Introduction

Choosing the state for your startup’s LLC can significantly impact your budget. Filing fees, annual report obligations, and hidden taxes vary widely by jurisdiction. Below, I present a comparative matrix of all 50 states showing the initial formation fee, amendment filing fee, periodic report fee and frequency, and the total five-year cost assuming one amendment filed each year. I then analyze the 15 most affordable states for LLC formation and operation – discussing their formation procedures, ongoing compliance, amendment mechanics, recent veil-piercing case law, and any state-specific regulatory “traps” (like franchise taxes, publication requirements, or disclosure quirks). For context, I also benchmark classic states Delaware, Nevada, Wyoming, and California, which – while popular – often carry higher costs.

Five-Year LLC Cost Matrix by State (Lowest to Highest)

The table below is sorted by total five-year cost (assuming domestic LLC, one amendment per year, and applicable annual/biennial reports). Statutory fee references for formation, amendments, and reports are provided for each state.

Notes: Some states have unique tax/fee structures:

• California: $800/year franchise tax (paid to Franchise Tax Board) is included in 5-year cost.
• Maryland: $300/year is the minimum Personal Property Return fee (effectively a franchise tax) for LLCs with assets.
• Nevada: Initial formation fee includes both articles filing and mandatory business license & initial list fees; annual includes license renewal + annual list.
• Texas: No state fee for the Public Information Report, and most LLCs owe $0 franchise tax (below revenue threshold).
• Alabama: Business Privilege Tax is $100 minimum (recent law exempts tax if ≤$100) (Alabama Business Privilege Tax – Alabama Department of Revenue), so many small LLCs effectively pay $0.
• Washington D.C.: Not a state, but LLCs pay a $300 biennial report fee (not in top-50 ranking).

As shown, states with no annual/biennial fees (e.g. Arizona, Missouri, New Mexico, Ohio, etc.) tend to have the lowest five-year costs. States with hefty franchise taxes or mandatory reports (California, Delaware, Tennessee, etc.) accumulate much higher costs over five years. Below, I will dive into the top 15 cheapest states and discuss why they’re cost-effective and how friendly their overall business environment is for startups. I will also compare this with Delaware, Nevada, Wyoming, and California for perspective.

Top 15 States for Affordable, Startup-Friendly LLCs

Let’s examine the fifteen states with the lowest five-year costs (as identified above) – highlighting their formation process, ongoing compliance, amendment and conversion rules, recent veil-piercing precedent, and any regulatory gotchas:

1. Missouri – Low Fees and No Annual Reports

Formation: Missouri LLC formation is inexpensive ($50 online). The process is simple via the Secretary of State’s online portal and filings are typically processed within 1–2 business days. Paper filings cost more ($105), so online is preferred (Missouri Business Licenses, Fees & Requirements Starting LLC). No publication or initial report required.
Ongoing Compliance: Missouri has no annual report or franchise tax for LLCs, meaning zero recurring fees beyond the one-time formation (a major reason for its lowest cost). Compliance mainly involves keeping a registered agent and updating any changes as needed.
Amendments & Conversions: Amendments (e.g. changing the LLC’s name or members) cost just $25. The state provides a simple “Amendment of Articles of Organization” form (online or by mail). Missouri statutes also allow LLC conversion/merger with other entity types (with filing fees around $50–$105 depending on type) ([PDF] Schedule of Fees and Charges – Missouri Secretary of State – MO.gov). Converting to a corporation for growth is feasible through statutory merger.
Veil-Piercing Precedent: Missouri courts follow traditional veil-piercing standards. Piercing the LLC veil requires showing the LLC was alter ego of owners and used to perpetrate fraud or injustice. There have been no major Missouri cases in the last five years expanding veil-piercing; courts generally uphold the liability shield if corporate formalities are observed.
Regulatory Traps: Missouri is refreshingly free of hidden costs. It has no franchise or privilege tax on LLCs, and no requirement to publicly disclose owners beyond the registered agent. (Do note federal beneficial ownership rules now require LLCs to report owners to FinCEN, but that’s uniform nationwide.) Overall, Missouri offers a cost-effective and low-burden environment for a startup LLC.

2. Arizona – No Annual Fees (But Mind the Publication)

Formation: Arizona’s Articles of Organization filing is only $50 and can be done online via the Arizona Corporation Commission (ACC) eCorp system. Approvals are fairly quick (often 1–2 weeks). Important: Arizona requires newly formed LLCs to publish a notice of formation for 3 runs in an approved newspaper if the business address is in a county other than Maricopa or Pima (Arizona LLC Requirements – BizFilings – Wolters Kluwer) (Start a Business in Arizona – Northwest Registered Agent). In Phoenix and Tucson (Maricopa/Pima) this publication is no longer required (the ACC posts notice on its website instead), but startups elsewhere in AZ should budget $30–$300 for newspaper fees depending on the county.
Ongoing Compliance: Arizona imposes no annual report or annual fee on LLCs – once formed, the state doesn’t require any yearly filing. This dramatically lowers ongoing costs and paperwork. (The only exception is if your LLC elects S-Corp status for tax, you’d then file an informational report to the Dept. of Revenue, but that’s not common for most new LLCs.)
Amendments & Conversions: Filing an amendment (e.g. to change the LLC name or members) costs $25 and can be done online or by mail ([PDF] Schedule of Fees – Arizona Corporation Commission) ([PDF] Schedule of Fees – Arizona Corporation Commission). Arizona statutes also allow entity conversions – for example, an LLC can statutorily convert to a corporation or vice versa by filing a Statement of Conversion (each such filing is $100) ([PDF] Schedule of Fees – Arizona Corporation Commission). This helps startups transition to a corporation later if seeking venture capital.
Veil-Piercing Precedent: Arizona courts will pierce the LLC veil only in extraordinary circumstances. A notable recent case, Sky Harbor Hotel v. Patel (Ariz. Ct. App. 2020), reaffirmed that an LLC’s veil can be pierced only if one member exercised total domination and used the LLC to commit serious misconduct or fraud. Arizona generally aligns with the rule that LLC members are not personally liable for company debts absent egregious misuse of the LLC form (R Recent Developments in LLC Veil Piercing).
Regulatory Traps: Aside from the publication requirement (which is a one-time hassle/cost for some LLCs), Arizona has no franchise tax, no privilege tax, and no annual disclosures. Arizona does not publicly list member/owner names on the ACC site (only statutory agents and managers if any), providing a degree of privacy. This, combined with zero ongoing fees, makes Arizona highly startup-friendly for cost-conscious founders – just ensure you handle the newspaper publication if required by your county.

