New York LLC
Some states are better for starting an LLC than others, but the best state to form an LLC in is usually the one where the owner plans to do business.
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Last Updated: March 27, 2026
Every entrepreneur gets lots of advice (solicited and unsolicited) when starting a business, including what the best state to form an LLC in is. After all, some states are more friendly to business than others. Usually, though, the best state to form an LLC in is the owner’s home state and the place where they’ll be conducting business. This guide explains why that’s likely the best route.
Although states like Delaware attract corporations with their business-friendly laws and tax advantages, those perks often don’t extend to an LLC. In fact, trying to establish an LLC in one state while doing business in another can be more expensive and a bigger paperwork hassle in the long run.
A limited liability company (LLC) is a kind of business entity combining the personal liability protection of a corporation with the flexibility and tax benefits of a sole proprietorship. It’s become a popular choice for entrepreneurs who want to start a business but not risk losing their personal assets if the business is sued or goes into debt. For more information, please see “What is a Sole Proprietorship?“
Prior to the LLC, the only way for someone to protect their personal assets as a business owner was to form a corporation. But corporations require more formalities and paperwork and must contend with “double taxation,” in which profits are taxed at the business level and again when they’re distributed to shareholders. LLCs by default have “pass-through taxation,” in which profits avoid being taxed at the business level and are only taxed at the level of the individual LLC owners, who are called “members.” Learn more about the pass-through taxation definition here.
When a person forms an LLC in the state where they live and plan to do business, it’s called a domestic LLC. A domestic LLC is mostly confined to doing business within its state of origin. So, does it really matter where an entrepreneur registers their LLC? It usually can’t, for example, open another office or other venue in another state. To do that, the company would need to register as a “foreign” LLC.
The “foreign” in a foreign LLC isn’t referring to another country but rather to any LLC that was formed in a state other than the one in which it does business. For example, if an entrepreneur started an LLC for their restaurant in New Jersey and wanted to open another restaurant in New York, they’d need to register as a foreign LLC in New York by getting a foreign qualification.
A foreign qualification refers to the process an entrepreneur uses to register their company to legally do business in another state. The process varies by state, but it usually involves completing a Certificate of Authority (which is paperwork similar to Articles of Organization) in the new state and paying a state fee, usually one that’s equivalent to or more expensive than the one paid to establish an LLC in the owner’s home state.
The LLC will usually also have to get a Certificate of Good Standing or its equivalent from its home state to verify that the business is in compliance in its state of origin.
Many of today’s entrepreneurs have heard how some states are much more attractive than others to businesses. For example, Delaware has attracted more than half of all Fortune 500 companies. But most of those are large corporations, and things like low corporate tax rates won’t apply to most LLCs (unless they choose to be taxed as a C corporation).
To decide whether it’s better for an entrepreneur to form an LLC in their home state versus another, it’s helpful to evaluate the pros and cons. It’s also helpful to review the benefits of forming an LLC in Delaware, Wyoming, and Nevada.
Most experts will advise that, with an exception or two, the best state for an entrepreneur to start an LLC in is the state where they live now and plan to conduct business. This section debunks some of the reasons for starting an LLC in another state.
States like Wyoming, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Alaska have no personal state income taxes. If an entrepreneur is living in one of those states and starts an LLC, it’s especially nice because not only will they not pay state income taxes at the business level, but they’ll also avoid them on their individual tax return. If an entrepreneur doesn’t already live in one of these states, they might think it’s wise to start their LLC there and avoid those state taxes.
But remember that a business owner doesn’t pay income taxes based on where their customers live; they pay them based on where they conduct business. So, if someone lives in California and plans to operate their business there, but they start their LLC in Texas, they’re still going to have to pay California state income taxes because they made the money in California.
But what if someone’s running an online business and they have customers from around the globe? Again, an entrepreneur can’t circumvent paying taxes this way. The business owner would still pay state income taxes based on where the business is operating, not necessarily where it was formed or where its customers are located.
An area of law that’s still evolving around this is how online businesses pay sales taxes and to whom. If a business owner has established what’s called a sales tax nexus in a particular state, they’ll be responsible for paying sales tax to that state.
If a person is establishing their LLC in another state but still planning to conduct business in their home state, they’ll have to register as a foreign LLC in their home state. That’s essentially doubling the paperwork.
Say a person lives in Washington and wants to operate their business there, but they decide to form the LLC in Nevada to take advantage of the friendlier business climate. First, they’d need to complete the Nevada LLC Articles of Organization for an LLC and any other associated paperwork. Then, to do business in their home state, they’d be required to complete a Washington Foreign Registration Statement to conduct business there.
