If my business is 100% online, can I choose any state?

No. If you run your online business from your home, that is where you are legally "transacting business". You are generally required to form your LLC (or register your out-of-state LLC as a foreign entity) in the state where you reside and operate most frequently.

Which state is the cheapest to open an LLC initially?

The state with the absolute lowest initial filing fee is Kentucky, at approximately $40. However, the state that offers the best long-term value combining low fees, tax benefits, and privacy is often cited as Wyoming ($100 filing, $60 annual minimum) or New Mexico ($50 filing, $0 annual fee).

Does my LLC need to register in every state where I have customers?

Generally, no. Having customers or clients in a few states does not usually constitute "transacting business" that requires foreign qualification. Registration is typically required where the business maintains a physical presence, such as an office, warehouse, or employees.

What happens if I move states after forming my LLC?

Since your LLC should be formed where you transact business, you are supposed to file a "withdrawal" of your Foreign LLC registration in the old state (if applicable) and then file a new Foreign LLC qualification in the state you move to.

Do I need to form a new LLC if I buy investment property in another state?

It is generally best practice to form a separate LLC in the specific state where the investment property is located. Forming an LLC in your home state to buy property elsewhere would require you to register that home-state LLC as a Foreign LLC in the property state, incurring unnecessary double fees and paperwork.

If I use a Wyoming LLC for privacy, does filing a Foreign LLC in my home state expose the owners?

Registering as a Foreign LLC in your home state might impact your privacy, depending on your home state's rules. For instance, if your home state requires managers or members to be listed on the Foreign LLC application or annual report, the privacy benefits of the original Wyoming LLC could be lost. Strategic structuring (like using the Wyoming LLC to own a child LLC in the home state) or hiring an Authorized Person to sign may mitigate this, but consultation with an attorney is recommended for advanced privacy strategies.

Will forming an LLC in Nevada help me avoid my home state’s income tax?

No. LLCs are typically pass-through entities; the profits flow through to the owner(s) who pay taxes on their individual income tax returns (Form 1040). You pay state income tax based on where you are a bona fide resident, not where your LLC is registered.

What are the annual costs for an LLC?

Most states require annual fees, often called Annual Reports, Annual Statements, or Franchise Taxes, which typically range from $15 to $500. Some states, like New Mexico and Ohio, have $0 annual report fees. Additionally, you must budget for Registered Agent fees (if you hire one) and local business license renewal fees.

Best State to Form an LLC in 2026: Home State vs. Delaware, Wyoming, & Nevada.

As a US freelancer, entrepreneur, or small business founder planning for 2026, you have likely researched forming a Limited Liability Company (LLC) to protect your personal assets. In that search, you almost certainly encountered the "Big Three": Delaware, Wyoming, and Nevada.

These states are intensely hyped as the ultimate destinations for incorporation, promising low taxes, anonymity, and superior legal protection. However, for the vast majority of small business owners, this advice is mostly misinformation.

Why? Because the state where you file your LLC is rarely the same as the state where you are legally required to transact business—which is almost always where you physically reside. Trying to save a small filing fee by choosing an out-of-state "magical" LLC often leads to double the cost, double the paperwork, and double the headaches.

Here is the honest guide to choosing the right jurisdiction for your LLC in 2026.

The Core Concept: Domestic vs. Foreign LLCs

To make the right choice, you must understand the difference between a Domestic and a Foreign LLC. This distinction determines your legal standing and costs.

Domestic LLC: This is an LLC formed in the state where you primarily reside and operate. If you live and run a consultancy in Texas, a Texas LLC is a "Domestic LLC."

Foreign LLC: This is an LLC formed in one state but registered to do business in another. If you form an LLC in Wyoming (State A) but operate from your home in California (State B), your Wyoming LLC is considered a "Foreign LLC" in California.

The "Transacting Business" Rule

The single most important factor is where you are legally transacting business. This is defined by where the owner repeatedly runs the business from (home office, co-working space, warehouse), not where the customers are located.

Key Takeaway: If you run your business from your kitchen table, that is where you are transacting business.

Why the "Home State" Strategy Wins

For 99% of single-member LLCs and small businesses, forming in your home state is the correct move. Forming elsewhere introduces significant administrative burdens known as Foreign Qualification.

Benefit	Why It Matters
Avoid Double Costs	If you form in Wyoming but live in New York, you must pay Wyoming's fees PLUS New York's Foreign LLC registration fees. You also pay for two Annual Reports and potentially two Registered Agents.
Prevent Fines	States strictly enforce registration. Operating an out-of-state LLC without registering it can lead to crippling fines (e.g., Connecticut has imposed fines averaging $4,600).
Tax Reality	The "Tax-Free State" myth is dangerous. Taxes are paid where the money is earned. Even if your LLC is in tax-free Nevada, if you work in California, you still owe California state income tax.
Legal Standing	An unregistered out-of-state LLC generally cannot sue in your home state's courts, leaving you legally vulnerable.

