Last Updated: May 10, 2024, 10:18 am by TRUiC Team

Cheapest States to Start an LLC

There’s a lot of advice out there about the cheapest and best states to start an LLC. Certain states have a reputation for being more LLC-friendly than others, but overall, the cheapest state to form an LLC will likely be your home state.

Read on for more information about the cheapest states to start an LLC. Our list covers information for home-based and online businesses as well as for LLCs with non-resident owners.

Once you’ve decided on the best state for you, check out our How to Form an LLC guides.

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What Is an LLC?

A limited liability company (LLC) is a business structure that provides its owners (called “members”) the personal liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership.

LLCs can be owned by one or more people. An LLC with one owner is known as a single-member LLC, and an LLC with more than one owner is a multi-member LLC.

Recommended: Check out our What Is a Limited Liability Company guide to learn more.

LLC Costs

When looking for the cheapest state to form an LLC, there are different costs to consider:

  • Formation costs
  • Maintenance costs (Including Annual Taxes)

These potential expenses can vary by state, and each one can have an impact on the overall cost of starting and maintaining an LLC.

Formation Costs

Each state has its own LLC registration fee. Because you can form an LLC yourself without hiring a lawyer, the registration fee is usually the main cost of actually creating the LLC.

State registration fees range from $40 to $500. Learn about LLC registration costs in your state in our LLC cost guides.

Kentucky has the lowest LLC registration fee at $40 and Massachusetts has the highest LLC registration fee at $500.

This is a one-time fee, so while it affects initial startup costs, it doesn’t have much impact on the overall cost of having an LLC in the long run.

Maintenance and Annual Tax Costs

In addition to the registration fee, the majority of states have an annual or biennial report fee. The amount of this fee varies considerably. While in most states the fee is $100 or lower (or even zero), some states have much higher report fees, including California ($800).

To learn more about ongoing LLC costs in your state, visit our LLC Annual Report guide and select your state.

The Cheapest State for Your LLC

Despite the differences in LLC fees and taxes from state to state, the cheapest state to form an LLC in is likely going to be the state where your LLC does business.

This is because even if you register your LLC in a state with low fees or state taxes, you will also be required to register it in your home state. So, trying to take advantage of lower costs in other states will actually make things more expensive.

For example, if you live in California, the state doesn’t care if your LLC is registered in Delaware — you will still have to pay California income tax (as well as register your LLC as a “foreign” LLC in California and pay all related fees).

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LLC Costs Per State

Interested in learning about LLC costs in your state?

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Best State to Form an LLC for Online Businesses

This holds true for online businesses as well: the best state for an online business to form an LLC is the state from where you run the business. Even if you are selling products or virtual services nationally, if you are working from home or an office, your business will need to be registered in that state.

Best State to Form an LLC for Non-US Residents

The best state to form an LLC for non-US residents can vary a bit depending on the type of business and whether it has employees in the US (among other factors).

For businesses without US-based employees that qualify as non-taxable, the cheapest states for an LLC would be the ones with low registration and maintenance fees. If the business is subject to state income taxes, forming and operating in a state with no income tax could be advantageous.

Visit our How to Open a Company in the USA guide to learn more.

Some of the most popular states for starting an LLC for non-US residents are: Wyoming, Nevada, New Mexico, and Delaware, due to privacy and/or cost advantages.

Learn more about starting and maintaining an LLC in any state in our LLC guides:

Cheapest State for LLCs FAQ

The best state for an LLC is the state where you or your business is located. While some states have lower fees or taxes, you will ultimately also have to register your LLC and pay taxes in the state where you do business.

The cheapest way to get an LLC is to file the formation documents yourself with the state. Check out our How to Form an LLC state guides for step-by-step instructions.

The cost of an LLC varies state to state. Each state charges a registration fee, which ranges from $40 to $500.

Yes, you can form an LLC in a state you don’t live in, but you will likely also be required to register it in the state where you live.

You cannot get a free LLC. Each state has a registration fee you must pay to form an LLC, ranging from $40 to $500, depending on the state.

Many states require LLCs to pay annual fees. Check out our LLC Cost guide for more information.

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Article Sources

Internal Revenue Service Business Guide
Small Business Association Business Guide
Internal Revenue Service Forms