1. Overview: Choosing the Right State for Your LLC
The state where you form your LLC affects everything from annual costs to privacy protections to how well your personal assets are shielded from business creditors. While Delaware and Wyoming get the most attention, the "best" state depends on your specific situation.
Key Factors to Consider
- Where you physically operate: If you have employees, an office, or conduct business in a state, you'll likely need to register there anyway
- Formation and annual costs: Initial filing fees plus ongoing franchise taxes and annual reports
- Privacy needs: Whether member/manager names appear in public records
- Asset protection: Strength of charging order protections against creditors
- Business complexity: Sophistication of the state's LLC laws for operating agreements
- Tax implications: State income taxes on LLC profits
Quick Summary: Which State Wins Each Category?
2. Side-by-Side State Comparison
This comprehensive table compares all key factors for LLC formation across the seven most popular states:
| Factor | Delaware | Wyoming | Nevada | California | Texas | Florida | New York |
|---|---|---|---|---|---|---|---|
| Formation Fee | $90 | $100 | $425 | $70 | $300 | $125 | $200 |
| Annual Fee/Tax | $300 | $60 | $350 | $800 min | $0-$1,200+ | $138.75 | $25 |
| State Income Tax | 0% (no nexus) | None | None | Up to 13.3% | None | None | Up to 10.9% |
| Privacy (Anonymity) | High | Excellent | Excellent | Low | Moderate | Moderate | Low |
| Charging Order Protection | Strong | Strongest | Strong | Moderate | Moderate | Moderate | Weak |
| Single-Member LLC Protection | Yes | Yes | Yes | Limited | Limited | Limited | No |
| Court System | Specialized | Standard | Standard | Standard | Standard | Standard | Standard |
| Publication Requirement | No | No | No | No | No | No | Yes ($500-$2000) |
| Ease of Formation | Easy | Easy | Easy | Moderate | Easy | Easy | Complex |
| Best For | Startups, VC | Privacy, Assets | Privacy, No Tax | CA Operations | TX Operations | FL Operations | NY Operations |
3. Delaware LLC
Delaware
The Corporate Favorite - Sophisticated Business LawDelaware is the gold standard for corporations seeking investment, but for LLCs, its advantages are more nuanced. It has the most developed LLC law in the country and a specialized business court (Court of Chancery), but these benefits matter most for complex, high-stakes situations.
Pros
- Court of Chancery - expert judges, fast decisions
- Most flexible LLC statute in the US
- Well-established case law provides predictability
- No state income tax on out-of-state income
- Strong charging order protection
- Recognized and respected by investors
- Easy to form and maintain
Cons
- $300 annual franchise tax regardless of revenue
- Need registered agent in Delaware
- Still need to register as foreign LLC where you operate
- Benefits mainly relevant for complex/litigated matters
- Overkill for most small businesses
4. Wyoming LLC
Wyoming
Best Asset Protection & Privacy - Lowest Ongoing CostsWyoming was the first state to create the LLC in 1977 and remains a leader in LLC-friendly legislation. It offers the strongest combination of privacy, asset protection, and low costs. For holding companies, real estate investors, and privacy-conscious entrepreneurs, Wyoming is often the top choice.
Pros
- Strongest charging order protection in the US
- Full protection for single-member LLCs
- Complete anonymity - no public member disclosure
- No state income tax
- Lowest annual fees ($60/year)
- No franchise tax based on revenue
- Lifetime proxy allowed
- No information sharing agreements with IRS
Cons
- Less developed case law than Delaware
- No specialized business court
- Still need foreign registration where you operate
- Distant from major business centers
5. Nevada LLC
Nevada
Strong Privacy & No State Taxes - Higher FeesNevada markets itself heavily as a business-friendly haven with strong privacy and no state income tax. While these benefits are real, Nevada's LLC fees are significantly higher than Wyoming's, making it less cost-effective for similar benefits. It's best for businesses with Nevada operations or specific privacy needs.
