5 Best States to Form LLC for Online Businesses
With 50 states to choose from, each offering different perks, it can feel daunting to choose the best one for your online business LLC.
But don’t worry—I’ve got your back.
I run online businesses myself and have formed three LLCs since 2020, so I know which state is best right now.
Whether you’re after tax advantages, privacy/anonymity, or a business-friendly environment, picking the right state can make all the difference in your success.
So, let’s break down the best states to form an LLC for your online business and help you find the perfect match!
Top 5 Best States for LLC Online Business Formation
When choosing the best state for forming your online business LLC, consider the following options:
| State | Filing Fees | Core Benefits | Annual Report Fees |
|---|---|---|---|
| Home state (U.S residents) | Varies | Faster, easier, cheaper reporting | Varies |
| New Mexico | $50 | No annual report requirement, low filing fees, best for privacy/anonymity | $0 |
| Wyoming | $100 | No state income tax, low fees, privacy | $50 |
| Delaware | $90 | Business-friendly laws, strong asset protection | $300 |
| Nevada | $200 | No income tax, strong privacy protections | $150 |
| South Dakota | $150 | No corporate income tax, low filing fees | $50 |
Top Pick for LLC Formation: Northwest
We highly recommend Northwest for your LLC needs ($39 + State Fees) as the best overall formation service in 50 U.S States. Why? They offer unbeatable affordability, exceptional privacy protection, and outstanding customer support. Plus, you’ll get their registered agent service free for the first year, saving you up to $300 in initial filing fees.
1. Your Home State (overall best state if you are based in the U.S)
When considering where to form your LLC, your home state often presents the best choice. It offers many benefits that simplify business operations and compliance.
Why Forming Your Online Business LLC in Your Home State is Best?
Forming an LLC in your home state provides convenience. You are familiar with local laws and regulations. This knowledge can help you avoid potential legal issues down the line.
Additionally, you can easily meet state requirements, like filing paperwork. This reduces the chance of errors when dealing with unfamiliar regulations in another state.
Another advantage is taxation. If you create an LLC in your home state, you may avoid paying extra fees to do business elsewhere. This setup allows you to focus your resources on growing your online business instead of juggling multiple state laws.
Being local also helps build your brand. Customers often prefer to support businesses from their community. Forming your LLC in your home state can boost your credibility and trust with potential clients.
2. New Mexico: Anonymity for LLC Owners
Forming an LLC in New Mexico is smart for online business owners who value privacy or anonymity. This state is one of the few that allows you to keep your identity private while reaping an LLC’s benefits.
Why Forming Your Online Business LLC in New Mexico is Awesome?
One of the biggest advantages of forming an LLC in New Mexico is the anonymity it offers. This state does not require you to disclose the names of LLC owners in public records. This means your personal information is less likely to be accessible to the public.
Additionally, New Mexico has no annual report requirement for LLCs, which cuts down on paperwork and fees.
This makes it easier to manage your business without the burden of constant reporting. The state also offers strong asset protection, shielding your personal belongings from business liabilities.
With friendly business laws and low fees, forming your LLC here can be a seamless process. You get the peace of mind of knowing your identity is protected while enjoying favorable business conditions.
3. Wyoming: Asset Protection and Low Fees
Wyoming is an attractive option for forming an LLC, especially for online businesses. Its benefits include strong asset protection laws, low formation fees, and no state income tax, which make it a favorite among entrepreneurs.
Why Wyoming is a Great State for Your Online Business LLC?
Wyoming LLC offers several key advantages for online business owners. First, there is no state income tax. This means you keep more earnings, which is vital for growing your business.
Additionally, the state provides strong asset protection laws. Members of an LLC can protect their personal assets from business debts and liabilities. This is crucial in case of lawsuits or financial troubles.
Formation costs are also very low. You can set up an LLC for just a few hundred dollars; the annual fees remain minimal.
4. South Dakota: Favorable Business Laws
South Dakota is an attractive option for forming an online business LLC. The state offers several advantages, from low taxes to simple regulations.
Why Forming Your Online Business LLC South Dakota is Awesome?
