Most Affordable States to Form an LLC in the U.S.
Starting a limited liability company(LLC) in the USA. Some states are celebrated for their
business-friendly practices, but the formation and maintenance costs differ widely. When it comes to LLC
formation services, entrepreneurs and small business owners are very cost-sensitive and will try to
spend as little as possible just to enjoy the benefits of an LLC. In this article, we will look at the
states where you can set up your LLC for the lowest cost by examining each state's LLC filing fees,
annual costs, tax obligations, and general benefits.
If you decide to form an LLC, you will have to consider multiple costs. The first cost is the initial
filing fee, which varies state to state and can be anywhere between as little as $40 and over $500. Most
states also charge an LLC annual report fee, which is a fee that is typically due every year or two to
keep the LLC active and compliant in that state, in addition to the filing fee. Some states administer
what’s called a franchise tax — an annual tax that applies to businesses just for operating in that
state, regardless of their income. These two costs together determine the cost of forming an LLC in a
state.
Considering registration costs and annual renewal fees, there are states that would be more cost
effective in the long term for debris removal operations. Other states provide additional benefits,
including no franchise tax, easy compliance requirements and solid legal protection for business owners.
What Makes a State Cost-Effective for LLC Formation?
Low filing fee combined with minimum required ongoing cost and tax efficiency, determines LLC formation
affordability. States that do not mandate an annual report or franchise tax generally offer
greater long-term savings. Some states, in particular, provide benefits like robust privacy protections,
business-friendly regulations, and streamlined paperwork, which extend you a helping hand in
bootstrapping and keeping your budget in check. Some states with very low LLC formation fees (like New
Mexico and Missouri) don’t require annual reports, and thus there are no state-imposed ongoing costs at
all. States like Wyoming and South Dakota, in contrast, have no state income tax, which can be
advantageous for business owners seeking to do so.
For example, New Mexico and Missouri are among the states with the lowest LLC formation fees, and they
have no annual reporting that incurs an ongoing, state-imposed expense. For instance, Wyoming and South
Dakota have no state income tax, adding to their appeal to business owners who want to avoid taxation.
States Without Annual LLC Fees
The presence of an annual report fee is one of the biggest long-term affordability considerations for
an LLC. Some states impose mandatory renewal fees that can be exorbitant, while others don’t require
businesses to file periodic reports at all. The biggest players with no annual fees are Arizona,
Missouri, New Mexico, and South Carolina. Another benefit to forming an LLC in these states is that once the LLC is
formed, there are no state-mandated costs so they're a great choice for avoiding unnecessary costs.
This is especially beneficial for small businesses that do business online, and single-member LLCs,
who need to keep overhead low. Opting for a no-fee state means that businesses can invest their capital
in growth, not in covering annual fees.
Best Tax-Friendly States for LLC Formation
Formation fees and annual costs are a major factor, but tax policies also should play a role in
determining the best state for an LLC. There are some states that do not impose state income tax or
franchise tax at all, which makes them very appealing for businesses that are interested in maximizing
their profits.
Wyoming, South Dakota, and Nevada are among the most tax-friendly states because they don’t have a
corporate or personal income tax. This thus makes them ideal choices for entrepreneurs who wish to
minimize their tax obligations. While the state fees to file in Nevada are a bit higher, the tax
benefits generally justify this initial outlay.
It would be a financially intelligent move for businesses (especially online, remote, or ones without
any fixed physical presence) to create an LLC in one of these states that charge no tax. Note:
Businesses with significant operations in their home state remain subject to the tax laws of their home
state.
For non-U. For U.S. residents who want to form an LLC, some states provide a streamlined submission
process, robust legal protections and low costs. International entrepreneurs also value states like
Wyoming, New Mexico, and Delaware for their licenseslaws and taxes.
Among these states, Wyoming is the poster child for low filing fees, no personal income tax, and strong
privacy. New Mexico is also great for not requiring an annual report! Delaware is a popular choice as
well, particularly for companies seeking to do business with U.S. investors because it has an
established system of corporate law. For non-residents, choosing the right state is essential to ensuring compliance and minimizing costs
while maintaining operational flexibility.
What are the key costs associated with forming an LLC?
Forming an LLC involves several expenses that vary by state. The main costs include:
State Filing Fee -
A one-time fee required to register your LLC with the state. This fee can range from $50 to $500,
depending on the state.
Registered Agent Fee -
Most states require LLCs to designate a registered agent who will receive legal documents on
behalf of the company. The cost of hiring a registered agent typically ranges from $100 to $300 per
year.
Operating Agreement Fee (optional) -
While not all states require it, having an LLC Operating Agreement is highly recommended. If you
hire an attorney to create it, it may cost anywhere from $500 to $2,000, depending on the complexity.