The "Magical States": Delaware, Wyoming, & Nevada

If the home state is usually best, why are these three states so famous? They serve specific niches that usually don't apply to the average freelancer.

1. Delaware: The Corporate Giant

The Hype: "50% of public corporations are here!
The Reality: Delaware offers a specialized Court of Chancery favored by Fortune 500 companies and venture capitalists.³

2. Wyoming: The Privacy Haven

The Hype: "Anonymous ownership and low fees!"
The Reality: Wyoming introduced the LLC and offers great privacy (owners aren't listed on public records).
Verdict: Great for holding companies or non-US residents with no physical US presence. If you live in the US, you lose privacy when you register the Foreign LLC in your home state.

3. Nevada: The Tax Shelter

The Hype: "Zero state income tax!"
The Reality: While Nevada has no income tax, it has high initial filing fees ($425+) and annual business license fees ($350+).
Verdict: Usually too expensive for small businesses. The tax benefits don't help you if you live in a state with income tax.

Comparison: Cost & Features (2026 Outlook)

Note: Costs are estimates based on 2025 data.

State	Initial Filing Fee	Annual Upkeep	Best For...
Home State	$35 – $500+	$0 – $800+	Most Freelancers & Local Businesses. Simplest compliance.
Wyoming	~$100	~$60	Asset Protection & Non-Residents. High privacy.
Delaware	~$90	~$300 (Franchise Tax)	VC-Backed Startups. Strong corporate law.
Nevada	~$425	~$350	Niche Strategies. High fees, no income tax.
New Mexico	~$50	$0	Budget Privacy. No annual report fees.

Real-World Scenarios: Which Strategy Fits You?

Scenario A: The Remote Freelancer

Profile: A software developer living in Colorado working 100% online.
Mistake: She forms a Wyoming LLC for privacy.
Consequence: Because she works from her home in Colorado, she is "transacting business" there. She must register her Wyoming LLC as a Foreign LLC in Colorado.⁴
Result: She pays filing fees to both Wyoming and Colorado every year.
Better Choice: Colorado Domestic LLC.

Scenario B: The Real Estate Investor

Profile: A resident of Maryland buying rental properties in Florida and Georgia.
Strategy: She forms a Domestic Florida LLC to hold the Florida properties and a Domestic Georgia LLC to hold the Georgia property.
Why: Real estate is "transacted" where the property sits. This avoids Foreign LLC complexity in Maryland (as long as she doesn't run a management office there).

Scenario C: The Digital Nomad (Non-US)

Profile: A citizen of France with no US office, employees, or warehouse, selling digital goods.
Strategy: She chooses Wyoming or New Mexico.
Why: Since she has no physical US presence, she can choose any state. These states offer the lowest fees and best privacy.

Step-by-Step: Choosing Your State in 2026

Identify Your "Home Base": Where do you pay personal taxes? Where is your driver's license? Where is your laptop when you work? This is your Home State.
Check for Real Estate: If the LLC exists solely to hold property, form the LLC in the state where the property is located.⁵
Check for Non-Resident Status: If you are a non-US resident with zero physical US footprint, choose Wyoming or Delaware.
The Default Move: If exceptions #2 and #3 don't apply, form a Domestic LLC in your Home State.

Frequently Asked Questions

Q: If my business is online, can I choose any state?

A: No. If you work from home, your home is your place of business. You must form (or register) your LLC in the state where you reside.

Q: Which state is the cheapest?

A: Kentucky has very low filing fees (~$40), but New Mexico offers the best long-term value (low filing fee, $0 annual report). However, chasing the "cheapest" state often costs more later due to Foreign Qualification fees.

Q: Does a Nevada LLC let me avoid my home state's taxes?

A: No. LLCs are "pass-through" entities.6 You pay taxes on your personal return (Form 1040) based on your residency. If you live in California, you pay California tax on your Nevada LLC's profits.

Q: What if I move to a new state?

A: You will generally need to "Domesticate" your LLC in the new state or register it as a Foreign LLC there, and then dissolve or withdraw from the old state.

Final Verdict

Choosing your LLC state is like choosing a doctor. You could pick the cheapest specialist in a faraway city, but when you have an emergency, you need the local practitioner.

For 2026, the advice remains clear: Unless you are a real estate investor or a non-US resident, ignore the hype of the "Magical States." Form your LLC in your home state. It is the cheapest, safest, and most compliant path for your business.

Disclaimer: This guide is for educational purposes only and does not constitute legal or financial advice. Always consult a CPA or attorney before forming your entity.