13 Cheapest States To Start An LLC
Launching a business can be challenging—it requires more than just a low-cost product or idea. To successfully establish a Limited Liability Company (LLC), you must understand your state’s formation fees and any recurring costs, such as renewal fees, annual report fees, or franchise taxes.
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Initial LLC Filing Fee
State regulations mandate that all business owners pay a filing fee when submitting the necessary documents to form an LLC.
In simpler terms, this one-time payment is required to file your LLC formation paperwork with the state government where your business is being formed.
Annual/Biennial Reports Fee
Most states require LLCs to pay a recurring fee to maintain compliance and good standing, typically every one or two years.
Click here to start your LLC in any of these states
LLC Annual Report
The name of this fee varies by state and may be referred to as:
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Annual Fee
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Annual Report
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Biennial Report
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Annual Franchise Tax
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Or similar terms
However, in most states, this fee is commonly called the Annual or Biennial Report.
Here’s a breakdown of the most cost-effective states to form an LLC, along with the vital link you’ll need to get started:
Kentucky
Kentucky tops the list as the most affordable state for forming an LLC, with a minimal filing fee of $40. The state also supports small businesses through incentive programs that offer financial assistance.
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LLC Filing Fee: $40
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Annual Fee: $15
Arkansas
With a $45 filing fee, Arkansas ranks as the second-cheapest state to start an LLC. Home to nearly 260,000 small businesses, the state continues to see growth in new business formations.
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LLC Filing Fee: $45
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Annual Fee: $150
Arizona
Despite setbacks during the pandemic, Arizona has rebounded as a leader in job growth, making it a promising state for new businesses.
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LLC Filing Fee: $50
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Annual Fee: $0
Mississippi
Mississippi boasts a low corporate tax rate and a well-educated workforce, supported by 37 in-state colleges and universities.
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LLC Filing Fee: $50
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Annual Fee: $0
Missouri
Missouri offers a strong sense of community, an affordable cost of living, and no annual LLC fees, making it an attractive choice for entrepreneurs.
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LLC Filing Fee: $50
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Annual Fee: $0
New Mexico
New Mexico’s favorable tax policies and temperate climate make it a popular destination for starting an LLC.
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LLC Filing Fee: $50
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Annual Fee: $0
Colorado
Renowned for its breathtaking landscapes and outdoor activities, Colorado attracts millions of visitors annually, making it ideal for outdoor-focused businesses.
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LLC Filing Fee: $50
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Annual Fee: $10
Hawaii
The Aloha State combines excellent support for new businesses with year-round beautiful weather.
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LLC Filing Fee: $50
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Annual Fee: $15
Michigan
Michigan, while ranked ninth in terms of business formation costs, is the fourth most affordable state to live in, adding to its appeal.
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LLC Filing Fee: $50
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Annual Fee: $25
Iowa
Unlike most states with annual LLC fees, Iowa charges its $50 fee biennially. It also boasts affordable living costs and no personal property tax.
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LLC Filing Fee: $5
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Biennial Fee: $50
Montana
Montana’s higher LLC filing fee is offset by a low annual fee, making it ideal for long-term business ventures.
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LLC Filing Fee: $35
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Annual Fee: $20
Utah
With its flat 4.95% tax rate, low living costs, and high quality of life, Utah is a smart choice for business formation.
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LLC Filing Fee: $59
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Annual Fee: $18
Indiana
Indiana rounds out the list, supporting over 512,000 small businesses that employ nearly half of its private workforce.
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LLC Filing Fee: $98
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Annual Fee: $50
Understanding the costs and benefits associated with LLC formation in these states will help you make an informed decision about where to establish your business.
Click here to start your LLC in any of these states
Important Reminder
While some states offer lower LLC formation costs, choosing a cheaper state solely to save on fees or ongoing expenses may not be the best approach. Forming an LLC in a state where you don’t conduct business could lead to significantly higher costs in the long run. The states can change their fees at any point in time.
Additional Costs of Forming an LLC
While states with low filing fees can help reduce initial expenses, it’s important to consider other potential costs when selecting the most cost-effective state for your LLC. Below are some additional expenses to keep in mind:
Annual Report Fees
Many states require an annual fee to maintain your LLC’s good standing, often charged as an annual report filing fee. These fees typically range from $15 to $50, depending on the state.
Franchise Taxes
In addition to annual fees, some states impose franchise taxes. These are not income taxes but a fee for the privilege of operating in the state. For example, California charges an $800 annual franchise tax, while states like Wyoming and New Mexico offer significantly lower ongoing costs.
Registered Agent Fees
Most states require LLCs to designate a registered agent to receive legal and official documents on behalf of the business. While you can serve as your own registered agent, many businesses choose to hire a professional service, which usually costs between $100 and $300 annually.
Foreign LLC Registration
If you form your LLC in one state but conduct business in another, you’ll need to register as a foreign LLC in the state where you operate. This process incurs additional filing fees and ongoing costs.
By understanding these expenses, you can better evaluate the true cost of forming and maintaining your LLC in a particular state.
Click here to start your LLC in any of these states
Disclaimer: The information provided in this article is for general informational and educational purposes only. It is not intended to be, nor should it be construed as legal or tax advice. Mazino Oyolo makes no guarantees regarding the accuracy, completeness, adequacy, or timeliness of the content. For advice specific to your circumstances, consult a qualified lawyer or accountant licensed in your jurisdiction.
