One simple decision could cost you or save you thousands of dollars if you are starting an LLC in 2026: The right state.
Most business owners assume they should create their LLC online where they live. But that is not always true. States like Wyoming, Delaware, and Nevada are considered for LLC formation.
Here, we will break down the best U.S. states to form an LLC in 2026 with their benefits.
What Are Key Factors to Consider?
Here are the factors you should keep in mind when choosing a state for your LLC:
1. Physical Presence
The first thing to think about is where your business actually operates. According to the guidance from the IRS and state governments, if you have an office, employees, or a store in a state, you need to form your LLC there. You may have more flexibility in choosing another state if your business is fully online and has no physical location.
2. Taxes
Federal taxes apply to all LLCs regardless of formation state. The IRS treats them as pass-through entities by default with income reported on owners’ personal returns. Texas follows where business occurs. Foreign LLCs often register and pay in their operating state anyway.
3. Fees
Every state charges fees to create and maintain an LLC. These include:
- Filing fees
- Annual report fees
- Franchise or renewal fees
These costs can range from very low to several hundred dollars per year. Lower fees can make a huge difference for new or small business owners.
4. Privacy
Privacy laws vary by state. Some states require the owner’s name to be public, while others do not.
For example, Wyoming allows LLC owners to stay anonymous in public records. This information comes directly from state filing rules and is often used by business owners who value privacy.
5. Legal Environment
Delaware is well known for its business-friendly courts and clear business laws. This reputation comes from a decade of corporate legal cases and is widely recognized by legal experts and universities.
6. Business Goals
Think about your long-term goals. Ask yourself:
- Do you want to grow fast?
- Do you want investors?
- Is your business online or local?
It is recommended to choose a state that matches how your business plans to grow.
What Are the Popular States to Form an LLC?
The states are as follows:
1. Wyoming
Best for small online businesses and non-residents due to its focus on anonymity and low maintenance.
Benefits
- No public disclosure of member or manager names.
- The initial filing is approximately $100, and the annual report fee is just $60.
- Zero personal or corporate state income tax.
- Strong “charging order” protection.
2. Delaware
Preferred choice for high-growth startups and companies planning to seek venture capital or go public.
Benefits
- Home to the Court of Chancery. It is a specialized court with an experienced judge (no juries) that resolves business disputes quickly and predictably.
- VCs and banks overwhelmingly prefer Delaware entities for their established body of cash law.
- Allows for a “parent” LLC with separate “series” (sub-units) to wall off different assets.
- Maintenance is higher with an annual franchise tax, even for small entities.
3. Nevada
This state positions itself as a luxury alternative to Wyoming. It offers extreme privacy but at a much higher price point.
Benefits
- No state income, corporate, or franchise taxes.
- It does not share information with the IRS and allows for anonymous ownership.
- Costs are steep; initial filing and licenses can exceed $400, with annual renewals around $350.
4. New Mexico
Ideal for solo entrepreneurs who want the absolute minimum administrative burden.
Benefits
- This state does not require annual reports or annual fees.
- A one-time filing fee of approximately $50.
- Does not publish member names in public records.
5. Texas and Florida
Popular for businesses with a physical presence or those targeting large US consumer bases.
Benefits
- Residents pay zero state tax on their LLC distributions.
- Perfect for scaling businesses that need access to massive local talent pools and customer bases.
When To Choose a Foreign State?
1. Online Businesses
LLC formation in another state is preferable if your business operates primarily online, such as:
- E-commerce
- Digital services
Remote consulting
States like Delaware, Wyoming, and Nevada are designed to efficiently accommodate these types of businesses.
2. Privacy
Foreign states like Delaware are considered for LLCs to hold intellectual property, contracts, or other assets. Its well-developed legal system and business-focused courts make it a trusted option for owners who want consistency and predictability in legal matters.
3. Potential Tax Advantages
Tax rules vary by state, and they matter. Wyoming and Nevada do not impose state income tax, and Delaware does not tax income earned outside the state. The policies offered in these states can help reduce overall tax exposure if your business isn’t operating physically in those states.
The Bottom Line
The best state to create your LLC depends on various factors, including business needs, fees, privacy, and many more. Most business owners find the process of forming an LLC overwhelming. This is what makes them consider the LLC formation services that help them with an efficient and affordable process.