Best State for Your LLC (It's Probably Not Wyoming)
Every YouTube video and blog post tells you to form in Wyoming or Delaware. Most of them are wrong for most people. Here is the real analysis.
8 min read
The short answer
For 90% of small business owners, the best state to form your LLC is the state where you live and operate. Wyoming, Delaware, and Nevada are great for specific situations, but forming there when you operate elsewhere usually costs you more money for no real benefit.
Why "Form in Wyoming" Is Usually Bad Advice
Here is what the influencers do not tell you: if you live in Texas and form a Wyoming LLC, you still have to register that LLC as a "foreign entity" in Texas. That means you are paying:
- Wyoming filing fee ($100) + Wyoming annual report ($60/year)
- Texas foreign qualification fee ($750) + Texas franchise tax
- Two registered agent services (one in each state)
- Two state filings to maintain every year
Instead of simplifying your life, you doubled your paperwork and fees. And you got nothing you would not have gotten from a Texas LLC (Texas has no state income tax either).
When Your Home State Is Best (Most of the Time)
Your home state is the right choice when:
- You live and work in one state
- Your customers are primarily in your state or online
- You do not have complex multi-member ownership structures
- You are not holding significant real estate or financial assets in the LLC
- You are a single-member or small partnership LLC
This covers the vast majority of freelancers, consultants, online businesses, agencies, and local service businesses.
Cost Comparison: Home State vs Wyoming
Example: You live in Florida and run an online business
| Cost | Florida LLC | Wyoming LLC + FL Foreign Qual |
|---|---|---|
| Formation filing | $125 | $100 (WY) + $125 (FL foreign) |
| Annual report | $138.75/year | $60/year (WY) + $138.75/year (FL) |
| Registered agent | $49/year (1 state) | $98/year (2 states) |
| Year 1 total | $312.75 | $521.75 |
| Ongoing annual | $187.75 | $296.75 |
The Wyoming route costs you $209 more in year one and $109 more every year after. For a standard small business, there is zero benefit to offset that cost.
When Wyoming Actually Makes Sense
Wyoming is a genuinely excellent state for LLCs. But it makes sense in specific situations:
You are a purely online business with no physical presence in any state
If you are a digital nomad or your business truly has no nexus in any state, Wyoming gives you low fees, strong privacy, and no state income tax without the need to register elsewhere.
You hold significant assets (real estate, crypto, investments) in the LLC
Wyoming's charging order protection is among the strongest. For single-member LLCs holding valuable assets, Wyoming makes a creditor's job significantly harder.
Privacy is a top priority
Wyoming does not require public disclosure of members. If you need anonymity (legitimate reasons: domestic violence survivors, public figures, competitive businesses), Wyoming delivers.
You need a Series LLC
Wyoming allows Series LLCs, which let you create separate 'cells' with distinct assets and liabilities under one umbrella. Useful for real estate investors with multiple properties.
When Delaware Is Worth It
Delaware is the gold standard for corporations and complex LLCs. But for a simple small business LLC, it is overkill. Delaware makes sense when:
- You plan to raise venture capital. Investors and VCs overwhelmingly prefer Delaware entities because of the Chancery Court and well-established body of case law.
- You have a complex multi-member structure. Delaware offers maximum flexibility in operating agreements. You can customize voting rights, profit distributions, and duties in ways other states restrict.
- You anticipate complex legal disputes. The Delaware Chancery Court handles business disputes faster and more predictably than most state courts. No juries, just expert judges.
- You are forming a C-Corp for a tech startup. This is the classic Delaware use case. If you are building a startup you plan to scale and sell or IPO, Delaware C-Corp is the standard.
Reality check
Delaware charges $300/year in franchise tax for LLCs, regardless of income. If your LLC makes $0, you still owe $300. For a simple freelance LLC, that is expensive for benefits you will never use.
What About Nevada?
Nevada markets itself heavily as a business-friendly state, and it has some real advantages: no state income tax, strong privacy, and charging order protection. But there are hidden costs:
- $200/year state business license (on top of the annual list fee)
- $150/year annual list filing
- If you operate in another state, you pay fees there too
For most people, Nevada is not worth it unless you actually live there.
The Complete Cost Comparison
| State | Filing Fee | Annual Cost | Income Tax | Privacy |
|---|---|---|---|---|
| Wyoming | $100 | $60 | None | High |
| Delaware | $90 | $300 | None (if no DE ops) | High |
| Nevada | $75 | $350+ | None | High |
| Florida | $125 | $138.75 | None | Low |
| Texas | $300 | $0* | None | Low |
| California | $70 | $820+ | Up to 13.3% | Low |
| New York | $200 | $9** | Up to 10.9% | Medium |
| Illinois | $150 | $75 | 4.95% | Low |
* Texas has no annual report but does have a franchise (margin) tax for entities with revenue over ~$2.47M.
** New York has a one-time publication requirement that costs $1,000-$2,000+ depending on the county.
The Decision Tree
- Do you live and operate in one state?→ Form there. Done. Do not overthink it.
- Are you a digital nomad with no state nexus?→ Wyoming is probably your best bet. Low cost, strong protections, no income tax.
- Are you raising VC money or building a startup to sell?→ Delaware C-Corp. Not an LLC. Talk to a startup lawyer.
- Do you hold significant assets and want maximum protection?→ Wyoming LLC for the charging order protection.
- Do you need maximum privacy?→ Wyoming or New Mexico (NM has no annual report and strong privacy, though less case law).
- Everything else?→ Home state. Every time.
Bottom Line
The "best state for your LLC" industry is driven by affiliate commissions, not your best interest. Formation services make more money when you form in Wyoming and then register in your home state (two filings, two registered agents). That is why they recommend it.
For most people: form in your home state, get an operating agreement, open a business bank account, and focus on making money. The state you form in matters far less than how you run your business.