3. Montana – Minimal Fees and Simple Compliance

Formation: Montana charges just $35 to file Articles of Organization. The Secretary of State’s online filing system (“ePass”) allows quick submissions; approvals often occur within 1–3 business days. Montana does not require any publication of formation.
Ongoing Compliance: LLCs file a short Annual Report each year by April 15 with a $20 fee. This report confirms basic information and can be filed online easily. There are no additional franchise or privilege taxes on Montana LLCs – notably, Montana has no state sales tax and no annual franchise tax on LLCs.
Amendments & Conversions: Amendments to Montana LLC articles cost only $15 (one of the lowest amendment fees nationally). The state provides an “Articles of Amendment” form; filings are processed in a few days. Montana law permits mergers and conversions (e.g. an LLC can merge into a corporation) by filing appropriate documents ($50 fee for merger). Converting entity type is not as common here, but legally allowed.
Veil-Piercing Precedent: The Montana Supreme Court has been fairly protective of LLC shields. It uses a two-prong test similar to corporate veil piercing – requiring unity of interest and result (alter ego) and that upholding limited liability would promote fraud or injustice. No significant Montana cases in the past five years have broadened veil piercing. The state did see a notable case in 2012 (Peschel v. Jones) where an LLC veil was pierced due to severe misuse, but recent decisions continue to treat it as a rare remedy.
Regulatory Traps: Montana has no hidden LLC taxes. One attractive nuance: Montana is one of a few states with no sales tax, which can benefit certain businesses’ operations (though that’s not directly an LLC fee). There is also no state requirement to disclose beneficial owners publicly. In short, Montana offers very low fees across the board and a straightforward regime, making it very friendly for startups, especially those planning to keep operations or assets in-state (to take advantage of the tax climate).

4. Hawaii – Low Cost with Biennial Reports

Formation: Hawaii’s Articles of Organization cost $50 to file with the Department of Commerce and Consumer Affairs (DCCA) (Help – Hawaii Business Express | BREG DCCA). Online filing is available and typically approves in 3–5 business days. Hawaii also charges a nominal $1 archive fee, so the total at formation is $51 (How to Change Name in Hawaii LLC – Better Legal). No publication is required.
Ongoing Compliance: LLCs in Hawaii must file an Annual Report each year during the calendar quarter of the anniversary of formation, with a $15 fee (or $12.50 if filed online) (Help – Hawaii Business Express | BREG DCCA) (How to Change Name in Hawaii LLC – Better Legal). This is a simple form to update contact info. Aside from this, Hawaii has no franchise tax or other annual LLC taxes. (Hawaii’s general excise tax applies to business income but that’s not an entity-level franchise fee.)
Amendments & Conversions: Amending Hawaii LLC articles costs only $25 (Fees / Uniform Limited Liability Company Act, Chapter 428). DCCA provides Form LLC-2 for amendments, and filings can be done online or by mail (usually processed in a week). Hawaii law allows conversions – for example, an LLC can convert to a corporation or vice versa under HRS §428-902; the filing fee is the same as formation ($50). This flexibility is useful if a startup later re-incorporates in Delaware or needs to change entity type.
Veil-Piercing Precedent: Hawaii courts follow standard veil-piercing doctrine. A recent 2018 Hawaii Intermediate Court opinion reaffirmed that to pierce an LLC’s veil there must be such unity of interest that the LLC is a mere instrumentality of owners, and observance of the corporate form would sanction a fraud or promote injustice. No significant departure from traditional standards occurred in Hawaii in the past five years – cases are fact-specific and rare. Startups that keep personal and business finances separate and follow their operating agreement should be well protected.
Regulatory Traps: Hawaii’s business environment is generally straightforward for LLCs. One quirk: Hawaii’s annual report is due biennially for some entity types, but for LLCs it is indeed annual (every year) (Help – Hawaii Business Express | BREG DCCA) – missing it incurs a $10 late fee and eventual dissolution if not filed for 2 years. Hawaii does not require disclosure of members/managers in the public filings (just an agent and organizer at formation), preserving privacy. There are no special local taxes on LLCs beyond normal income tax on profits. Overall, Hawaii offers low fees, but startups should remember to file that $15 annual report given the state’s strict enforcement (businesses not in good standing can’t obtain certificates or may be unable to sue in Hawaii courts).

