Best State to Form an LLC: A State-by-State Look at What You’ll Actually Pay

Every year, millions of people file to start a limited liability company in the United States. The U.S. Census Bureau recorded roughly 5.5 million new business applications in 2025 alone—and a growing share of those come from outside the country. Indian entrepreneurs, in particular, have become one of the largest groups of non-resident LLC founders, driven by the growth of SaaS, e-commerce, and cross-border freelancing. For all of them, the first real decision isn’t what to sell or how to market it—it’s which state to file in.

The internet has an opinion. Search “best state to form an LLC” and you’ll get page after page insisting you need Wyoming, or Delaware, or Nevada. Some of that advice is useful. A lot of it is marketing copy from formation services that earn a referral fee regardless of which state you pick. LLCBuddy, which maintains a free database of LLC filing requirements, fees, and annual costs for all 50 states, is one of the few resources that lays out the numbers without steering you toward a particular formation service. The data below draws on that database alongside official Secretary of State filings from every jurisdiction.

The Home State Default (and Why It Usually Wins)

Here’s the boring truth most “best state” guides bury at the bottom: if you live and operate your business in one state, that’s almost always where you should form your LLC. It doesn’t matter that Wyoming has no income tax or that Delaware hosts 60 percent of the Fortune 500. Those facts apply to corporations with multi-state operations and institutional investors. They rarely help a freelance designer in Ohio or a landscaping crew in Georgia.

The reason is simple. If you form in State A but do business in State B, State B will require you to register as a “foreign LLC.” That means paying filing fees and annual reports in both states, maintaining a registered agent in both, and complying with two sets of rules. For a solo founder running an online shop from a spare bedroom in Florida, forming in Wyoming doesn’t eliminate Florida’s requirements—it doubles your paperwork.

This rule doesn’t apply to non-U.S. residents. If you’re running a business from Bengaluru or Hyderabad with no physical presence in any American state, you’re free to form your LLC wherever the costs and rules suit you best. That’s the one scenario where state shopping genuinely makes sense.

What Filing Fees Actually Look Like Across 50 States

The initial filing fee—paid once to submit your Articles of Organization—ranges from $35 in Montana to $500 in Massachusetts. The national average sits around $132. But the filing fee is only the entry ticket. What matters more is the annual cost of keeping your LLC alive.

At the cheap end: Kentucky charges $40 (₹3,400) to file and $15 per year for its annual report. New Mexico charges $50 to file and nothing annually—no report, no fee, no franchise tax. Arizona is $50 to file with no annual report requirement at all. Missouri and Ohio follow the same pattern: file once, then essentially leave the state alone.

At the expensive end: Massachusetts charges $500 (₹42,000) to file, then $500 every year for its annual report. California charges only $70 to file but hits every LLC with an $800 franchise tax due annually regardless of revenue—even if the business earns nothing. New York’s filing fee is $200, and new LLCs must publish a formation notice in two newspapers for six consecutive weeks, a requirement that can run anywhere from $200 in rural counties to $1,500 or more in New York City.

Five-year total cost is where the picture gets clearest. A New Mexico LLC costs roughly $50 (₹4,200) over five years. A California LLC costs upward of $4,070 (₹3.4 lakh). The gap is enormous, and it has almost nothing to do with quality of legal protection.

Wyoming, Delaware, and Nevada: When They Actually Make Sense

Wyoming was the first state to create the LLC structure in 1977, and it remains the favourite for founders who genuinely have no fixed U.S. location—digital nomads, e-commerce operators with no warehouse, and non-resident entrepreneurs forming a U.S. entity from abroad. The filing fee is $100 (₹8,400), the annual report costs $60, and the state levies no personal or corporate income tax. Wyoming also allows anonymous ownership: member and manager names don’t appear in public records. For Indian founders running SaaS or export-oriented businesses with no U.S. physical presence, these are real advantages. No SSN is required; the state accepts an ITIN or allows formation without one.

Delaware is the classic choice for venture-backed startups planning to raise institutional capital or eventually go public. More than 60 percent of Fortune 500 companies are incorporated there, not because the filing fee is cheap ($90) but because of the Court of Chancery—a dedicated business court with no juries and deep corporate law precedent. Investors expect it. Indian founders who have raised from Y Combinator, Accel, or Sequoia know this: the term sheet will almost certainly assume a Delaware entity. But Delaware charges a $300 annual franchise tax on every LLC, and for a bootstrapped business that isn’t chasing venture money, the Delaware premium buys very little.

Nevada markets itself aggressively as a tax haven: no state income tax, no franchise tax, and strong privacy protections. The pitch sounds compelling until you look at the fees. Formation costs roughly $425 when you include the mandatory business licence and initial list filing. Annual renewals run $350 or more. And if you actually live in, say, California, forming in Nevada does not exempt you from California taxes. The California Franchise Tax Board does not care where your LLC is registered.

The States Nobody Talks About

The states with the strongest cost-to-value ratios rarely show up in sponsored listicles, mostly because they don’t generate affiliate commissions for formation services.