But that’s not all. The business owner will need to appoint and maintain a registered agent (for more information, please see the “What is a registered agent?” page) in both states, and a registered agent must have a physical street address in each state. If the owner opts to use a registered agent service for this purpose, it’ll be an extra ongoing cost to budget for. They’d also have to maintain other compliance requirements, such as filing an annual report for both states.
Of course, the more states an LLC is registered in, the more compliance requirements it will have. And that means more opportunities for forgetting or making errors that could cause the state to fine the LLC or penalize it in some other way (maybe even dissolving the business).
Not only will being registered in multiple states mean more paperwork, but it’ll also mean more fees. States charge a fee for filing LLC paperwork, and they also charge a fee to LLCs for registering as a foreign LLC. These fees can range anywhere from around $50 to $500.
In most cases, the business’s ongoing expenses will also increase. Most states charge a fee (again, the cost range is wide) for filing an annual or biennial report. The business will have to pay such a fee in both the state in which it first registered and in each state where it’s registered as a foreign LLC. Plus, there may be other ongoing fees in the states where the company is registered, such as a general business license fee.
When a state boasts about its low corporate tax rate, some entrepreneurs need to remember that they’re not starting a corporation. As mentioned above, an LLC has pass-through taxation by default, which means that it wouldn’t pay corporate taxes if the state taxes the LLC the same way the federal government does (which most states do). So, if an entrepreneur is looking at state income taxes as a deciding factor in where to start their LLC, they’ll likely be more interested in the state’s personal income tax rate than its corporate tax rate.
The corporate tax rate can be a factor if the owner chooses to have their LLC taxed as a corporation, which is an option for many LLCs. An entrepreneur can apply for their LLC to be taxed as a C corporation (the default form of a corporation) or an S corporation (please see the “What is an S Corp?” page for more information).
An S corporation also has pass-through taxation, but it may be able to save some LLC members on self-employment taxes. A C corporation does have double taxation and would pay corporate taxes. Larger LLCs sometimes find that, once all the numbers are crunched, they can actually lower their overall tax burden with the tax deductions available to C corporations. If that’s the case with an LLC, the state’s corporate tax rate will be a bigger factor in the owner’s decision.
Because of the nature of real estate, it does make sense in most cases to form an LLC in the state where the real estate is. After all, whether an entrepreneur is selling, buying, renting, etc., they’re going to be making money from the real estate itself, and so that’s where they’d be conducting business.
There also may be cases where an LLC member living in one state does all the LLC’s business in another state, in which case moving the LLC to another state may make sense. Even so, they’d have to take special care not to conduct any business operations in their home state.
In all of these scenarios, it’s best to consult a business attorney with some experience in this field.
With all the above being said, some states are especially attractive to businesses in general. But it is usually recommended for entrepreneurs to form an LLC in the state where they live and plan to do business.
Of course, if an entrepreneur lives in any of the following states, that’s probably the best place to start their LLC. But if not, an entrepreneur might consider the above points before diving in.
Delaware is often hyped as the most business-friendly state in the nation, one with laws favoring business owners and more privacy protections for those owners. But even Delaware’s own website says that there are a lot of myths around the state’s friendliness to business. This section takes a realistic look at the benefits of forming an LLC in Delaware.
Delaware’s Court of Chancery is a centuries-old non-jury court that’s known for catering to businesses. The lack of a jury generally means that faster decisions are made. According to the Court of Chancery’s website, “The Delaware Court of Chancery is widely recognized as the nation’s preeminent forum for the determination of disputes involving the internal affairs of the thousands upon thousands of Delaware corporations and other business entities through which a vast amount of the world’s commercial affairs is conducted. Its unique competence in and exposure to issues of business law are unmatched.”
That all sounds good for an entrepreneur with a Delaware business doing business in Delaware. But in order for the Court of Chancery to hear the business’s case, it must be brought in Delaware. If an entrepreneur has only formed their business in Delaware and isn’t doing business there, lawsuits brought against them are unlikely to be tried in the Court of Chancery.
Four states — Delaware, Wyoming, Nevada, and New Mexico — offer “anonymous LLCs,” which are intended to keep members’ names and personal information out of the public eye. This added privacy protection is appealing to many entrepreneurs, but it’s important to be aware of its limitations. See the anonymous LLC definition guide for more information.
Remember, a business owner can’t hide from the IRS or other tax authorities. The IRS and the Delaware Division of Revenue collect information about a company’s owners, directors, officers, and other responsible parties in several ways, including tax returns, applications for tax ID numbers, and financial account holding reports.