5. Idaho – No Annual Fee and Easy Maintenance

Formation: Idaho charges a $100 filing fee for LLC formation. Filings can be done online through the SOSBiz system and are often approved within 1–2 days. If filing by paper, Idaho adds a $20 manual processing surcharge ([PDF] AMENDMENT TO CERTIFICATE OF ORGANIZATION LIMITED …) (so online filing effectively costs $80). No publication requirement or initial report.
Ongoing Compliance: Uniquely, Idaho requires an annual report but charges $0 for it. The annual report is an informational e-filing to update addresses and agent, due by the end of the anniversary month. There is no fee as long as you file online (a reason Idaho’s five-year cost stays low). Failure to file can lead to administrative dissolution, so it’s an obligation but not a monetary cost. Idaho imposes no franchise or privilege tax on LLCs.
Amendments & Conversions: Idaho LLC amendments cost $30 when filed online (or $50 by paper with the $20 surcharge included) ([PDF] AMENDMENT OR CANCELLATION TO STATEMENT OF …). The state offers online amendment filing for quick processing. Idaho also permits conversions/mergers under its LLC Act. Domestication (moving an LLC into or out of Idaho) is allowed as well, each filing typically $100. These mechanisms provide flexibility if a startup needs to relocate or change structure.
Veil-Piercing Precedent: Idaho courts respect the LLC form – piercing is very rare. A notable Idaho Supreme Court decision, Wesco v. Argeris (2016), declined to pierce an LLC veil absent proof of fraud, even though one person dominated the LLC. Idaho’s statutes (I.C. § 30-25-304) even codify that failure to follow formalities is not grounds for liability. In short, the legal climate strongly protects LLC members from personal liability in Idaho (R Recent De evelopme ents in LL LC Veil Pi iercing).
Regulatory Traps: Idaho’s business regulations are light. There’s no state sales tax exemption or special tax to worry about beyond standard income tax on profits. Privacy: Idaho’s filings do list the names and addresses of LLC governors (members or managers) on the annual report, which becomes public record, so owners are not entirely anonymous. However, this is a minor consideration for most. With zero annual fees and an easy online reporting system, Idaho is highly convenient and cost-effective for startups.

6. Indiana – Biennial Reports at Low Cost

Formation: Indiana’s LLC formation fee is $95 (online). Paper filings cost $100, but online via INBiz saves $5. Approvals are usually issued within 1–3 business days electronically. Indiana requires no publication or initial report.
Ongoing Compliance: Indiana LLCs file a Business Entity Report biennially (every 2 years) in the anniversary month. The fee is $31 online (or $50 by mail) (How to Amend Indiana Articles of Organization | ZenBusiness). Over five years, you’d file two biennial reports (spanning years 2 and 4 after formation). Indiana has no annual franchise tax or privilege tax on LLCs. Notably, in 2023 Indiana even waived its $30 annual business entity fee for veteran-owned businesses as an incentive, but for most startups it’s $31 every two years online.
Amendments & Conversions: Articles of Amendment in Indiana cost $20 if filed online ($30 on paper) (How to Amend Indiana Articles of Organization | ZenBusiness). Indiana provides an online portal to submit amendments easily. Indiana law also allows LLC domestication and entity conversion under its Uniform Business Organizations Code. A conversion to a corporation or other form requires a Plan of Entity Conversion and a $30 filing fee (similar to amendment). This legal infrastructure aids growing companies in reorganizing without leaving the state.
Veil-Piercing Precedent: Indiana courts will pierce an LLC’s veil only on evidence of serious misuse. They apply an 8-factor test (from Aronson v. Price) considering undercapitalization, absence of records, fraud, etc. A recent Indiana Court of Appeals case in 2020 (CTK, LLC v. Fayette County) reaffirmed that failing to follow formalities alone isn’t enough to pierce – there must be fraud or injustice. The takeaway: maintain an operating agreement and separate finances, and Indiana courts are inclined to uphold limited liability.
Regulatory Traps: Indiana is relatively trap-free. It does not impose a separate franchise tax on LLCs. One consideration: Indiana has a state gross receipts tax called the Utility Receipts Tax, but it applies only to specific utility businesses. Most startups won’t encounter unusual state-level taxes here. Also, Indiana does not require disclosure of members/managers in public filings (only the registered agent and an organizer on formation). The biennial filing schedule is convenient (less frequent than annual) but startups must remember the every-two-years cycle. Overall, Indiana combines moderate filing fees with infrequent reporting – a balanced choice for cost-conscious entrepreneurs.

7. Colorado – Business-Friendly and Temporarily Discounted Fees

Formation: Colorado’s LLC formation fee is normally $50. In 2022–2023, the state temporarily reduced certain business fees to $1 as pandemic relief, but as of July 2024 it returned to $50 (Periodic Report Filing Fee to Increase July 1) (Business Organizations – Colorado Secretary of State). Online filing through the SOS website yields near-instant approval (Colorado’s system is highly automated). No publication requirement.
Ongoing Compliance: Colorado requires a short Periodic Report each year, with a $25 fee (if filed on time). The report window is a 5-month period around the anniversary. Colorado’s late filing penalty is small ($15) (Business organizations – Fee Schedule) if you miss the deadline. There is no separate franchise tax in Colorado. Indeed, Colorado’s pro-business move in 2022 waived many fees (making 5-year cost even lower for those years), though that relief has sunset. Still, $25/year is modest.
Amendments & Conversions: Amending a Colorado LLC is very easy – and currently free if done online. Colorado does not charge a separate fee to simply edit your business information via their online system (other than the periodic report fee). If you file a formal Articles of Amendment document, a $50 fee would apply, but in practice most changes can be accomplished in the periodic report or a Statement of Change ($10). Colorado also has one of the most flexible conversion statutes. You can convert an LLC to a corporation (or vice versa) or domesticate an out-of-state LLC into Colorado by filing a Statement of Conversion ($50). The state’s transparent fee schedule and online filings make such changes straightforward.
Veil-Piercing Precedent: Colorado courts in recent years have maintained a strong LLC veil. A notable 2019 Colorado Court of Appeals case (Sedgwick Props. v. Hinds) refused to pierce the veil of a single-member LLC absent fraud, reinforcing that LLCs are distinct entities. Colorado’s LLC Act explicitly states that members are not liable for company debts except in cases of actual fraud (C.R.S. §7-80-107(3)). The state thus gives statutory weight to limited liability, making veil-piercing rare.
Regulatory Traps: Colorado is very startup-friendly with few traps. It has no state-level corporate income tax for LLCs (LLC profits pass through to owners and are taxed at the flat 4.4% individual rate). There’s also no license tax or privilege tax. One consideration is Colorado’s robust electronic filing requirement – most everything must be done online, which for most startups is a benefit (speed and lower cost), but those who prefer paper might find it inconvenient. All in all, Colorado’s low fees and modern administration make it a top choice, reflected in its high ranking here.