New Mexico charges $50 (₹4,200) to form an LLC and requires no annual report or ongoing fee of any kind. Member names are not disclosed publicly. For non-residents operating a location-independent business—including the large number of Indian IT consultants and freelancers serving U.S. clients—New Mexico is arguably cheaper and simpler than Wyoming over any time horizon longer than 12 months.

Ohio dropped its filing fee to $99 in 2022 and requires no annual report. The state has a large, functional business court system and a well-maintained Secretary of State portal. It will never appear on a “best states” listicle because nobody runs an LLC-formation affiliate programme in Ohio.

Kentucky has the lowest filing fee in the country at $40 and charges just $15 annually. Montana is even cheaper to file at $35, with a $20 annual report. Neither state is glamorous. Both are functional and inexpensive.

The Real Cost Is Compliance, Not Formation

Filing your Articles of Organization is a one-afternoon task. The ongoing work—and the ongoing cost—comes from staying compliant year after year.

Most states require an annual or biennial report. Miss the deadline and your LLC falls out of good standing. Ignore it long enough and the state will administratively dissolve your company. Reinstatement typically costs more than the original filing. Every state also requires a registered agent—a person or service with a physical address in the state that can receive legal documents on your behalf. If you don’t live in the state where your LLC is formed, that’s $100 to $300 per year for a commercial agent.

Then there are the quirks. New York’s publication requirement can cost well over a thousand dollars in the five boroughs. California’s $800 franchise tax is due even if the LLC has zero revenue. Illinois recently raised its annual report fee to $75. These aren’t details that appear in the headline fee comparisons. They’re the costs that actually eat into a small business’s cash flow.

For non-resident founders, compliance has an additional layer. Foreign-owned single-member LLCs must file IRS Form 5472 annually, reporting transactions between the LLC and its foreign owner. The penalty for missing this filing is $25,000—not a typo. Indian founders must also consider RBI’s Overseas Direct Investment reporting requirements under FEMA, and should verify whether the India-U.S. Double Taxation Avoidance Agreement (DTAA) applies to their specific income streams. These obligations exist regardless of which state you choose.

How to Actually Choose

The decision framework is simpler than the internet makes it look.

If you operate in one state—you have a home office, clients, employees, or a storefront there—form your LLC in that state. Full stop. The marginal savings of filing elsewhere evaporate once you account for dual registration and dual compliance.

If you have no fixed U.S. location—you’re a digital business with no employees, no warehouse, and no physical presence in any state—Wyoming and New Mexico are the two strongest options. Wyoming offers more legal precedent and privacy protections. New Mexico wins on long-term cost.

If you’re raising venture capital or planning an IPO, Delaware is the standard. Investors and their lawyers expect it. Don’t fight that fight.

If you’re an NRI or Indian resident starting a U.S. entity, Wyoming is the most common starting point. The formation process is fast, no SSN is required for the EIN application (though the IRS fax process takes four to six weeks), and the state imposes no residency requirements on LLC owners. You will need a U.S. registered agent and a U.S. business bank account—fintech banks like Mercury and Relay serve non-resident LLC owners, though traditional banks like Chase or Bank of America increasingly require an in-person visit. A state-by-state comparison of LLC requirements and formation LLC services can help narrow the options based on your specific situation.

What Most “Best State” Guides Get Wrong

The fundamental error in most state-comparison content is conflating corporate incorporation with LLC formation. Delaware’s Court of Chancery has extraordinary value for C-corps with complex shareholder disputes. It offers almost nothing to a two-member LLC selling candles on Etsy. Nevada’s “no income tax” pitch is accurate but irrelevant to anyone who lives in a state that does impose income tax—you owe taxes where you live and work, not where your LLC is registered.

The second error is ignoring the foreign LLC trap. Roughly half of the “cheapest state” rankings forget to mention that forming out of state triggers registration requirements in your home state. A Wyoming LLC owned by a Californian doesn’t cost $160 per year. It costs $160 (Wyoming) plus $800 (California franchise tax) plus the registered agent in Wyoming plus the California Statement of Information fee. The “cheap” option is now the most expensive one.

The third error is treating privacy as universally valuable. Anonymous ownership matters if you’re a high-net-worth individual or you have legitimate security concerns. For a local plumber or a freelance copywriter, nobody is searching your LLC filings. Privacy protections that cost an extra $200 per year in agent fees and out-of-state registration are a luxury with no practical return.

The Bottom Line

The best state to form an LLC is almost always the one where you already do business. The exceptions are narrow and specific: location-independent digital businesses, non-resident founders, and venture-backed startups. For the growing number of Indian entrepreneurs building U.S.-facing companies from India, Wyoming and New Mexico remain the strongest defaults—cheap to form, simple to maintain, and structured for owners who may never set foot in the state.

For everyone else, the smart move is to file in your home state, set a calendar reminder for your annual report, and get back to the actual work of building your business. The information is public. It’s free. And getting it right the first time is cheaper than fixing a mistake later.

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