Key Takeaways

  • The best place to file an LLC depends on where you conduct business, tax obligations, and filing costs.
  • Most small business owners benefit from forming their LLC in their home state to avoid extra fees and compliance requirements.
  • Delaware, Nevada, and Wyoming are popular business-friendly states with favorable tax laws and privacy protections.
  • Out-of-state LLCs must file as “foreign LLCs” in their operating states, which often doubles filing and annual maintenance costs.
  • Delaware offers specialized business courts, Nevada offers privacy and no income tax, and Wyoming provides low fees and strong asset protection.

Where to file LLC (a limited liability company) depends on a number of variable factors, which are listed below:

  • The investors
  • The amount of one-time formation fee
  • The amount of recurrent annual fees
  • The amount of recurrent franchise taxes
  • The amount of state income taxes
  • The legal system of the state

The state to file an LLC in will be determined by the investors or owners of the LLC. They should carefully consider the expenses associated with forming it in that state and how the legal system of the state will affect their LLC's business model. These factors vary from state to state.

Which State Is Right for Your LLC?

You can choose between a domestic or foreign LLC. A domestic LLC operates in the state where it was formed while a foreign LLC operates in a state where it wasn't formed. An LLC which does business outside the state where it was formed has to file a “foreign qualification” in order to do business in a different state. For instance, if you form your LLC in Nevada where you don't reside, you'll have to register your Nevada LLC in your resident state as a foreign LLC to be able to do business there.

If you file a foreign LLC:

  • You'll have two LLCs (one in your resident state, one in Nevada).
  • You'll pay double state filing fees.
  • You'll pay a registered agent to physically represent your LLC in Nevada.
  • You'll pay double yearly report fees.

Factors That Determine the Best State for Your LLC

When deciding the best place to file LLC, start by identifying where your business will actually operate. If you primarily conduct business, hire employees, or maintain property in one state, that’s usually the best location to form your LLC. Filing in another state can trigger additional registration, reporting, and tax obligations.

Key factors to evaluate include:

  • Physical presence: If you have an office, store, or employees in a state, you’ll need to register there regardless of where your LLC is formed.
  • Tax environment: Some states impose high state income taxes or franchise taxes, while others—like Wyoming and Nevada—have none.
  • Formation and maintenance fees: Compare initial filing costs, annual report fees, and business license requirements.
  • Legal protections: States like Delaware offer advanced business courts that resolve disputes quickly and efficiently.
  • Privacy laws: Wyoming and Nevada provide strong member privacy protections by not requiring owner names in public filings.

While some states market themselves as “tax havens,” LegalZoom and other industry experts note that for small business owners, the home state remains the most practical choice.

Are the Business-Friendly States for You?

If you've been doing a bit of digging on LLCs, chances are you've heard that states like Wyoming, Delaware, and Nevada are more promising for your LLC than your home state. It's true that these states are more business-friendly than other states, but you might not qualify to benefit from them because of certain legal requirements (which you might not meet) and inadequate paperwork.

If your business offers goods or services to residents of your home state, there's no point forming your LLC in a different business-friendly state and still compulsorily register it in your home state. Even Internet-based businesses can't escape the tax obligations of their home states by forming LLCs in different states. A Florida resident running an internet business from home should ideally form an LLC in Florida.

Filing in Your Home State vs. Another State

Although Delaware, Nevada, and Wyoming often rank high as business-friendly states, forming an LLC outside your home state can increase complexity and costs. If you form your LLC in a different state but operate primarily at home, you’ll be required to:

  • File for a foreign LLC qualification in your home state.
  • Pay registration fees and annual reports in both states.
  • Maintain registered agents in both locations.

This means double fees and compliance filings. For most small business owners, it’s cheaper and easier to file an LLC where the business operates. CNBC notes that professional filing services can simplify this process by ensuring your LLC meets all local compliance rules.

Tax Evasion vs Tax Avoidance

Tax evasion isn't the same as tax avoidance, there's a massive difference. Refusing to pay taxes or cheating the government by inaccurate tax filing is tax evasion. Avoiding taxes is employing legal means to reduce them.

LLCs in Delaware

Delaware is the all-time favorite for forming LLCs. Clearly, Delaware doesn't demand taxes from out-of-state revenues, which can amount to significant tax savings for LLCs in Delaware. Additionally, franchise taxes and initial filing fees are favorably low

Delaware's Chancery Court, which is one of a kind in the 50 states, is a major advantage for LLCs. That's because it treats only business-related issues. That, in turn, means that business-related disputes are resolved faster in Delaware than anywhere else where they might be delayed as they wait for other varied cases. Again, Chancery Court judges are lettered in business law while judges in general courts in other states may not be.

