Which States Are the Easiest to Start an LLC in?

Many entrepreneurs look at the prospect of establishing a Limited Liability Company (LLC) because of its protective measures that make success a more viable goal. 

We’ve previously discussed ‘How an LLC Can Help You Grow’, diving into how it provides a strong foundation for business. You may want to start an LLC for the credibility, protection, and flexibility that this label can give you.

Of course, it does not come without challenges. Statistics posted on chamberofcommerce.org reveal that around 18% of all businesses fail within their first year. That’s not such a startling ratio, but it does highlight the need for preparation and long-term planning when considering your launch. More than just figuring out your audience for your particular brand, it’s also about the nature of LLCs and what comes with that territory. One of the biggest factors to focus on is where exactly you start your LLC.

Why You Should Start an LLC in Your Home State

Yes, there are certain states that, on paper, seem like better options for LLC formation. That said, the best option more often than not is to simply set up in your home state regardless of where that is. There are a few reasons why you might want to play in the home court before seeking out other states.

You Get to Register as a Domestic LLC

If you consider the best ‘Tips to Help Grow Your LLC’, a lot of it boils down to simplifying the process for yourself so that you don’t overextend. This not only helps you focus on other aspects of your business but also makes dealing with taxes easier.

When you register in your own state, you are considered a domestic entity. If you try to form your LLC in another state, it will be considered a foreign LLC unless you also conduct your business there. If you plan to run your LLC from your home state but register it in another instead, you will have to face multiple registrations and more fees for both filing and annual reporting. The complexities that come with operations and legal compliance just overcomplicate things for you in the long run.

It’s More Accessible and Cost-Effective

Why go out of your way when you can start your LLC right where you live? It ends up being more cost-effective both in immediate needs and the bigger picture. This rings especially true if you plan to run your LLC locally.

When you have it registered elsewhere, any income you earn will still be taxed accordingly to where you do your business. You will also need to get registered agents for both states you operate in. Basically, you can potentially box yourself out of the perceived benefits while adding extra costs.

You Have More Ease with Local Regulations and Incentives

Different states will have their own regulations and incentives, which you may have an easier time familiarising with and integrating into your planning if it’s already your home state anyway. When you visit LLC.org, you can see how to start an LLC in any state, so it’s quite simple to see what permits, requirements, and benefits may await you based on your location.

With enough research, you can easily decide whether you might have an easier time staying put in your area or if it’s worth traveling to another state.

Easiest States to Start an LLC

Let’s say you really don’t want to run your LLC in your home state. You have options, as LLC laws depend on the state you file in. If you live in a state with very high taxes or complicated business regulations, it may be worth packing up and moving somewhere you can more easily start an LLC (provided you file and receive your income there, too.)

Here are some of the easiest states to start an LLC in and why.

Delaware

Delaware has long been a popular choice for entrepreneurs and executives seeking out easy LLC launches. They have great laws that are really geared toward empowering businesses and corporations. Their stock issuance fees also make it more friendly to individuals that might want to run multiple LLCs. 

Supplementary reading: 6 Tips To Stay On Top Of Your Business Assets

Delaware.gov notes a 36.9% growth in new formations of LLCs in the state, continuously cementing itself as the industry standard. In fact, more than half of all Fortune 500 companies are incorporated here. Of course, it’s important to note that it is still primarily geared toward corporations more than LLCs, but it’s still worth looking into it for its privacy and lawsuit protections.

Wyoming

Wyoming is another great state for starting an LLC, particularly because of its security and corporate secrecy laws. On top of the privacy benefits, Wyoming also levies no corporate income or gross receipts tax. So if you’re looking for low taxes, this is the state to register in.

Of course, it’s worth noting that these tax benefits will only apply if you actually conduct your business in the state. It’s also worth noting that you won’t have to report as rigorously here as you would in other states. The only cost you’ll have to think about are administrative ones.

Wyoming is truly a state you can consider “business-friendly”, hence it’s the main state being used by Company Sage to provide ten LLCs every month to young adults who are aspiring entrepreneurs.

South Dakota

Last but not least, South Dakota may often be overlooked for popular options like Nevada. That said, it may offer you an easier time because of its business laws and low taxes. There is no state income tax and you can enjoy a 0% corporate tax rate if you choose to have your LLC taxed as a corporation.

This may interest you: 7 Ways Entrepreneurs Can Reduce Year End Tax Liabilities

Being strategic with how you obtain your licenses legally, establish operating agreements, and get your organisation articles are just some of the ‘6 Steps to Form a Limited Liability Company’. With those in mind, South Dakota stands out because it simplifies those processes thanks to minimal bureaucracy. Additionally, it also comes with asset protection and confidentiality should you want to form an anonymous LLC.

Be sure to check out the video below:

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