5 best states to form an LLC in 2024

A limited liability company (LLC) is a business that offers management flexibility, pass-through taxation and, in most cases, personal asset protection during bankruptcy or lawsuits. Often, your home state is the best state to form an LLC. But, entrepreneurs may register an LLC in another state to take advantage of lower fees or to support future growth goals.

We reviewed guidelines and fee structures for all 50 states to determine the best state to open an LLC. Our assessment considered the registration process, reporting requirements and benefits of filing as a foreign entity.

• Best state to form an LLC: Your home state.
• Best for fast-growing businesses: Delaware.
• Best state for affordable ongoing LLC fees: Ohio.
• Best state for potentially lower taxes: Nevada.
• Best state for cheap LLC registration: Arizona.

Best state to form an LLC: Your home state

Pros:

• Familiarity with home state processes and laws.
• Business owners can be registered agents in most cases.
• Won’t be double taxed.

Cons:

• Further considerations needed if home state differs from business location. 
• Could be more complex if you sell or rent property in another state.
• Better options may exist for companies with locations in multiple states.

Your home state is typically the best state to form an LLC. Often, the benefits outweigh the potential drawbacks, such as higher registration costs or annual filing fees. 

When launching a business, state governments recognize a company as domestic (the owner or members reside in the state) or foreign (they live out of the state). If you do business in the same state you live in, you are likely familiar with your local tax laws and processes. As a domestic entity, you can be the registered agent, whereas you would pay a registered agent service provider to handle this role when forming an LLC in another state.

Moreover, you may incur additional taxes when opening an LLC in a different state. You can avoid double taxation by forming an LLC in your home state. However, companies that have multiple business locations or rent or sell property in another state may benefit from registering as a foreign LLC. The same goes for business owners who reside in another state than where their company is located.

Best for fast-growing businesses: Delaware

Pros:

• Privacy protection for LLC members.
• Favorable corporate tax laws.
• No annual report requirements.

Cons:

• More expensive filing fee for foreign LLCs.
• Charges an annual state tax fee.

Delaware is the best state to form an LLC if your business is expanding quickly and you want to convert your LLC to an S-corporation in the future. Flexible business formation regulations, a unique Court of Chancery and a robust legal and corporate services community make Delaware a popular state for incorporating businesses. 

Indeed, the Delaware Division of Corporations 2022 Annual Report found that “66.8% of all Fortune 500 companies are incorporated in Delaware.” 

Like Nevada, Delaware allows LLC members to leave their names off registration documents. But, foreign entities must use a Delaware registered agent.

However, it’s expensive to register an LLC in Delaware, costing $200 for foreign entities or $110 if Delaware is your home state. Additionally, LLCs must pay annual state tax fees ($300). Learn more in our guide on starting an LLC in Delaware.

Best state for affordable ongoing LLC fees: Ohio

Pros:

• Same price for domestic and foreign LLC registration.
• No annual reporting requirement.
• Inexpensive biennial fees.

Cons:

• Higher LLC registration fee than Arizona.
• May need to file annually with your home state if it is different from Ohio.
• Must have a registered agent in Ohio.

Many states require LLCs to send forms and pay fees annually. Ohio is an outlier with no annual reporting requirement or filing fee for LLCs. Unlike Delaware, Ohio charges domestic and foreign LLCs the same registration fee ($99), which is higher than Arizona but could be less than your home state.

Yet, Ohio requires all businesses to have a statutory (registered) agent. In addition, if you do business in your home state, you may still need to register your LLC there and file yearly forms as required. See our guide for more information on how to start an LLC in Ohio.

Best state for potentially lower taxes: Nevada

Pros:

• Business court similar to Delaware.
• Online filing process.
• No corporate or personal income tax.
• General business license and fee requirement.

Cons:

• Higher LLC filing fees than some other states.
• Directors and officers are public.
• Tax benefits may not apply if you don’t do business in Nevada.

Nevada doesn’t have corporate, personal income or franchise tax, making it the best state to form an LLC for potentially lower taxes. It also has a minimal payroll tax and models its business court on the Delaware model to reduce the costs and risks of litigation. 

Nevada charges $200 annually for a state business license, which is higher than some other states we looked at, including Arizona and Ohio. It also requires more information for filing than Delaware. Find more details in our guide to starting an LLC in Nevada.

Best state for cheap LLC registration: Arizona

Pros:

• Possibly lower upfront costs than your home state.
• Online registration process.
• No annual report or fee.