Advantages and Drawbacks of Delaware LLCs

Delaware is known for its advanced legal framework for business entities. The Delaware Court of Chancery specializes in business law and resolves disputes faster than most state courts. Additionally, Delaware does not tax out-of-state income, and its franchise taxes remain relatively low for small businesses.

Advantages:

  • Flexible LLC management structure.
  • Low franchise taxes for small entities.
  • Privacy—member names are not required in public filings.
  • Extensive case law and predictable legal outcomes.

Drawbacks:

  • Must register as a foreign LLC if operating in another state.
  • Annual franchise tax and registered agent fees.

For companies seeking venture capital or planning to go public, Delaware often stands out as the best place to file LLC. However, for small businesses that only operate locally, the benefits may not outweigh the extra costs.

LLCs in Nevada

It's for good reasons that Nevada is dubbed a “tax haven.” Since Nevada doesn't tax capital gains, business incomes, or inheritances, it's a favorite of business owners. Furthermore, Nevada doesn't demand franchise taxes. It only requires nominal business licenses and yearly fees. LLCs in Nevada don't need to file any income tax returns.

Again, Nevada doesn't need yearly meetings or operating agreements to honor state laws, and business owners don't have to reside in Nevada or even in the U.S. Sadly, however, Nevada's companies rank the highest in fraud. Nevada has also increased their fees for filing, which are now higher than those of Delaware and Wyoming.

Why Some Entrepreneurs Choose Nevada

Nevada’s lack of corporate and personal income taxes makes it an attractive state for some entrepreneurs. It also offers strong privacy protections, as the state doesn’t require disclosing LLC members in public filings.

Benefits of a Nevada LLC include:

  • No corporate, personal, or franchise taxes.
  • No requirement for operating agreements or annual meetings.
  • Strong privacy and asset protection laws.

However, Nevada’s business registration and annual fees have increased over time, making it more expensive than Wyoming or Delaware for small firms. Additionally, if your company operates elsewhere, you’ll still need to register as a foreign LLC and pay taxes in your home state.

LLC in Wyoming

Like Nevada, Wyoming doesn't demand franchise taxes or business income taxes. Wyoming has a low yearly renewal fee of $52. Wyoming doesn't need a State Business License. The Wyoming state government is making efforts to make Wyoming the most business-friendly state of the union.

Filing an LLC can be a bit tricky and the paperwork can be confusing. But it's important that you get it right from the beginning with qualified legal help.

Choosing the Right Filing Service

Selecting the right LLC formation service can make the process simpler and more compliant. Leading platforms like ZenBusiness, LegalZoom, and Northwest Registered Agent are highly rated for their reliability and cost-effectiveness.

When choosing a filing service, consider:

  • Registered agent services included in the package.
  • Annual compliance reminders and filing support.
  • Customer support and turnaround times.
  • Transparency of pricing to avoid hidden fees.

These services can help ensure your LLC meets both state and federal requirements, saving time and avoiding filing errors.

Wyoming’s Appeal for Small Business Owners

Wyoming frequently ranks as one of the most affordable and privacy-focused states to form an LLC. The state imposes no income or franchise taxes, charges a modest $100 filing fee, and has one of the lowest annual report fees in the nation (starting at $60).

Key benefits of a Wyoming LLC:

  • Low startup and renewal fees.
  • No requirement to list members publicly.
  • Strong asset protection laws that shield owners’ personal assets.
  • No business license requirement for most industries.

Wyoming is often recommended by small business experts as one of the best places to file an LLC for those seeking affordability and anonymity, particularly for online businesses or holding companies.

Frequently Asked Questions

1. What’s the best state to file an LLC for tax savings? Wyoming, Nevada, and South Dakota offer no state income tax, making them top contenders for tax efficiency.

2. Should I form an LLC in Delaware if I live elsewhere? Delaware is ideal for corporations and large-scale startups. Small businesses usually benefit more from forming an LLC in their home state.

3. Can I form an LLC in one state and operate in another? Yes, but you’ll need to register as a foreign LLC in every state where you do business, leading to additional fees and paperwork.

4. Which state is cheapest to start an LLC? Wyoming and Montana are among the cheapest states, with low formation and annual fees.

5. Do I need a lawyer to decide where to file my LLC? Not necessarily, but consulting a business attorney can help ensure you comply with state laws. You can find qualified attorneys through UpCounsel’s marketplace for personalized guidance.

If you need help with where to file LLC or with the entire process from scratch to finish, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.