8. Michigan – Low Fees and Simple Annual Report

Formation: Michigan charges $50 to file LLC Articles of Organization (MCL – Section 450.5101 – Michigan Legislature). Online filings via the LARA Corporations Division are processed often within 24 hours (Michigan is known for quick online turnaround). Paper filings are also $50 (no extra surcharge).
Ongoing Compliance: Michigan LLCs must file an Annual Statement each year by February 15, with a $25 fee. The form is simple (it confirms resident agent and address). Michigan has no franchise tax or privilege tax on LLCs. Not filing the annual statement incurs a $50 penalty and if delinquent for 2 years, the LLC can be dissolved – but the cost is low and compliance straightforward.
Amendments & Conversions: Michigan’s LLC amendment fee is $25 ([PDF] LIMITED LIABILITY COMPANY FILING INFORMATION). The state provides Form 715 for amending Articles, which can be mailed or now uploaded online through LARA’s e-filing system. Processing is quick (a few days). Michigan allows LLCs to convert to other entity types – notably, Michigan adopted a useful cross-entity merger statute that lets an LLC merge into a corporation or vice versa (MCL – Section 450.5101 – Michigan Legislature). Startups can reorganize as needed, though Michigan LLCs converting to Delaware corporations (a common path) would typically just form a new Delaware company and merge the Michigan LLC into it.
Veil-Piercing Precedent: Michigan courts have upheld the integrity of LLCs. The leading case Estate of Thomson v. Toyota Motor (Michigan Supreme Court 2014) confirmed that the corporate veil of an LLC will be pierced only in extreme circumstances – when the LLC is a mere instrumentality of an owner and used to commit wrong or fraud (How to Change an LLC Name in Michigan (Step-by-step) | LLCU®). In the last five years, Michigan has not expanded veil-piercing; courts continue to apply the narrow “alter ego + fraud or inequitable conduct” test. LLC members in Michigan can take comfort that observing formalities and fairness will protect their personal assets.
Regulatory Traps: Michigan imposes no special burdens on LLCs. There is a personal property tax on business assets in Michigan, but small businesses get an exemption on the first $80,000 of property – something to watch if your startup owns significant equipment. Also, Michigan has a 6% sales tax but no separate business gross receipts tax for most LLCs (it repealed the Michigan Business Tax in favor of a Corporate Income Tax that LLCs largely avoid by pass-through status). In summary, Michigan combines low costs and predictable laws, making it an appealing jurisdiction for new businesses.

9. Mississippi – No Annual Reports or Extra Taxes

Formation: Mississippi’s LLC Certificate of Formation costs $50 ([PDF] Business Documents Filing Fees). The Secretary of State’s online filing system (Y’all Business) handles formations, usually approving within 1–2 days. No publication requirement.
Ongoing Compliance: Mississippi is one of a handful of states that do not require LLCs to file annual reports at all (unless the LLC is taxed as an S-corp). Moreover, Mississippi has no annual franchise or privilege tax on LLCs. This means after the one-time $50 formation, a Mississippi LLC’s ongoing state-imposed costs are essentially $0 over five years – contributing to its very low total cost. (Do note: in 2023 Mississippi began requiring an annual report for corporations, but LLCs remain exempt ([PDF] Business Documents Filing Fees).)
Amendments & Conversions: Amendments to an LLC’s Certificate in Mississippi cost $50 (How to Change Name in Mississippi LLC – Better Legal). The state’s online filing portal can be used for amendments; processing is quick. Mississippi recently modernized its law (Miss. Code §79-29-223) to allow entity conversions – an LLC can convert into a corporation or LP by filing a certificate of conversion ($50 fee). This is helpful if a startup later needs a different structure.
Veil-Piercing Precedent: Mississippi courts have had few LLC piercing cases. They generally apply the same test as for corporations, requiring proof of complete control by owners and misuse of that control to commit fraud or wrong. In a 2017 case (Oxford Mall v. K&B, Miss. Sup. Ct.), the court refused to pierce an LLC veil simply because of common ownership with another entity, underscoring that each LLC is separate absent serious misconduct. The state has no unique LLC veil statute, so common law standards (stringent) apply.
Regulatory Traps: Mississippi is very friendly in having no annual requirements, but one “trap” is the state’s tax on LLC income: Mississippi treats LLCs as pass-throughs, so members pay state income tax up to 5%. There is no separate LLC tax. Another consideration: Mississippi offers strong privacy – LLCs do not have to list member names in public filings (only the organizer and registered agent). Finally, Mississippi is known for relatively low local costs (e.g. low filing agent fees). With essentially zero maintenance fees, a Mississippi LLC is extremely cost-effective, so long as the business doesn’t mind that Mississippi’s legal infrastructure and courts are less developed than, say, Delaware for complex corporate matters.