Cons:

• Need a registered agent with an Arizona address.
• Names and addresses are public records.
• Fewer tax advantages than Nevada.

Although your home state may be the least expensive option for LLC formation, Arizona’s $50 signup fee makes it a good alternative and the best state for cheap LLC registration. Business owners can complete the process online. Additionally, Arizona doesn’t require annual reports or fees unless you need to amend your documents. 

Arizona lacks the privacy protections offered by Delaware because names and addresses are public records. Although Arizona may have lower tax rates than some states, it’s not tax-free like Nevada for companies doing business there. Moreover, the reduced costs may not pan out since you still need to hire a registered agent service and may need to file as a foreign entity, which comes with a $185 filing fee. 

Learn more in our guide to starting an LLC in Arizona.

What is an LLC?

A limited liability company (LLC) is a business entity allowed by state governments. State regulations outline how long an LLC may last (perpetual or when a partner dies), annual reporting requirements and fee structures.

Companies that form an LLC in their home state are “domestic” businesses. When you register an LLC in a state where your company doesn’t have a physical location, or it’s a state different from where you previously formed your LLC, it’s considered a “foreign” business.

LLCs offer advantages of corporation and partnership structures. They limit the personal responsibility of owners, protecting personal assets in the event of a lawsuit against the company or bankruptcy. At the same time, LLC members claim profits and losses on their individual income returns, avoiding corporate taxes. Yet, when beneficial, members can opt to be classified as a corporation for tax purposes. 

Tips for starting an LLC

LLCs provide more liability protection than sole proprietorships yet are more straightforward to establish than corporations. However, entrepreneurs should take appropriate steps to form an LLC correctly. 

Explore your home state’s statutes and learn the lingo

Each state uses its own terminology for LLC formation documents, such as articles of organization or certificate of formation. While some states require a list of officers and member names and addresses, others only need the registered agent’s contact details. 

Check out your state’s guidelines and look up any unfamiliar terms. This makes it easier to find the best state to form an LLC.

Key terms to know include:

• Operating agreement.
• Pass-through taxation.
• Registered (or statutory) agent.
• DBA (Doing business as) or fictitious name.
• Articles of organization.
• Employer identification number (EIN).
• State tax ID number.
• Business license.
• Annual report. 

Understand your initial and annual costs and obligations

Costs to start an LLC vary widely among states. Aside from an initial fee, you may need to apply for an EIN or fictitious name license. Any amendments or mistakes incur additional costs. Many states require annual reports and fees after your initial registration.

Multi-location companies may need to establish LLCs in several states. And state and local regulations may require business licenses or other permits. In addition to government fees, foreign LLCs may need to hire registered agents or someone with a physical address in the state authorized to sign legal documents on behalf of your company. 

Consider third-party legal advice and services 

With any business, there are legal and tax factors to consider when choosing a business structure. While forming an LLC isn’t overly complicated, it does require more effort than a sole proprietorship. 

Consult with legal advisors when setting up your operating agreement, especially if your company has more than one member. It’s also important to discuss how you dissolve the LLC if a member leaves, becomes ill or dies. 

Time-strapped entrepreneurs can outsource the formation process to save time. The best LLC formation services assist with filing documents, accessing legal advice and offering educational resources.

Frequently asked questions (FAQs)

Can I start an LLC in a state that isn't my home state?

Yes, you can register an LLC in any state, even if you don’t live there or have a physical storefront there. However, you may pay higher fees to start an LLC in another state because you need a registered agent and must sign up as a foreign LLC.

How long does it take to form an LLC?

LLC application processing time varies by state, filing method and time of year. Typically, electronic filing options are quicker than mailing documents. However, states facing a heavy backlog of applications may have longer waiting times. Many states publish time estimates on their websites.

What is the best state to start an LLC as a non-resident?

The best state to form an LLC as a non-resident depends on your business goals. Delaware is the top choice for fast-growing companies looking to convert to a corporation in the future. On the other hand, Ohio LLCs only need to file biennial reports, and Nevada is a tax haven if most of your business happens within the state.

What state has the lowest taxes for LLCs?

Several U.S. states have lower tax rates, and Nevada is among the lowest. It doesn’t have a personal income or corporate tax. For individuals who live or do most of their sales in Nevada, this can result in substantial savings.

However, you pay taxes to the state where you reside. So, these benefits may not apply if you don’t live in Nevada.