Starting your LLC in South Dakota stands out for several reasons. First, the state has no state income tax, meaning you can keep more earnings. This is a significant advantage for online businesses, where profit margins vary.
Additionally, South Dakota has a 0% corporate tax rate. If you choose to have your LLC taxed as a corporation, this can lead to substantial savings. There’s also no business inventory tax, which is a plus if your online business involves goods.
The LLC filing fee is $150, and the annual report fee is just $50. These costs are reasonable compared to other states.
5. Nevada: Privacy and No State Taxes
Nevada is an excellent choice for your online business LLC due to its strong privacy protections and lack of state income tax. These factors create a favorable environment for entrepreneurs looking to thrive in the digital landscape.
Why Nevada is a Great State for Your Online Business LLC?
One key reason to consider Nevada is its privacy laws.
The state does not require LLC members or managers to be listed in public records. This means you can maintain a higher level of anonymity, which is often crucial for online entrepreneurs. Additionally, Nevada allows you to use a registered agent service to shield your identity further.
Another advantage is the absence of state income tax. This can result in significant savings compared to states that impose taxes on business income.
By choosing Nevada for your LLC, you keep more of your profits, allowing you to reinvest in your online business and growth opportunities.
6. Delaware: The Incorporation Haven
If you’ve been researching where to form your LLC, you’ve probably come across Delaware. It’s a top choice for businesses of all kinds, including online ventures, and there’s good reason for it.
Delaware is famous for its business-friendly laws, strong privacy protections, and efficient LLC formation process—making it an excellent option for entrepreneurs.
Why Delaware is Great for Online Businesses?
Delaware LLC offers some pretty unique advantages that make it a standout for online businesses. First off, its legal system is tailored to favor businesses, with clear and flexible laws.
This means that running and managing your LLC can be a lot smoother. You can set up custom management structures, which is great if you want more control over running your business.
One of the biggest perks? Privacy.
Delaware doesn’t require LLCs to list the names of members or managers in public filings, so you can keep your personal information private. This is a huge plus for online business owners who value discretion.
Another bonus is how fast and efficient the process is. You can form an LLC in Delaware in as little as 48 hours, which is perfect if you’re looking to get up and running quickly.
In addition, Delaware doesn’t have a state sales tax, which can be a huge money-saver for online businesses, especially those selling products or services across state lines.
And let’s not forget the low fees. Delaware’s cost-effective filing structure makes it a budget-friendly choice without skimping on the benefits.
Considerations Before Choosing a State for Your Online Business
Selecting the right state for forming your LLC is vital for your online business’s success.
Various factors like tax policies, fees, legal benefits, and state regulations play a significant role. Let me walk through a few:
Evaluating State Tax Policies
Tax policies should be at the forefront of your decision-making when choosing a state. Different states have varying tax rates that can impact your business’s profitability. For example, states like Wyoming and Nevada do not levy personal or corporate income taxes, making them appealing to many entrepreneurs.
In contrast, California has high personal income and corporate taxes. The franchise tax in states like Delaware can also concern your business costs.
Filing and Annual Fees
Filing fees and annual fees vary significantly across states. For instance, Wyoming has a low annual fee of about $50. This can be a considerable advantage for startups and small businesses.
In comparison, Delaware’s fees might go up depending on your business structure and revenue. Some states also charge a business license fee, which adds to startup costs.
Assessing Legal and Operational Advantages
The legal framework of a state can greatly affect your business operations.
States like Delaware offer strong legal protections and a business-friendly environment that attracts many companies. Their courts are experienced in business law, providing a reliable system for resolving disputes.
Conversely, if privacy is a priority, states like Wyoming allow anonymous LLC ownership.
Business Location vs. Online
If your business operates primarily online, you don’t necessarily need to incorporate it in your home state. For example, you could form your LLC in a state like New Mexico or Nevada, which is known for its favorable tax laws.
Still, operating out-of-state may introduce complexities. You might need to register as a foreign LLC in your home state, which involves additional fees and paperwork.
