Best States to Form an LLC in 2026: A Complete Comparison

Choosing where to form your LLC is one of the most important decisions you’ll make as a new business owner. The state you pick determines your filing fees, annual costs, tax obligations, privacy protections, and legal framework — and these differences can add up to thousands of dollars over the life of your business.

In this guide, we’ll break down the best states for LLC formation in 2026 across every category that matters: cost, taxes, privacy, asset protection, and simplicity.

The Short Answer: Most People Should Form in Their Home State

Before we dive into state rankings, here’s the single most important piece of advice: if you operate a business in one state, you should almost always form your LLC in that state.

Forming in Delaware or Wyoming sounds appealing, but if you physically operate in another state, you’ll need to register as a “foreign LLC” there — which means paying filing fees, annual reports, and maintaining a registered agent in both states. For most small businesses, that doubles your costs and paperwork for little practical benefit.

That said, there are legitimate reasons to form out of state:

• You operate in multiple states and need a neutral “home base”
• You want maximum privacy and don’t have a physical presence in any particular state
• You’re forming a holding company or asset protection entity
• Your home state has exceptionally high fees (like California’s $800 annual franchise tax)

The Cheapest States to Form an LLC

If cost is your primary concern, these states offer the lowest combined formation and ongoing maintenance fees.

Montana takes the crown with the lowest filing fee in the nation at just $35 and a $20 annual report. Total five-year cost: $135. However, Montana does have state income tax, so it’s best for Montana residents.

Mississippi, Missouri, New Mexico, and Arizona all combine $50 filing fees with $0 annual costs. Once formed, there are essentially no ongoing state-level fees. Arizona does have a publication requirement in most counties, adding a one-time cost of $80–$120.

Best States for No Income Tax

Seven states have no personal income tax, which means LLC profits (taxed as pass-through income) aren’t taxed at the state level:

Texas: No annual report fee for most LLCs. Franchise tax only applies to businesses with revenue over $2.47 million.

Wyoming is the standout: no income tax, moderate fees ($100 filing + $60/year), strong asset protection, and excellent privacy. It’s the most cost-effective no-tax state for LLC formation.

Texas has a high $300 filing fee but zero ongoing costs for most small LLCs. The franchise tax only kicks in at $2.47 million in revenue.

Nevada is often marketed as the best state for LLCs, but its $425 initial cost and $350 annual fees make it the most expensive no-tax state. Unless you specifically need Nevada’s legal protections, Wyoming typically offers the same benefits for less money.

Best States for Privacy

If keeping your name off public records matters, these states stand out:

• Wyoming: Members and managers are not listed on the Articles of Organization or annual reports
• New Mexico: No member information required on formation documents, and no annual reporting at all
• Delaware: Members and managers are not required on the Certificate of Formation

Best States for Asset Protection

Asset protection refers to how well a state’s laws shield LLC members from creditors. The key feature is charging-order protection — whether a creditor can only get a charging order (a lien on distributions) or can actually foreclose on your LLC interest.

Top states for asset protection:

1. Wyoming — Charging-order protection is the exclusive remedy for single-member and multi-member LLCs. Creditors cannot force dissolution or seize management control.
2. Nevada — Similar strong charging-order protection, with a statute explicitly making it the exclusive remedy. Also provides strong protections against “veil piercing.”
3. Delaware — While not as explicitly protective as Wyoming for single-member LLCs, Delaware’s Court of Chancery provides highly predictable, business-friendly outcomes.
4. South Dakota — Strong trust and asset protection laws that complement LLC protections.

Most Expensive States to Avoid (If Possible)

If you have flexibility in where you form, these states carry the highest costs:

Massachusetts is the costliest at $500 to file and $500 per year. That’s $3,000 in state fees alone over five years.

California’s $70 filing fee is deceptive — the $800 annual franchise tax kicks in from year one (though new LLCs get a first-year exemption), making it $3,270 over five years.

New York looks affordable on paper, but the publication requirement ($200–$1,600 depending on county) makes it one of the most expensive for initial formation. New York City LLCs also face the 4% Unincorporated Business Tax.

The Home State vs. Other State Decision Framework

Here’s a simple framework for deciding:

Form in your home state if:

• You have a physical location (office, store, warehouse) in one state
• You have employees in one state
• Most of your customers are in one state
• You’re a service provider working locally

Consider forming out of state if:

• You run an online business with no physical presence
• You live in California or Massachusetts and want to minimize annual fees
• You need maximum privacy for legitimate reasons
• You’re creating a holding company to own other LLCs or assets
• You operate in multiple states equally

State-by-State Quick Reference

Here’s how every state stacks up on the factors that matter most:

Cheapest overall: Montana ($35 + $20/year)

Best no-tax + affordable: Wyoming ($100 + $60/year, no income tax)

Best for privacy: New Mexico ($50, no annual report, no member info published)

Best asset protection: Wyoming or Nevada

Simplest ongoing compliance: Missouri, New Mexico, or Arizona (no annual report)

Best for large businesses: Delaware (Court of Chancery, predictable legal framework)

Final Thoughts

There’s no single “best state” for everyone. The right choice depends on where you operate, how much you want to spend, and what features matter most to you.

For the vast majority of small business owners, your home state is the right answer. It’s simpler, cheaper (no dual registration), and avoids the headaches of managing compliance in multiple states.

If you do have a legitimate reason to form out of state, Wyoming offers the best overall package: no income tax, strong asset protection, good privacy, and reasonable fees. New Mexico is the cheapest long-term option with privacy. Delaware is the gold standard for larger or venture-backed businesses.

Use our state comparison tool to see detailed requirements for any state, including step-by-step formation guides and downloadable PDF checklists.