Pros
- No state income tax (personal or corporate)
- Strong privacy - no member disclosure required
- No information sharing with IRS
- Strong charging order protection
- No franchise tax on out-of-state revenue
- Well-developed LLC statutes
Cons
- Higher formation fees ($425)
- Higher annual fees ($350 + business license)
- State business license required ($200/year)
- Wyoming offers similar benefits at lower cost
- Privacy benefits over-marketed by formation mills
6. California LLC
California
The Expensive Reality - Form Here Only If You MustCalifornia has the most expensive LLC requirements in the nation. The $800 minimum franchise tax applies to ALL LLCs doing business in California - even if formed elsewhere. This means California businesses rarely benefit from out-of-state formation and face double registration costs if they try.
Pros
- If you operate in CA, you need CA registration anyway
- Straightforward formation process
- Large legal community familiar with CA LLC law
- World's 5th largest economy - business hub
Cons
- $800 minimum franchise tax (even if no revenue)
- Additional LLC fee for gross receipts over $250K
- State income tax up to 13.3%
- Strict compliance requirements
- Limited privacy - Statement of Information public
- Weaker charging order protections
- FTB aggressively pursues out-of-state LLCs
7. Texas LLC
Texas
No Income Tax - Business Friendly GiantTexas combines no state income tax with a business-friendly regulatory environment. The franchise tax has been reduced significantly and most small LLCs pay nothing. For businesses operating in Texas, forming locally makes sense and avoids foreign registration complexity.
Pros
- No state personal income tax
- No franchise tax for LLCs under $2.47M revenue
- Business-friendly regulatory environment
- Large economy with diverse opportunities
- Series LLC available
- Strong economy and growth
Cons
- Higher formation fee ($300)
- Franchise tax for larger businesses (0.375%-0.75%)
- Must file annual Public Information Report
- Manager names disclosed publicly
- Charging order protection weaker than Wyoming
8. Florida LLC
Florida
No Income Tax + Strongest Homestead ProtectionFlorida combines no state income tax with the nation's strongest homestead protection - your primary residence is essentially untouchable by creditors regardless of value. For Florida residents, this provides powerful personal asset protection that complements LLC protections.
Pros
- No state personal income tax
- Unlimited homestead exemption (primary residence)
- Reasonable annual filing fees
- Growing business community
- Series LLC available
- Strong tenancy by entireties protection for married couples
Cons
- Must file annual report ($138.75)
- Manager names disclosed in annual report
- Single-member LLC protection uncertain
- Less developed LLC case law
- Charging order protection weaker than Wyoming
9. New York LLC
New York
High Costs & Publication Requirement - Form Only If NecessaryNew York is one of the most expensive and complex states for LLC formation due to its unique publication requirement. You must publish notice of LLC formation in two newspapers for six weeks - a requirement that can cost $500-$2,000+ depending on the county. If you operate in New York, you'll need to comply anyway.
Pros
- Major business hub - NYC and beyond
- Low annual filing fee ($25)
- Strong economy and business opportunities
- If you operate in NY, you need NY registration anyway
Cons
- Publication requirement ($500-$2,000+)
- High state and city income taxes
- Weak charging order protection
- Single-member LLCs get NO charging order protection
- Complex compliance requirements
- Member names may become public through publication
Publication Requirement Warning
Within 120 days of formation, New York LLCs must publish notice in two newspapers (one daily, one weekly) in the county of the LLC's office for six consecutive weeks. Costs vary dramatically by county:
- Manhattan: $1,200-$2,000+
- Brooklyn/Queens: $800-$1,500
- Albany County: $200-$400
- Upstate counties: $200-$600
Failure to publish can result in suspension of your LLC's authority to conduct business.
10. The "Foreign LLC" Reality Check
Critical: You Can't Escape Your Home State
Many business owners believe forming an LLC in Delaware or Wyoming lets them avoid their home state's taxes and fees. This is a myth. If you "do business" in a state, you must register there as a "foreign LLC" - regardless of where you originally formed.