Understanding State-Specific LLC Regulations
Every state has unique LLC regulations that can affect your business. Some states, like California, have strict reporting requirements that may increase your workload.
Conversely, states like New Mexico offer simpler processes for forming and maintaining an LLC. Reviewing these regulations can help you understand what to expect and avoid complications later.
Additional States Worth Considering
If you’re exploring options for forming an LLC, several other states deserve your attention. Each has unique benefits that may fit your business needs.
- Arizona: Arizona is known for its low filing fees and simple online registration process. Due to its growing business community, it’s a great choice for online tech startups.
- Kentucky: Kentucky offers a friendly business climate and has no minimum capital requirement. This can be appealing for new entrepreneurs.
- Indiana: In Indiana, LLCs can be formed quickly, often within a week. The state also provides several tax incentives that can benefit small businesses.
- Ohio: Ohio has a relatively low tax burden and a straightforward formation process. Its diverse economy makes it suitable for various types of businesses.
- Alaska: Alaska LLCs benefit from no state sales tax. The state offers privacy protections for owners, making it a good choice for those looking for anonymity.
- North Dakota: North Dakota is business-friendly and has minimal regulations. Its tax rates are low, which can help keep your costs down.
- Arkansas: Arkansas is affordable for startups with low annual fees. The state is working to improve its business development resources.
- North Carolina: North Carolina has a strong tech sector and a supportive business environment. It also offers various incentives for tech startups.
Conclusion: Selecting the Best State for Your LLC
Choosing the right state to form your LLC is a key decision that can impact your online business’s growth and operation. Each state has its perks, and finding the one that aligns with your business goals can make a huge difference.
Two of the top contenders are New Mexico and Wyoming, both offering benefits that are hard to beat.
Wyoming stands out for its low filing fees and zero state income tax, which are game-changers for keeping operating costs low. It’s also known for strong privacy protections, so your personal details can stay out of public records.
Meanwhile, New Mexico offers similar perks but with an added layer of privacy for online businesses.
You don’t have to disclose LLC members in public filings, making it one of the best states for maintaining your anonymity. Plus, New Mexico’s straightforward and affordable formation process makes it an excellent choice for online entrepreneurs who value simplicity and privacy.
While Delaware is often celebrated for its business-friendly laws and strong legal protections, it’s usually a better fit for larger corporations rather than small LLCs. If you’re building an online business, you’ll likely find more value in Wyoming or New Mexico unless you’re planning on expanding into a full-scale corporation.
No matter your chosen state, Northwest Registered Agent can make the process easy and hassle-free.
For just $39, they handle all the heavy lifting for your LLC formation, and their free registered agent service for the first year ensures your privacy is protected. With lifetime customer support, you can count on expert help whenever you need it.
Frequently Asked Questions
Why might a state be considered worst for starting an LLC for an online business?
Some states may have high taxes or complicated regulations, which can make operating expensive and time-consuming. Additionally, states with strict privacy laws might not be suitable if you value anonymity for your business.
What is the best online filing service for an LLC?
Northwest Registered Agent is often recommended for LLC filing. They offer various services, including submitting your paperwork and providing a registered agent. Their customer support is known to be reliable, helping you navigate the process smoothly.
Which state offers the easiest process for setting up an LLC for a non-resident?
Wyoming is often considered the easiest state for non-residents to set up an LLC. It has no residency requirements, offers low filing fees and strong privacy protections, and does not require state income tax. Read my Wyoming LLC for a non-US resident guide.
What factors should be considered when choosing a state to register an online business LLC?
Consider tax rates, filing fees, and business regulations when selecting a state. You should also look at the state’s privacy policies and annual reporting requirements. These factors can impact both the cost and ease of running your business over time.
Disclosure: We may earn commissions if you buy via links on our website. Commissions don’t affect our opinions or evaluations. We’re also an independent affiliate of many platforms, including ClickFunnels, Kartra, GoHighLevel, Podia, Northwest Registered Agent, and others. We’re not employees of these services. We receive referral payments from them, and the opinions expressed here are our own and are not official statements of these companies.