In fact, Delaware’s website claims, “Delaware is not a secrecy haven, any more than any other state or the United States itself. Indeed, Delaware has done more than most states to ensure proper transparency.”
Consider, too, that when someone registers as a foreign LLC in another state, they’ll likely have to disclose the names and other information about their members.
Delaware does attract large corporations, and it’s true that more than half of all Fortune 500 companies have been formed there. But as stated earlier, those companies are corporations, not LLCs. Corporate tax breaks don’t help LLCs.
Something else to consider is that Delaware’s $300 annual tax applies to all domestic and foreign LLCs, limited partnerships, and general partnerships. Entrepreneurs can form a limited partnership in Delaware or other states if that’s a better fit for the business.
Nevada has neither personal nor corporate state income taxes. It’s also one of the four states that allow anonymous LLCs, so there’s greater privacy protection for LLC members than in most states.
However, the same reasons for not forming in Delaware mostly apply to Nevada, too. If a person is not doing business in Nevada, their LLC won’t be able to take advantage of their lack of taxes. As for privacy, the same limitations apply.
Another thing to consider is the cost of forming a Nevada LLC. An entrepreneur can expect to pay $75 for the Articles of Organization, but there’s also the “Nevada “Initial/Annual List of Managers or Managing Members and State Business License Application.” The list carries a $150 fee, and the Nevada State Business License is $200 more. Altogether, a business owner will pay $436 in fees to start their Nevada LLC.
Entrepreneurs also need to think about the ongoing fees. Nevada’s business license must be renewed annually for $200 for LLCs. Plus, the Nevada annual list is $150 every year for LLCs. So, a Nevada LLC owner will be paying at least $350 every year in annual fees.
If someone hates taxes, they’re going to love Wyoming. The state has no personal, corporate, or franchise taxes. As mentioned, it’s also one of the four states where entrepreneurs can form an anonymous LLC. Wyoming filing fees are also modest at $103 for the Wyoming Articles of Organization.
Again, though, there are limitations to LLC privacy, and the owner pays taxes where they make money. If someone’s living and doing business in Wyoming, that’s great. But if someone only formed their LLC in Wyoming but transacts business elsewhere, they won’t see much tax savings. Refer to the specific LLC taxes by state to see the detailed breakdown (or see the franchise taxes definition guide).
New Mexico does have personal state income tax as well as a gross receipts tax on LLCs, but New Mexico’s filing fee of just $51 is one of the lowest in the country. Another very unusual benefit New Mexico has is its lack of an annual report requirement, which not only means less paperwork but also no annual filing fee. And, it allows for anonymous LLCs.
Despite these perks, though, if a person isn’t planning to do business in New Mexico, forming an LLC in New Mexico usually won’t benefit them much. The business owner will still need to pay the filing fees for whatever state they’re doing business in.
Starting a business could be the fulfillment of a lifelong dream, but the paperwork and red tape can make it intimidating. When an entrepreneur is ready to start their LLC, ZenBusiness is ready to help. Starting at $0 plus state fees, ZenBusiness can help anyone form an LLC in all 50 states and the District of Columbia.
Plus, ZenBusiness offers a host of other services to help entrepreneurs run and grow their businesses, covering everything from registered agent services to the ZenBusiness Money Pro app, which helps keep business finances organized.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
In most cases, the best state to form an LLC is the state where the founder lives and plans to do business. Other states may have more favorable taxes, but an entrepreneur ultimately pays taxes where they do business, not necessarily where they formed the LLC.
Yes. An LLC owner is not required to live in the state where they’re forming their LLC. If they’ve already started an LLC and want to expand to another state, though, they’ll need to register as a foreign LLC there.
At the time of this writing, Kentucky has the lowest LLC filing fee at $40.
Again, it’s usually best to create an LLC in the place where the owners intend to operate the business. LLC owners are taxed in the state where they make the money.
The best reason to form an LLC in Delaware is that the business owners plan on doing most of their business there. Delaware is a very business-friendly state with laws that favor entrepreneurs, but, as discussed above, those benefits may not outweigh the hassle and expense of starting an LLC there when the owners plan to do most of their business in another state.
For most online business owners, the best state to form an LLC is where they live. Forming in another state typically means registering as a foreign entity in the home state anyway, resulting in double fees and paperwork.
Delaware, Wyoming, and Nevada have business-friendly reputations, but unless an entrepreneur has specific needs (such as privacy concerns or significant tax advantages), the simplicity and cost-effectiveness of forming in the owner’s home state usually outweigh any potential benefits of filing elsewhere. Consider consulting with a business attorney who can provide customized guidance.
Start an LLC in Your State
When it comes to compliance, costs, and other factors, these are popular states for forming an LLC.
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