What "Doing Business" Means
States define "doing business" broadly. You likely trigger foreign registration requirements if you:
- Have employees, contractors, or agents in the state
- Have a physical office, warehouse, or storefront
- Own or lease real property in the state
- Regularly meet with clients in the state
- Have significant sales to customers in the state
- Have bank accounts in the state (in some jurisdictions)
The Hidden Cost of Out-of-State Formation
Consider a California resident who forms a Wyoming LLC thinking they'll save money:
| Scenario | California LLC Only | Wyoming LLC + CA Foreign Registration |
|---|---|---|
| Formation Fee | $70 | $100 (WY) + $70 (CA foreign) = $170 |
| Annual State Fees | $800 | $60 (WY) + $800 (CA) = $860 |
| Registered Agent Fees | $0-150 | $100-300 (WY) + $0-150 (CA) = $100-450 |
| Complexity | One state filing | Two state filings, two sets of requirements |
| Total First Year | $870-$1,020 | $1,130-$1,480 |
- Holding companies with no physical operations (real estate, IP, investments)
- Online businesses with no physical presence in any state
- Asset protection structures (separate from operating companies)
- Multi-state operations where you need a "home base" state
- Seeking investment (Delaware for VC/institutional investors)
- Complex operating agreements requiring sophisticated LLC law
11. Recommendations by Business Type
Here's specific guidance based on your business model and situation:
E-Commerce / Online Business
Selling products or services online with no physical location or employees in any particular state.
Consulting / Freelancing
Service business working with clients, possibly remotely.
Real Estate Investing
Owning rental properties or flipping houses.
Tech Startup Seeking Investment
Building a company to raise VC or angel investment.
Local Retail / Restaurant
Brick-and-mortar business serving local customers.
Professional Services (Doctor, Lawyer, CPA)
Licensed professional providing services.
Holding Company / Family Office
Entity to hold investments, real estate, or family assets.
Amazon FBA / Dropshipping
E-commerce using fulfillment by Amazon or dropshipping.
SaaS / Software Company
Software-as-a-service or digital products business.
Multi-State Operations
Business operating in multiple states with employees/offices in several locations.
Cryptocurrency / Digital Assets
Trading, investing, or building in the crypto space.
Content Creator / Influencer
YouTube, TikTok, podcasting, or similar content business.
Quick Decision Framework
Related Business Templates & Guides
Protect your business with properly drafted agreements and know your rights in disputes:
Delaware LLC Dispute Templates
Demand letters for Delaware LLC member disputes, fiduciary duties, and operating agreement breaches
Books & Records Demands
Demand access to company financial records and documents
Minority Owner Oppression
Protect minority member rights against majority abuse
Partnership Disputes
Demand letters for partnership and joint venture conflicts
Breach of Contract
Templates for contract breach disputes and demands
California Business Disputes
California-specific business contract demands
LLC Member Dispute?
If you're having issues with LLC partners, distributions, or governance, our demand letter templates can help you assert your rights.
LLC Dispute TemplatesNeed a Business Contract?
Operating agreements, NDAs, and contractor agreements to protect your new LLC.
Business TemplatesFrequently Asked Questions
What is the best state to form an LLC?
There is no single "best" state - it depends on your situation. For most small businesses, your home state is best. Wyoming offers the best combination of privacy, asset protection, and low costs for holding companies and online businesses. Delaware is preferred for startups seeking investment.
Can I form an LLC in Wyoming but live in California?
Yes, but if you "do business" in California (have customers, employees, or significant activity there), you must also register as a foreign LLC in California and pay the $800 minimum franchise tax. This means you'd pay fees in both states.
What is a charging order protection?
Charging order protection prevents creditors from seizing your LLC ownership interest. Instead, they can only receive distributions when and if made. Wyoming provides the strongest protection, including for single-member LLCs. Some states provide weaker protection or none for single-member LLCs.
Is Nevada really better than Wyoming for LLCs?
Nevada and Wyoming offer similar privacy benefits and no state income tax. However, Wyoming has lower annual fees ($60 vs $550+) and stronger charging order protections. Nevada's marketing tends to overstate its advantages.
Do I need a registered agent in the state where I form my LLC?
Yes. Every state requires a registered agent with a physical address (not PO Box) in that state. For out-of-state formation, you'll need to hire a registered agent service ($50-$300/year).
What is New York's publication requirement?
New York requires LLCs to publish notice of formation in two newspapers for six weeks within 120 days of formation. This costs $500-$2,000+ depending on the county, making New York one of the most expensive states for LLC formation.