which to form an LLC. Forming an LLC in Wyoming is relatively inexpensive. The initial filing fee to set up an LLC in Wyoming is only $100 and the annual report costs $60. Wyoming also has a business-friendly tax structure with no corporate or personal income taxes and offers the strongest asset protection laws in the nation. Sales tax is a low 4.0%.

Historically, Delaware has been the most popular state to form an LLC because of its strong reputation for being friendly to businesses and its ability to offer a quick filing process in addition to the increased protections it offers to business owners. The filing fee in Delaware is currently $90 (which is comparably lower than most states filing fees), but Delaware requires LLCs to file an annual tax which costs $300 (which is comparably higher than other states).

Additionally, Delaware is respected among businesses because Delaware uses a separate court (the Chancery Court) to handle any business lawsuits or matters. The Chancery Court comprises judges who are experienced in business affairs. This allows the judges to ensure fair and equitable outcomes; this is also why Delaware is consistently ranked among the top states in equity lawsuit fairness. Finally, Delaware protects business owners against creditors in the opportune case that a member is sued, or the company goes bankrupt.

Nevada does not tax corporate or personal income and does not have franchise taxes. The state also does not require you to hold annual meetings or maintain an operating agreement. Nevada’s LLC Act was designed to imitate Wyoming’s renowned protections. Nevada does not have information-sharing agreement with the IRS, unlike many other states, which means business owners can maintain their privacy. Note, however, that it costs $75 to form an LLC in Nevada with an annual list fee of $150 and a business license renewal fee of $200.

Choosing the ideal state for forming an LLC involves careful consideration of factors such as costs, asset protection, privacy, and taxation. Wyoming, Delaware, Nevada, and New Mexico are prominent contenders, each catering to various needs. Whether seeking affordability, corporate prestige, anonymity, or tax advantages, the ultimate decision hinges on your industry and personal preferences.

With our expertise, we assist in forming LLCs across all states, providing valuable guidance in making the right choice for your business. If you're interested in forming an LLC and have any questions, connect with our experienced paralegal team. Complete the provided contact form or dial +1 (307) 683-0983 to reach out to us.