10. New Mexico – No Reports, High Privacy

Formation: New Mexico charges $50 to file Articles of Organization. The process is handled by the NM Secretary of State’s online system (as of late 2024, NM moved to online-only filings (Business Services | Maggie Toulouse Oliver – New Mexico Secretary …)). Approval takes 1–3 days typically. New Mexico does not require publication of formation.
Ongoing Compliance: New Mexico is another state with no annual or biennial report filings for LLCs. Once your LLC is formed, the state imposes no recurring fees or reports at all. This, along with no franchise tax, keeps costs minimal. (Starting in 2024, all LLCs nationwide will have to file a federal beneficial ownership report under the Corporate Transparency Act, but New Mexico itself doesn’t mandate any state annual filing.)
Amendments & Conversions: New Mexico LLC amendments cost $50 ([PDF] Domestic Limited Liability Company Amendment Application Checklist) (How to Change an LLC Name in New Mexico (Step-by-step)). You can file an amendment form (or now online) to change the Articles (e.g. name, duration, etc.). Turnaround is quick. New Mexico has statutes permitting mergers and domestication (so an out-of-state LLC can domesticate into NM or vice versa), typically for the same $50 fee. Converting an LLC to a corporation would require creating the new entity and doing a merger or asset transfer, as NM law doesn’t have a direct one-step “conversion to corporation” statute. Startups sometimes use NM LLCs as anonymous holding entities, and those can be merged into Delaware corps later when needed.
Veil-Piercing Precedent: New Mexico courts have very sparse case law on LLC veil piercing. Historically, NM follows the approach that an LLC’s veil may be pierced under the same conditions as a corporation’s – when the entity was instrumentality of owners and used to commit fraud or perpetuate injustice. No notable NM Supreme Court cases in recent years have changed that. The state is known for strong anonymity (members aren’t publicly listed), but remember that anonymity alone isn’t an asset protection if the veil is pierced (which again, is rare and would require proof of wrongdoing).
Regulatory Traps: The key appeal of New Mexico is no annual fees and high privacy. The state does not even require listing managers or members in the formation documents – only the organizer and a registered agent are on record. This has made NM a popular choice for those seeking anonymity (Business Services | Maggie Toulouse Oliver – New Mexico Secretary …). A caveat: the new federal BOI reporting will somewhat diminish this anonymity by requiring private owner info to FinCEN, but it isn’t public. New Mexico also has no franchise or privilege tax. One must still pay normal income tax on LLC earnings (NM has a 5.9% flat corporate tax, but LLCs usually pass-through to personal taxes). Overall, New Mexico is extremely low-cost and hands-off from a regulatory perspective – ideal for a lean startup wanting to minimize disclosures and expenses.

11. Kentucky – Low Fees, Annual Report Simple

Formation: Kentucky’s LLC formation fee is only $40, one of the lowest in the nation. You can file online via the Kentucky One Stop Business Portal and typically get approval within a day. No publication required. An initial report called the “Organization Tax” was repealed years ago, so only the $40 fee applies.
Ongoing Compliance: LLCs in Kentucky file a short Annual Report each year by June 30 with a $15 fee. This is done online in minutes (or via a postcard form). There’s no franchise tax on Kentucky LLCs, but note: Kentucky does levy a Limited Liability Entity Tax (LLET) on business gross receipts or gross profits if they exceed $3 million. Most small startups won’t hit that threshold, and for many LLCs the LLET results in the minimum $175 (which is creditable against income tax). For five-year cost purposes, we did not include LLET since new startups often qualify for the small business relief. However, founders should be aware as the business grows.
Amendments & Conversions: Articles of Amendment in Kentucky cost $40 (the same as formation) (How to Change an LLC Name in Kentucky (Step-by-step) | LLCU®). The form is straightforward. Kentucky provides statutory entity conversion (KRS 14A.8-101) allowing an LLC to convert to a corporation or other form; the filing fee for conversion is typically the same as a new formation ($40). This flexibility is helpful if planning to attract investors via a C-Corp later.
Veil-Piercing Precedent: Kentucky’s leading case on LLC veil piercing, Turner v. Andrew (Ky. 2011), set a high bar – requiring not just domination of the LLC by a member but also sanctioning of fraud or inequity if the veil is not pierced. Kentucky courts in recent years have continued to require a showing of actual misconduct (like commingling funds for personal use, undercapitalization intended to defraud creditors, etc.) before disregarding the LLC form. In short, Kentucky respects the liability shield if the LLC is used legitimately.
Regulatory Traps: Aside from the potential LLET for larger LLCs, Kentucky has a generally pro-business environment. The state does not require listing of members in the public filings, only a principal office and registered agent. One minor trap: Kentucky mandates professional LLCs (PLLCs) for certain licensed professions – so a startup offering, say, engineering services must form as a PLLC (which has the same fees but an extra step of getting board approval). For most typical startups, no special hoops. With very low fees and straightforward compliance, Kentucky earns its spot among the most affordable states.

