Registering an LLC is an exciting first step in your business.

But you need to make sure you make the right decision regarding your company location to make your life easier in the future as your business grows. Most business owners prefer to form an LLC in their home state because it’s easy.

And it makes sense. As a resident, you likely have a physical address for your business and can be the registered agent for the company.

However, forming an LLC in a different state can also be advantageous in many ways.

For instance, some states have favorable tax benefits for LLCs. Others have loan programs for new businesses. That said, you should take the time to vet your options when registering an LLC. The best states can help you save money on taxes and annual fees.

This guide will explore the best states to register a limited liability company (LLC) in the US. But first, a quick primer on LLCs.

What Is a Limited Liability Company (LLC)?

Like a partnership or a sole proprietorship, an LLC is a business structure allowed by the state statute. An LLC is not a corporation. But it combines the elements of corporations, partnerships, and sole proprietorships into one business entity, offering owners liability protection, tax advantages, and a flexible management structure.

An important feature of LLCs is “limited liability,” which means owners are protected from personal liability for business debts. This means that if a business is unable to pay its debts, the creditors can’t come after the physical possessions of owners to settle the amount owed. Only the business assets are at risk.

 LLCs can either be:

  • Single-member
  • Multi-member

Limited liability companies (LLCs) use single-through taxation. This means the LLC itself doesn’t pay taxes and doesn’t have to file tax returns with the IRS. Instead, the owner(s) must report all profits (or losses) and pay taxes on their tax returns.

Domestic LLC vs. Foreign LLC

If you form an LLC in your state of residence (aka your home state), it’s known as a domestic limited liability company.

When you form an LLC somewhere else other than your state of residence, it’s called a foreign LLC. In this context, the term “foreign” doesn’t mean the company is owned by a non-US resident. It simply means the company is registered outside of its home state.

Why is this important?

One advantage of forming an LLC in a different jurisdiction from your own is that you can enjoy all the business benefits offered by the foreign state.

On the downside, as a foreign LLC, you have to pay filing fees and annual fees in both states. You’re also required to maintain a registered agent in every state your business operates.

The Best Place to Start an LLC in the US

Without further ado, these are the best states to form an LLC in the US.

1. Delaware

Delaware gets the maximum votes for the best state to launch an LLC, and for a good reason. It offers low fees and significant tax benefits. In fact, this Southern state does not tax out-out-state income for foreign LLCs.

For this reason, many entrepreneurs consider Delaware a business-friendly state for forming LLCs. Today, Delaware is home to over 50% of all US publicly-traded companies and roughly 68% of Fortune 500 companies.

Delaware also offers some of the lowest filing fees and franchise taxes. Some of the advantages of registering your LLC in Delaware include:

  • Business-friendly environment
  • No corporate taxes for foreign LLCs
  • Low filing fees and franchise taxes
  • Streamlined filling process
  • Court of Chancery for business

2. Wyoming

Wyoming is another great state for registering an LLC. This Western state offers low fees and great tax benefits for entrepreneurs looking to start an LLC.

Like Delaware, Wyoming offers a business-friendly tax structure with no corporate or personal taxes. Plus, the state has the strongest asset protection laws in the country. The regulatory framework in Wyoming is also more business-friendly than in other states.

For example, many states require you to visit the state when filing returns, but Wyoming allows everything to be done online.

Advantages of registering an LLC in Wyoming include:

  • No franchise taxes
  • No corporate or personal income taxes
  • Minimal reporting obligations
  • Friendly business environment

3. Nevada

Nevada is another state you’ll want to consider for registering an LLC. This Western state has no state taxes. That includes personal income tax, corporate income tax, and franchise tax.

Plus, it offers more privacy protection.

Like Delaware, Nevada also offers a friendly business environment.

The state doesn’t require LLC owners to publish their names when registering a business, thereby granting them complete anonymity. Nevada doesn’t even require companies to hold annual meetings, making it easier for you to run a business in the state.

Advantages of registering an LLC in Nevada include:

  • Business-friendly environment
  • No personal or corporate income taxes
  • Anonymity in public filings
  • No franchise taxes
  • No requirements for annual meetings

4. Alaska

Alaska is another place without state taxes, making it an ideal location for forming an LLC. The filing fees are also relatively low compared to other states.

Moreover, Alaska also offers tax credits and a variety of loan programs designed for new businesses. There are credits for mineral exploration, new area development, film production, oil and gas, and more.

Available loan programs include a rural development initiative fund, small business development loans, and a microloan program for women entrepreneurs.

Advantages of registering an LLC in Alaska include:

  • Low filing fees
  • Tax credit benefits
  • Loan programs for new businesses
  • No income or sales tax

5. Florida

Florida is also one of the best states to form an LLC, courtesy of its low taxation charges, affordable fees, and ease of filing.

The state is business-friendly and doesn’t impose federal income tax on LLCs.

Additionally, there is no minute record, no resolution maintenance required, and owners can decide on the maintenance structure.

Better still, Florida allows a law firm to be an LLC. Many states, including California, don’t allow businesses that require a professional license to operate as an LLC.

Advantages of registering an LLC in Florida include

  • No income tax
  • Low corporate tax rate of 5.5%
  • Low sales tax rate of 6%
  • No taxes from capital gains
  • Easy filing process

Wrapping Up

That’s it! The five best states to launch an LLC in the US.

Hopefully, you now know the state to form your LLC. It’s always advisable to form an LLC in your state of residence. But if the tax climate and business environment are not friendly in your home state, you should consider forming an LLC outside your state.

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