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Which state should you form your LLC in?

Updated . General information, not legal or tax advice.

For most small businesses the answer is the state where you actually operate: where you work, keep an office, have employees or sell from. Forming somewhere else rarely removes your home state’s requirements. It usually adds a second state’s.

Why the home state is usually simplest

A company formed in one state that does business in another must register there as a “foreign” entity. The U.S. Small Business Administration notes that foreign-qualified businesses typically pay taxes and annual report fees in both their formation state and every state where they’re registered (SBA). That means two sets of fees, two annual filings, and a registered agent in each state.

Compare the state fees

Pick where you operate and where you’re thinking of forming. This adds up the published state fees only; it doesn’t include taxes on income, publication costs, or anything a service charges.

  • Delaware charges every LLC an annual tax of $400, due June 1, with a $200 penalty plus interest for late payment, whether or not the company does business there (Delaware Division of Corporations). Delaware’s strengths, its business courts and corporate case law, matter most to companies raising venture capital, and those are usually corporations rather than LLCs.
  • Wyoming has low fees: $100 to form and an annual report license tax of $60 or $0.0002 per dollar of Wyoming assets, whichever is greater (Wyoming fee schedule). If you operate elsewhere, you still pay your home state’s fees.
  • Nevada requires a $200 state business license each year for LLCs, on top of its annual list fee (Nevada Secretary of State).
  • California charges an $800 annual tax to every LLC organized there or doing business there, including LLCs formed in another state, until the LLC is cancelled (California Franchise Tax Board). A Californian who forms in Wyoming pays California’s $800 as well.

When forming elsewhere can make sense

  • You plan to raise money from investors who expect a Delaware entity.
  • The business genuinely operates in several states or entirely online, with no clear home state.
  • You want a specific legal feature another state offers, after talking to a lawyer.

Privacy is often cited as a reason, but most states publish only the registered agent and an address, and you can use a registered agent service in your home state too.

Before you decide

This is general information, not legal or tax advice. If your situation involves investors, several states or significant income, an accountant or business attorney in your state can tell you what applies. Whatever you choose, check the name in each state where you’ll register.