12. Utah – Low Annual Fee and Easy Changes

Formation: Utah’s Certificate of Organization for an LLC costs $59 (Utah oddly sets many fees at non-round numbers) ([PDF] Updated Fee Schedule July 1, 2024 – corporations.utah.gov). The Utah Department of Commerce provides an online portal (OneStop) to file; approvals come back within 2 business days typically. No publication requirement.
Ongoing Compliance: Utah requires an Annual Renewal (report) for LLCs, with an $18 fee each year. This can be filed easily online (Utah emails a reminder with a PIN to the registered agent). Utah has no separate franchise tax for LLCs. However, all Utah LLCs must obtain a state business license and pay a small registration fee to the Tax Commission when they start doing business (usually ~$22, one-time). This isn’t an annual LLC fee, but something to note operationally.
Amendments & Conversions: Utah’s LLC amendment filing fee is $37 ([PDF] How to Amend Your Limited Liability Company Certificate of …). Utah’s online system allows electronic amendments, which are processed in a few days. Utah is also one of the states that has adopted a statutory conversion process – you can convert an LLC to a corporation (or vice versa) by filing a Articles of Conversion (fee $37, same as amendment) ([PDF] How to Amend Your Limited Liability Company Certificate of …). This is very useful for startups, as it avoids having to dissolve and reform a new entity. Utah even allows a domestic LLC to transfer its domicile to another state (domestication) or accept an out-of-state LLC into Utah – offering flexibility as companies grow or relocate.
Veil-Piercing Precedent: Utah courts have pierced LLC veils on rare occasions, generally mirroring corporate veil standards. In a 2019 Utah Court of Appeals case, the court noted that Utah’s LLC Act (UCA §48-3a-304) explicitly states members are not liable for LLC debts, and piercing requires showing fraud or abuse of the LLC form. No notable new precedent has emerged in the last five years easing piercing. Utah LLC owners who avoid commingling and fraud have a reliable liability shield.
Regulatory Traps: Utah is considered very business-friendly. One point to watch: Sales taxes – Utah imposes sales tax on goods and certain services, so if your startup is selling products, ensure compliance (though this is not an LLC-specific fee). Also, Utah has strong asset protection laws (it was among the first to protect single-member LLCs from certain creditor remedies), which is a plus. The state does require public disclosure of an LLC’s principal office and registered agent, but not the members. In summary, Utah combines moderately low fees with robust legal provisions that benefit startups looking for flexibility and protection.

13. Ohio – Absolutely No Ongoing Fees

Formation: Ohio’s Articles of Organization cost $99 to file. The Ohio Secretary of State offers online filings through Ohio Business Central, with approvals often in 2–3 business days. The $99 fee is a bit unusual (not a round number), but Ohio recently legislated various fee reductions – as of 2022, the formation fee dropped from $125 to $99 to encourage business growth ([PDF] Secretary of State Agency Fees – 01/31/2025 Description Revised …).
Ongoing Compliance: Ohio is one of the few states with no annual or biennial report requirement for LLCs at all. Once your LLC is formed, you have no ongoing state filings or fees to maintain its good standing. (Ohio LLCs do have to file if certain changes occur, like a statutory agent change or dissolution, but no routine report.) There’s also no franchise or privilege tax on Ohio LLCs. This means an Ohio LLC’s five-year state fees are basically just the formation fee – a big reason for its ranking.
Amendments & Conversions: Ohio LLC amendments cost $50 (How to Amend Articles of Organization in Ohio (2025) – LLCBuddy) (Section 111.16 – Ohio Revised Code – Ohio Laws). Ohio provides a standard Form 611 for amendments. Interestingly, Ohio’s recent revisions to its business laws (effective 2022) allow a lot of flexibility – LLC operating agreements can even allow certain changes without formal amendment filings in some cases. Ohio has robust conversion and domestication statutes in its Revised Code. An Ohio LLC can convert to a corporation or other form by filing a Certificate of Conversion ($50) and the new formation documents. Ohio also permits statutory mergers between different entity types. These modern provisions help startups reorganize as needed without leaving Ohio.
Veil-Piercing Precedent: Ohio courts have a well-developed body of law on piercing (the Belvedere test, refined by Dombroski v. WellPoint). To pierce an LLC’s veil in Ohio, a plaintiff must show: (1) control by the member to such a degree that the LLC had no separate mind/will, (2) control used to commit fraud or an illegal act, and (3) injury or unjust loss resulted (Section 111.16 – Ohio Revised Code – Ohio Laws). Ohio courts in the last five years have continued to enforce this strict three-prong test. For example, in FirstEnergy v. Pircio (Ohio App. 2020), the court refused to pierce an LLC veil despite one owner’s heavy control, because fraud wasn’t proven. Thus, founders can expect strong liability protection in Ohio.
Regulatory Traps: Ohio has virtually no state-level traps for LLCs. There is no annual business license fee (except certain professional licenses). Ohio also has no state corporate income tax – it uses a gross receipts tax (Commercial Activity Tax, CAT) that exempts the first $150,000 of revenue, so most small startups owe $0 CAT. Ohio does require businesses to pay municipal income taxes in many cities where they operate, which is an extra complexity but not directly an LLC incorporation issue. Overall, Ohio offers an extremely low-maintenance environment – ideal for a startup that wants to “set it and forget it” in terms of state paperwork.

14. West Virginia – Simple and Low-Cost, with One Stop Portal

Formation: West Virginia charges $100 for LLC formation. Filings are done through the WV One Stop Business Portal, which streamlines registration with the Secretary of State, Tax Department, and Labor Department in one application. Typical approval time is 2–5 business days. No newspaper publication is required.
Ongoing Compliance: WV LLCs file a brief Annual Report each year by July 1, with a $25 fee. The report confirms the principal office, members/managers, and agent. West Virginia has no franchise or privilege tax on LLCs, but it does impose a $50 annual business license fee (called the Business Registration Tax) every two years. This $50/biannual fee is payable to the state Tax Department when renewing your general business license. Over five years, that’s roughly $125 in business license fees. (We included just the $25 SOS reports in the table, since the $50 license is not always considered an LLC “report,” but founders should budget for it.) Even with that, WV’s costs are very low.
Amendments & Conversions: West Virginia’s Articles of Amendment fee is $25 (West Virginia Code | §59-1-2). The state’s One Stop system allows you to file amendments online. West Virginia law permits conversions and domestications as well – for instance, you can convert an LLC to a corporation (fees similar to a new filing, $100). WV also recognizes series LLCs, but that’s a niche feature not often used by typical startups. For most, the standard amendment process suffices for changes, and it’s inexpensive.
Veil-Piercing Precedent: West Virginia courts apply traditional veil-piercing standards and have done so sparingly with LLCs. A key case, Kubican v. The Tavern, from the WV Supreme Court in 2017, pierced an LLC’s veil where the single member siphoned funds and left the LLC undercapitalized to pay debts – essentially using it as a sham. The court emphasized that absent such bad-faith conduct, the LLC’s separate existence must be respected. The lesson: don’t abuse the LLC form, and your liability protection stands strong in WV.
Regulatory Traps: Aside from the biennial $50 business license renewal, WV has few traps. The state is known for being fairly bureaucratic (hence the creation of the One Stop portal to simplify filings). While not a trap, note that WV, like several states, requires LLCs to obtain a business registration certificate from the state Tax Dept. (the $30 initial fee for that is often rolled into One Stop). Also, if an LLC has employees, WV requires unemployment and workers’ comp registrations – but again, those apply anywhere. In terms of state taxes, WV has a straightforward income tax (pass-through to members). All told, West Virginia provides an inexpensive and reasonably easy environment for maintaining an LLC, especially now that multiple filings are consolidated through the One Stop system.

