For most small businesses, the best state to form an LLC is your home state: the one where you live, have your office or employees, and make your sales. If you form the LLC somewhere else, your home state still treats it as doing business there, so you register it in your home state as a foreign LLC, keep a registered agent in both states, and pay both states' yearly fees. Forming elsewhere makes sense mainly for companies raising outside investment (Delaware) or for an LLC with no operations in any one state.
Why your home state usually wins
An LLC must register in every state where it does business, not only where it was formed. The SBA spells it out: a business formed in one state and active in others files for foreign qualification in each of them, and typically pays taxes and annual report fees in both its state of formation and the states where it qualifies. So a Texas shop formed in Wyoming pays Wyoming's yearly fee and keeps a Wyoming registered agent, and still registers in Texas as a foreign LLC, keeps a Texas registered agent and files the Texas franchise tax report.
It also does not dodge your home state's taxes. California is the clearest case: its $800 annual tax applies to every LLC that is organized or doing business in California, wherever it was formed (Franchise Tax Board). Income taxes generally follow where the business earns its money and where its owners live, not the state named on the formation document.
When another state makes sense
- Delaware: its LLC law and its business courts are familiar to investors and their lawyers, which matters when you plan to raise venture capital or bring in institutional investors. Delaware LLCs file no annual report but pay a flat annual tax, due June 1, whether or not they earn anything (Division of Corporations).
- Wyoming: low yearly costs, with most LLCs paying only the minimum license tax with the annual report (Wyoming Secretary of State). It can suit a holding company, or a business with no office, staff or property in any other state.
- Nevada: often promoted, but costly to keep. Nevada requires an initial list and a state business license at formation and renews both every year, so it costs more each year than most home states (Nevada law, chapter 86).
Their fees side by side, from the same official sources as each state's guide, with the date each was checked:
| State | To file | Every year to keep it | Yearly filing and tax |
|---|---|---|---|
| Delaware | $110 | $400 a year | None for LLCsTax: LLC annual taxSources: filing, report, tax; checked 2026-10-26 |
| Nevada | $425 | $350 a year | Annual List of Managers or Managing Members, $150, every yearTax: State Business LicenseSources: filing, report, tax; checked 2026-10-26 |
| Wyoming | $100 | from $60 a year | Annual Report and license tax, from $60, every yearSources: filing, report; checked 2026-10-26 |
Questions to ask before forming elsewhere
- Where will the LLC have its office, employees, inventory or customers? Each of those states will expect a registration.
- Will you raise money from investors who expect a Delaware company? If not, Delaware's advantages mostly go unused.
- Add up two states' yearly fees and two registered agents against one. Our LLC cost table has every state's figures.
If the answer points home, start with your state's guide in how to start an LLC.
More on LLCs
- How to start an LLC: the steps that are the same in every state.
- What an LLC is and what it protects.
- What an LLC costs in each state: filing fees and yearly fees side by side.
- LLC vs S corp: how the tax election works.
General information, not legal or tax advice. Facts checked 2026-10-26 against the official sources linked above; confirm with the state or the IRS before you file. How we check our facts · Report an error