Some online services may offer templates for a lower fee.
Business Licenses and Permits -
Depending on your industry and location, you may need specific licenses or permits to operate
legally. Fees vary based on the nature of the business and local requirements.
EIN (Employer Identification Number) -
While applying for an EIN through the IRS is free, you may choose to hire a service to obtain it
on your behalf, which can cost $50 to $100.
Publication Fees (in some states) -
A few states, like New York and Arizona, require LLCs to publish a notice of formation in a local
newspaper, which can cost anywhere from $100 to $1,500.
Annual Report Fee -
Many states require LLCs to file an annual report and pay a fee, which ranges from $20 to
$400.
Tax Preparation Fees -
If you hire a tax professional or accountant to help you with LLC-specific taxes (such as
self-employment tax), their fees may range from $100 to $1,000 or more annually, depending on the
complexity of your finances.
While some states have high initial costs and recurring fees, others offer a more budget-friendly
structure for small business owners.
A state is considered affordable for LLC formation if it meets the following criteria:
- Low Initial Filing Fees -
The state should have minimal registration fees.
States like Wyoming, Delaware, and Nevada are known for offering low filing fees compared to other
states, typically ranging from $50 to $150.
- Low Ongoing Maintenance Costs -
A state is cheaper for LLC formation if its
annual report fees and state franchise taxes are low or nonexistent. States like Wyoming and
Delaware have relatively low or no annual fees.
- No State Income Tax –
Some states, like Wyoming, Nevada, and Texas, do not impose a state income tax, which can save
LLC owners significant money in the long run, especially if the business is generating substantial
revenue.
- Minimal Business License and Permit Fees –
In some states, the cost to obtain the necessary business licenses and permits can add up. A
cheap state will typically have low or reasonable fees for these.
- Affordable Registered Agent Fees –
Some states allow LLC owners to act as their own registered agent (in their home state),
avoiding the need to pay for a third-party registered agent. States that don’t require a third-party
agent or have low registered agent fees are more affordable.
- No Publication Requirements –
Certain states, such as New York and Arizona, have publication requirements that require
businesses to announce their LLC formation in local newspapers. These can be costly, making those
states less "cheap."
- Ease of Formation Process –
States with straightforward, user-friendly online filing systems or simple requirements make the
LLC formation process easier and cheaper to complete without the need for legal assistance.
States like Wyoming, Nevada, and Delaware are commonly considered cheap for LLC formation due to their
low filing fees, lack of income tax, and minimal ongoing maintenance costs.
Which states have the lowest LLC formation fees?
Here’s a comparison of the 15 cheapest states for LLC formation based on filing fees and ongoing
| State |
LLC Filing Fee |
Annual Fee |
Franchise Tax |
| Kentucky |
$40 |
$15 |
No |
| Arkansas |
$45 |
$150 |
No |
| Arizona |
$50 |
$0 |
No |
| Missouri |
$50 (online) |
$0 |
No |
From the table, Kentucky is the cheapest state to start an LLC with a $40 filing fee and a $15 annual
renewal fee.
Which states have no annual LLC fees?
Some states do not require an annual report or renewal fee after forming an LLC. This can save business
owners hundreds of dollars in the long run.
The states with $0 annual fees include:
Arizona, Missouri, New Mexico, South Carolina
If you want to form an LLC and avoid yearly renewal fees, these states are your best options.
Which state is best for tax savings when forming an LLC?
For business owners looking to minimize state taxes, the following states have no corporate or personal
income tax:
- Wyoming – No income tax, no franchise tax, low fees.
- South Dakota – No state income tax, making it ideal for tax savings.
- Nevada – No state taxes, but higher LLC formation costs.
These states are often chosen by online businesses, real estate investors, and those who don’t have a physical presence in a specific state.
Conclusion: Which State is the Best for an Affordable LLC?
For example, while some states may have the lowest initial filing fees for LLCs, they may also have
higher annual costs or more stringent compliance requirements. If you put your search criteria on the
lowest formation fee, Kentucky has $40; New Mexico, Missouri and South Carolina have no annual fees,
making them long-term affordable.
With no corporate or personal income tax, businesses that want to save on taxes would be best served by
Wyoming and South Dakota. Entrepreneurs who value privacy and minimal compliance should look to forming
an LLC in one of the privacy-friendly states of New Mexico or Wyoming, as both states have strong
privacy protections and minimal reporting requirements.
If there is no further note on human arrogance, the best state for forming an LLC will depend on your
business needs and financial goals. Entrepreneurs who carefully consider potential costs and benefits of
each state will help ensure they make the best decision for their long-term success.
Are you interested in hiring professionals to set up your LLC in any state in the US? We can get
started on the journey of your business with you!