15. Wisconsin – Low Maintenance and Pro Business

Formation: Wisconsin’s LLC Articles of Organization cost $130 if filed online (or $170 by mail). Online filing via the WDFI system is highly recommended – approvals are often instantaneous or within a day. (The state recently added a $25 mail surcharge, hence $130 online vs $170 paper).
Ongoing Compliance: Wisconsin LLCs file an Annual Report with a $25 fee, due by the end of the quarter in which the LLC was formed. The report can be filed online easily. Wisconsin has no separate LLC franchise tax, but it does levy a $25 annual “report filing fee” on all entities (which is exactly this annual report fee). Not filing can lead to administrative dissolution after a notice period, so mark your calendar. Wisconsin does not impose any franchise or privilege taxes on top of the income tax that LLC members pay on profits.
Amendments & Conversions: Wisconsin reduced its LLC amendment fee in 2020 – it is now just $25 if filed online (or $40 by mail) (How to Amend Articles of Organization in Wisconsin (2025)). The Department of Financial Institutions (DFI) provides Form 504 for amendments, which is straightforward. Wisconsin’s statutes permit mergers and conversions – you can merge an LLC into another entity or convert it to a different form under Wis. Stat. §183.1207. The filing fee for articles of conversion is $150, so a bit higher if changing entity type, but this is rarely needed early on.
Veil-Piercing Precedent: Wisconsin courts have occasionally pierced LLC veils, but the standard is strict. A notable case, Consumer’s Co-op v. Olsen (WI Supreme Court, older but often cited), set out that to pierce the veil, there must be such unity of interest that separateness has ceased and adherence to the fiction of separateness would sanction a fraud or lead to an inequitable result. In the LLC context, Wisconsin courts in the past five years have not deviated from this norm. The general approach is that LLC owners are not personally liable for debts unless the LLC was a mere shell for wrongful conduct. Maintaining proper records and not intermingling funds keeps one safe.
Regulatory Traps: Wisconsin stands out for having no major hidden fees or taxes for LLCs. One item: Wisconsin requires businesses to file and pay a personal property tax to local municipalities on tangible business property each year, but small businesses get exemptions and the tax has been phased out on some property – this is more of an accounting consideration. Wisconsin also has a reputation for a well-run Secretary of State/DFI system – filings are efficient and customer service is good, which is a “soft” benefit for startups. With moderate one-time costs and low annual fees, Wisconsin earns its spot as a cost-effective, business-friendly state for LLC formation.

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These top 15 states distinguish themselves by minimal fees and burdens. Most have either no annual report or a very cheap one, and none levy separate franchise taxes on LLCs in a way that significantly inflates the five-year cost. They offer flexible legal frameworks for amendments and conversions, which is valuable if a startup needs to pivot in the future. Crucially, their courts have not shown any hostility toward the LLC liability shield in recent years – if anything, states like Wyoming, Indiana, and others have codified or reinforced protections (e.g., Wyoming’s explicit LLC veil-piercing statute (Wyoming Cleans Up Veil Piercing in LLC Act | Business Law Prof Blog)). This gives entrepreneurs confidence that choosing a low-cost state does not mean compromising on legal protections.

Benchmarking Delaware, Nevada, Wyoming, and California

It’s worth comparing the above findings with four well-known states often discussed in entity selection: Delaware, Nevada, Wyoming, and California. These states are frequently chosen (or at least considered) for reasons beyond just fee cost – such as legal infrastructure, investor preferences, or tax climate – but they present a different cost profile:

