Choosing the state in which to form your LLC is one of the most important decisions regarding your business. But there are 50 states in the USA (+ one federal district) in which you can register your LLC... So how do you know which one to register your LLC in?
If you are an American resident, the answer is usually quite easy: it is usually recommended to open your LLC in the state in which you reside.
If you want to create your LLC as a non-US resident, the decision may be a little more complicated. Let's see then how to choose the right state to register your LLC!
The most popular states to open an LLC
If you do not have a physical presence in the United States, and you offer products or services online, the states that our clients usually choose to register their LLC are the following:
Delaware
- The most popular state
- Favorable legislation
- Anonymity
- There is no Sales Tax
- Filing Fee: $90
- Annual Report: $300
Wyoming
- Does not have Income Tax
- Legal Protections
- Anonymity
- Economic costs
- Filing Fee: $102
- Annual Report: $60
New Mexico
- Top for freelancers
- Easy maintenance
- Anonymity
- The most economical
- Filing Fee: $50
- There is no annual report
How to choose the state for your LLC?
These are the points that you should analyze when choosing the status of your Limited Liability Company (LLC) in the United States.
Will your business have a physical presence in the United States?
If your business has a physical presence in the United States, it is often recommended that you open your LLC in the state in which your LLC operates.
By physical presence, we understand:
- Some of the partners are residents of the USA
- There is a physical establishment where the LLC's operations are carried out (offices, stores, warehouses...).
- There are dependent agents in the USA, that is, employees or companies that work almost exclusively for the LLC.
While you can open an LLC in another state than where your LLC operates, doing so may require a lot of complicated paperwork and legal advice:
- You will need to qualify your LLC as "Foreign" in your state of physical presence
- You will need to hire a registered agent and renew it annually, which may represent an additional cost.
- You must present a document to avoid double taxation between the state of your LLC and the state of residence
- You will have to pay the annual obligations of both states
- Etc..
The regulations of each state
Being a Federal country, there are organizations that apply their rules to all states and other organizations that apply them at the state level.
As far as LLCs are concerned, IRS (Internal Revenue Service) rules apply the same in all states, while state secretaries have their own regulations.
Each state's regulations regarding LLCs are detailed in what is called a "Limited Liability Company Act." Although this does not vary much between the different states, it is advisable to inform yourself about the rules imposed by each state secretary before making the decision.
In addition, it is important to note that through an operating agreement, the LLC itself can override certain state rules regarding its operation.
The Filing Fee
The filing fee or registration fee is the price that each state charges to register your LLC. Values are usually between $40 and $500, with the average at $123 and the median at $100.
If you are very sensitive to price, it is a point to take into account.
Annual renewal costs
Según el estado que elijas, es posible tener que presentar un reporte anual (puede tener otros nombres, como "Franchise Tax" o "reporte bianual"). This type of report is an obligation to be fulfilled periodically in order to renew the LLCs and appear in compliance with the state secretary.
The annual report essential to renew the LLC and be able to continue operating, but it usually costs between $0 to $800, and an average of $89 (see the details for each state).
The good thing is that there are certain states that do not require an annual report to be submitted, and other states where they request it, but it has a $0 fee.
States that do not require annual reporting
- South Carolina
- Ohio
- New Mexico
- Missouri
- Arizona.
States without annual report fee
- Idaho
- Mississippi
- Minnesota
- Texas
It is essential not to forget to submit the annual report, as this can lead to significant fines or even the automatic closure of your LLC.
Anonymous
There are some states that allow the creation of "anonymous LLCs." This means that you can establish an LLC there and the state secretary does not require the owners or managers of the LLC to give their identity. They will only require the name of the registered agent or an organizer name (the person filing the LLC).
As a result, the names of the members of the LLC are not publicly available, and the LLC cannot be easily linked to a specific person. This way, you can protect your privacy and the association of your name with the company publicly.
Attention, registration as an anonymous LLC does not guarantee complete anonymity with your bank or the Internal Revenue Service (IRS). It also does not exclude the company from paying taxes.
