
When forming a Limited Liability Company (LLC), one of the most strategic decisions you’ll make is where to form it. While your home state may seem like the default choice, many entrepreneurs look beyond their borders for better tax advantages, business-friendly regulations, and privacy protections. In this guide, we’ll explore the best states to form an LLC for tax savings in 2025 and help you make an informed decision.
Why Your LLC’s State Matters
The state you choose to form your LLC in affects:
- Tax obligations (state income tax, franchise tax, etc.)
- Annual fees and reporting requirements
- Privacy laws for owners
- Legal protections and business laws
If your LLC operates solely in one state, forming it there is often the most straightforward choice. However, if you conduct business in multiple states or operate an online business, choosing a tax-advantageous state can save money.

Top States to Form an LLC for Tax Savings
Here are the best U.S. states in 2025 known for tax-friendly LLC formation:
State | State Income Tax | Franchise Tax | Annual Fees | Best For |
---|---|---|---|---|
Wyoming | None | None | $60 | Privacy, asset protection, no tax |
South Dakota | None | None | $50 | Low cost, no corporate income tax |
Nevada | None | $200 (annual list) | $350 | No income tax, strong privacy laws |
Delaware | None (for out-of-state) | $300 flat fee | $300 | Legal system, VC-backed startups |
Alaska | None | None | $100 | No state-level tax |
Florida | Yes (5.5% corp tax) | None | $138.75 | Good for e-commerce and real estate |
Texas | None (no income tax) | Franchise tax | Varies | Larger businesses, real estate |
1. Wyoming: The King of LLC Tax Savings
Wyoming has earned a stellar reputation as the most cost-effective and tax-friendly state for LLCs. Here’s why:
- No state income tax
- No franchise tax
- $100 one-time filing fee
- $60 annual report fee
- Strong asset protection laws
- Anonymous ownership allowed
Best for: Entrepreneurs, digital nomads, and online businesses looking for minimal taxation and maximum privacy.
2. South Dakota: Simple and Straightforward
South Dakota is another top contender due to its absence of income tax and low compliance costs.
Key Benefits:
- $150 initial LLC filing fee
- $50 annual report fee
- No business income tax or franchise tax
- Business-friendly legal environment
Best for: Businesses wanting low regulation and minimal government interference.
3. Nevada: Great for Privacy and No Income Tax
Nevada offers a zero percent corporate and personal income tax, making it attractive for LLC formation. It also provides strong privacy protections—LLC owners do not need to disclose personal information publicly.
However:
- It has higher annual fees (~$350+)
- $200 annual business license fee
- Requires filing an annual list of officers and directors
Best for: Businesses needing anonymity or operating in regulated industries.
4. Delaware: Popular Among Startups
Delaware is the most popular state for venture-backed startups and corporations, thanks to its business-friendly court system (Chancery Court).
Tax Highlights:
- No state income tax on out-of-state LLCs
- Flat $300 annual franchise tax
- No minimum capital requirement
Despite not being the cheapest, Delaware’s legal stability and business predictability make it worthwhile.
Best for: Tech startups, businesses seeking funding, or future IPO.
5. Alaska: A Hidden Gem
Often overlooked, Alaska has no state income tax or sales tax, making it very LLC-friendly.
Pros:
- No franchise or excise taxes
- Business licensing fees are reasonable
- Offers certain tax credits and incentives for Alaska-based businesses
Best for: Businesses in fisheries, oil, energy, and rural development sectors.
6. Florida: Attractive for Online Businesses
Florida has no personal income tax, but LLCs that elect to be taxed as corporations pay 5.5% corporate income tax. Despite that, Florida is popular among online business owners and real estate investors.
Key Factors:
- Reasonable filing and renewal fees
- No franchise tax for LLCs
- Strong consumer market and infrastructure
Best for: E-commerce entrepreneurs, real estate ventures, and retirees.
7. Texas: Zero Income Tax but Franchise Tax Applies
Texas is unique. While it has no personal or corporate income tax, it does levy a franchise tax on businesses that generate more than a certain amount of revenue.
Current Franchise Tax (2025):
- 0.375% for wholesalers/retailers
- 0.75% for other businesses (over $2.47 million revenue)
Best for: High-revenue LLCs that benefit from a robust Texas economy.
Important Considerations Before Choosing a State
While taxes matter, don’t forget these other factors:
Factor | Why It Matters |
---|---|
Nexus Rules | If your LLC operates in another state, you may still owe taxes there. |
Foreign LLC Registration | Forming in one state and operating in another requires dual compliance. |
Legal Protections | Some states offer better asset protection laws. |
Privacy Requirements | Not all states allow anonymous LLC ownership. |
Domestic vs. Foreign LLCs: Cost Comparison
Scenario | Initial Cost | Annual Maintenance | Tax Advantage |
---|---|---|---|
Forming in Home State | Low | Low | Varies |
Forming in Wyoming, operating elsewhere | Higher (dual fees) | Higher (foreign LLC) | Possibly better |
Delaware LLC for remote SaaS startup | Medium | Medium | High if scaling |
Which State is Best for Your LLC?
The answer depends on your situation:
- Local small business: Stick with your home state
- Online business/digital nomad: Wyoming or South Dakota
- Venture-backed startup: Delaware
- Real estate investor: Florida or Texas
- Privacy-focused entrepreneur: Nevada or Wyoming
Final Thoughts
Forming an LLC in a tax-friendly state can give your business a financial edge—but don’t forget to weigh legal requirements, operational realities, and ongoing costs. For most online or location-independent entrepreneurs, Wyoming and South Dakota are hard to beat. However, Delaware continues to be the go-to for startups eyeing outside investment.
Pro Tip: Always consult a business attorney or CPA before forming an LLC in a different state than your residence.