• Delaware: The gold standard for corporate law, but at a price. Delaware’s LLC formation fee is modest ($110), but it charges a $300 annual LLC franchise tax (flat, regardless of income) (LLC/LP/GP Franchise Tax Instructions – Division of Corporations – State of Delaware) (LLC/LP/GP Franchise Tax Instructions – Division of Corporations – State of Delaware). Over five years that’s $1,500 in taxes alone. Delaware also has a high amendment fee ($200) (Certificate Type). Why companies still choose DE: Delaware offers unparalleled legal predictability – a dedicated Court of Chancery and the nation’s most developed business case law. For startups seeking venture capital, investors often prefer a Delaware entity (typically a corporation, but sometimes an LLC) for familiarity and governance reasons (LLC/LP/GP Franchise Tax Instructions – Division of Corporations – State of Delaware). Delaware also allows confidential formation (LLC member names aren’t filed) and strong asset protection laws. Veil piercing in DE is rare; Delaware courts are protective of the LLC veil and apply the concept only in egregious fraud cases. In short, Delaware is not the cheapest (about $2,710 five-year cost in our table), but many consider its legal benefits worth the cost for high-growth startups (LLC/LP/GP Franchise Tax Instructions – Division of Corporations – State of Delaware).
• Nevada: No income tax, but high fees. Nevada touts itself as a business-friendly state with no personal or corporate income tax. However, the state makes up for it with hefty filing fees: $425 to form an LLC (which includes a required $200 business license and $150 list of managers) and about $350 every year for the license renewal and annual list. Over five years that’s $1,750 in recurring fees. Nevada’s amendment fee is also high ($175) (Nevada Corporation LLC Nonprofit Amendment – Harbor Compliance). Why some choose NV: Like Delaware, Nevada has statutes highly protective of managers/members (even more explicitly – Nevada law discourages piercing by requiring “manifest injustice” beyond just fraud). Plus, no state income tax can be attractive if the owners live in a no-tax state (though for most startup owners, income is taxed in their home state anyway). Regulatory traps: Nevada is known for aggressive business license enforcement – every LLC must maintain a state business license annually or face penalties (Nevada LLC Annual Fees & Annual Report). Also, Nevada has joined information-sharing networks in recent years (eroding some of the historical “privacy” mystique it had). In sum, Nevada offers tax advantages for some and strong liability protection, but purely on fees, it’s one of the most expensive states (around $3,050 five-year cost).
• Wyoming: Often cited as a cheaper alternative to Delaware/Nevada. Wyoming’s formation fee is $100 and its annual license tax is $60 (minimum) (Wyoming Business Division) – notably low. Five-year cost (~$700) is higher than the top 15 due to that $60/year tax, but still much less than Delaware or Nevada. Why companies choose WY: Wyoming was the first state to authorize LLCs (in 1977) and continues to innovate – it allows anonymous LLC ownership, has no state income tax, and recently strengthened LLC asset protection by statute (Wyoming Cleans Up Veil Piercing in LLC Act | Business Law Prof Blog). For single-member LLCs, Wyoming prevents outside creditors from seizing LLC interests (charging order protection). Many online businesses or holding companies form in Wyoming for its low fees and privacy. Veil piercing and legal climate: Wyoming law explicitly codifies that courts may pierce the LLC veil only in cases of fraud or similar manifest injustice, and mere failure to follow formalities isn’t enough (Wyoming Cleans Up Veil Piercing in LLC Act | Business Law Prof Blog). This statute was passed after a one-time piercing in GreenHunter Energy (2014) to reassure LLC owners. Bottom line: Wyoming hits a sweet spot of relatively low cost, strong legal protection, and no income tax, making it very startup-friendly (it just fell outside the top 15 by cost because states like Arizona and Missouri edge it out on having no annual fee at all).
• California: High cost, mandatory taxes – chosen usually because a startup is physically there. California has a low filing fee ($70), but every LLC must pay an $800 franchise tax annually to the Franchise Tax Board, regardless of income. Additionally, CA LLCs pay a gross receipts fee if revenue exceeds $250k (which can range from $900 to $11,790, scaling up). We did not include that variable fee in the five-year cost (which is already $4,260 with just the $800/year and $20 biennial reports) – but for a successful startup, the gross receipts fee could add significantly more. Compliance: California requires an initial Statement of Information ($20) within 90 days of formation and then every 2 years (How much does an LLC cost in California? – 2025 State Fees). It also has more bureaucracy (separate filings for the Franchise Tax Board vs. Secretary of State). Why companies still form in CA: If your startup is operating in California, you’ll owe the $800 tax anyway (foreign LLCs registering in CA pay it too). Some choose to just form in CA to avoid dual filings. Also, California has strong laws in areas like investor rights and an entrepreneurial ecosystem that, while not legally related to LLC fees, often means companies start there out of practical necessity (proximity to markets or talent). Veil Piercing: California courts will pierce LLC or corporate veils under the common alter ego doctrine; they consider factors like commingling, undercapitalization, and ignoring formalities. There have been cases piercing LLCs (e.g. Curci Investments v. Baldwin, 2017, made waves about charging orders and alter ego for LLCs), but generally, courts require a showing that recognizing the LLC would sanction a fraud or promote injustice. California’s legal environment is robust but not as specialized as Delaware’s for business entities. In summary: Purely from a cost perspective, California is expensive – essentially a ~$4k mandatory cost over five years just to exist, which for a strapped startup is a heavy lift. The state’s benefits lie elsewhere (market access, etc.), not in fee savings.

In Perspective: Delaware, Nevada, and Wyoming often come up in discussions for their legal advantages or tax climate, while California is home to many startups by default. However, as the matrix shows, these states do not rank among the cheapest on raw dollars. If cost containment is the priority and your business doesn’t explicitly require what Delaware or Nevada offer, one of the top 15 affordable states might serve you better initially. Keep in mind that if you form outside California but actually operate there, you must register in CA and still pay the $800 – eliminating the cost benefit. Similarly, if you need Delaware to satisfy investors, the legal advantage might outweigh the fees.

Closing Thoughts

When deciding where to form your startup’s LLC, cost is a crucial factor – and as I’ve shown, it varies dramatically by state. States like Missouri, Arizona, Montana, and others make it possible to maintain an LLC for five years for just a few hundred dollars total, whereas others can run into the thousands primarily due to annual taxes. Equally important are the legal and regulatory environments: All states in our top 15 list have solid legal protections (and no recent trends of undermining the LLC liability shield), and they avoid onerous requirements that don’t exist elsewhere.

That said, every startup’s situation is unique. You should weigh the fee savings against considerations like where your business operates physically, where you have to pay taxes, where you might go to court if disputes arise, investor expectations, and administrative convenience. Forming in a cost-friendly state can save money, but if you’ll immediately need to register (and pay fees) in your home state to legally do business, the benefit may be moot.

Use the data above – both the numbers and the narrative context – to make an informed choice. The good news is that with many states modernizing their laws and lowering fees to attract businesses, entrepreneurs have multiple excellent options for a cost-effective, startup-friendly LLC jurisdiction in 2025 and beyond.