The states that allow anonymous LLCs are: Delaware, Nevada, New Mexico and Wyoming.
The legislation
The legislation of each state is another point to take into account when choosing which state is best for you to open your LLC.
When opening an LLC in the United States, if your business is subject to lawsuits, they may need to be resolved in the state where your LLC is registered.
There are certain states, such as Delaware or Wyoming, where there is a legislature and extensive jurisprudence favorable to commercial entities. This way, you can ensure that your LLC will have an additional layer of protection against possible legal conflicts.
Costs and obligations of LLCs by State
| Status | Filing Fee | Documentation | state fee | Date | Expiration | Fine in case of delay |
|---|---|---|---|---|---|---|
| Alabama | $200 | Annual Report | $100 (may vary) | Annual | Extendable to 2 and a half months after training | State tax penalty |
| Alaska | $250 | Biannual Report | $100 | Biannual | January | $37.50 |
| Arizona | $50 (+ $299 post) | There is none | $0 | - | - | - |
| Arkansas | $45 online, $50 by mail | Annual Report | $150 | Annual | May 1 | $25 |
| California | $70 | Franchise Tax and Biannual Report | $800 + $20 | Annual (Tax) and Biennial (Report) | 3 months after the formation of the LLC (Tax) and anniversary date (Report) | $250 |
| Colorado | $50 | Annual Report | $10 | Annual | Last day of the anniversary month | $40, if it exceeds 3 months $100 |
| Connecticut | $120 | Annual Report | $80 | Annual | March 31 | - |
| Delaware | $90 | Annual Report | $300 | Annual | June 1 | $200 + 1.5% each extra month |
| Florida | $125 | Annual Report | $138.75 | Annual | May 1 | $400 |
| Georgia | $100 | Annual Report | $50 | Annual | April 1 | $25 |
| Hawaii | $50 | Annual Report | $15 | Annual | 3 months after the anniversary date | $10 |
| Idaho | $100 | Annual Report | $0 | Annual | Last day of the anniversary month | - |
| Illinois | $150 | Annual Report | $75 | Annual | First day of the anniversary month | $100 |
| Indiana | $95 online, $100 by mail | Annual Report (Business Entity Report) | $31 | Biannual | Last day of the anniversary month | - |
| Iowa | $50 | Biennial Report | $45 | Biannual | April 1 of every odd year | - |
| Kansas | $160 online, $165 by mail | Annual Report | $50 | Annual | 15th day of the fourth month after the close of the fiscal year | - |
| Kentucky | $40 | Annual Report | $15 | Annual | June 30 | - |
| Louisiana | $100 | Annual Report | $35 | Annual | Anniversary date | - |
| Maine | $175 | Annual Report | $85 | Annual | June 1 | $50 |
| Maryland | $100 | Annual Report, Personal Property, Tax Return (if you own properties in the state) | $309 | Annual | April 15 | - if no properties are present |
| Massachusetts | $500 | Annual Report | $520 | Annual | Anniversary date | - |
| Michigan | $50 | Annual Report (Annual Statement) | $25 | Annual | February 15 | - |
| Minnesota | $155 online, $135 by mail | Annual Report (Annual Renewal) | $0 | Annual | December 31 | - |
| Mississippi | $50 | Annual Report (Annual Renewal) | $0 | Annual | April 15 | - |
| Missouri | $50 (online), $105 (mail) | There is none | $0 | – | – | – |
| Montana | $70 | Annual Report | $20 | Annual | April 15 | $15 |
| Nebraska | $105 | Biennial Report | $13 | Biannual | April 1 of odd years | - |
| Nevada | $75 + $150 | Annual List of Managers or Managing Members and State Business License Renewal | $150 + $200 | Annual | Last day of the anniversary month | $75 + $100 |
| New Hampshire | $100 | Annual Report | $102 | Annual | April 1 | $50 |
| New Jersey | $125 | Annual Report | $78 | Annual | Last day of the anniversary month | - |
| New Mexico | $50 | There is none | $0 | - | - | - |
| New York | $200 + publication costs | Biannual Report | $9 | Biannual | Last day of the anniversary month | - |
| North Carolina | $125 | Annual Report | $202 | Annual | April 15 | - |
| North Dakota | $135 | Annual Report | $50 | Annual | November 15 | $50 |
| Ohio | $99 | There is none | $0 | - | - | - |
| Oklahoma | $100 | Annual Report | $25 | Annual | Anniversary date | - |
| Oregon | $100 | Annual Report | $100 | Annual | Anniversary date | - |
| Pennsylvania | $125 + publication costs | Decennial Report | $70 | 10 years | Last day of years ending in 1 | - |
| Rhode Island | $150 | Annual Report | $50 | Annual | November 1 | $25 each month late |
| South Carolina | $110 | None (Unless LLC treated as Corp) | $0 | - | - | - |
| South Dakota | $150 | Annual Report | $50 | Annual | Last day of the anniversary month | $50 |
| Tennessee | $300 (minimum) | Annual Report | $300 minimum ($50/member) | Annual | First day of the fourth month after the end of the LLC's fiscal year | - |
| Texas | $300 | Annual Report | $0 if benefits < $1,180,000 | Annual | May 15 | $50 + 5% interest on the installment + 5% additional interest if there is a delay > 30 days |
| Utah | $70 | Annual Report | $15 | Annual | Anniversary date | $10 |
| Vermont | $125 | Annual Report | $35 | Annual | 2 and a half months after the fiscal year | $25 |
| Virginia | $100 | Annual Report | $50 | Annual | Last day of the anniversary month | $25 |
| Washington | $200 | Annual Report | $60 | Annual | Last day of the anniversary month | $25 |
| West Virginia | $100 | Annual Report | $25 | Annual | June 30 | $100 |
| Wisconsin | $130 (online), $170 (mail) | Annual Report | $25 | Annual | Last day of the anniversary quarter | - |
| Wyoming | $100 (mail), $102 (online) | Annual Report | $62 | Annual | First day of the anniversary month | - |
Conclusion
The state in which it is best for you to open your LLC will depend exclusively on the needs and operations of your business. It may be worth consulting with a legal expert to make a decision.
In general, if you plan to have a physical presence in the United States, it is usually advisable to open your LLC in the state in question.
If you are going to offer services or products online, the most common states to open an LLC as a non-US resident are usually Delaware, New Mexico and Wyoming.
If you are looking to learn more about the characteristics of each state, discover our guides:
Frequently Asked Questions
What is the best state to open an LLC as a freelancer?
If you work freelance and want to easily export your services by charging in dollars, opening a unipersonal LLC can be a great option. The most common states for freelancers are Delaware, Wyoming and New Mexico. Personally, I opened my LLC in New Mexico since it has a low registration fee and no annual report is required.
What is the best state to open an LLC?
There is no best state to open an LLC in general. Each state has its advantages and disadvantages depending on each business. In general rules, if you have a physical presence, it is usually advisable to open it in the state where your business has a presence. If you are a non-resident and your business will not have a physical presence, Delaware, New Mexico and Wyoming may be good options.
Can I easily change status after registering my LLC?
Once you register your LLC, you cannot change status. What you can do is dissolve your current LLC and create another one in the state of your convenience.
How to dissolve my LLC?
To dissolve an LLC, federal, state, and local requirements must be met. You must formally dissolve the company in your state by filing specific legal documents, which are different in each state. You must also notify your state's tax authority for income tax and sales tax purposes. You must also notify the IRS.Is it easy to create an LLC?
Creating an LLC is not a complicated process. It can be done completely online on the secretary of states websites. However, there are several services that can do all the work for you, which makes it even easier.
Written by
Ignacio Navarro
Ignacio Navarro is a Certified Public Accountant, graduated in 2020 from the National University of Tucumán. Founder of Start Companies since 2023, he advises clients worldwide on forming LLCs in the United States and on proper tax filing. His expertise combines legal, tax, and practical knowledge, offering a comprehensive service that spans from company formation to bank account setup and sales platform integration.
