Thinking about starting a business in the United States? A crucial first step is determining where your business will be registered and conduct business. Some states are preferred over others because of their tax policies. Outlined below are a few of the most popular tax-friendly states for LLC formation.
| Factor | Delaware | Wyoming | Nevada | South Dakota |
|---|---|---|---|---|
| State Income Tax | None for out-of-state LLCs | None | None | None |
| Sales Tax | None | None | 4.6% | None |
| Annual Fees & Franchise Tax | $300 flat fee | $60 + $60 annual report | $350 + $200 annual report | $150 annual report |
| Privacy Protections | No public disclosure of members | No public disclosure of members | No public disclosure of members | Owners’ names are public |
| Legal Protections | Strong business laws, Chancery Court | Strong asset protection, lifetime proxy | Strong asset protection, charging order protection | Strong asset protection |
| Flexibility for LLCs | Customizable operating agreements, Series LLC allowed | Series LLC allowed, strong asset protection | Series LLC allowed, no state business license required | Series LLC allowed |
| Filing Speed & Cost | Customizable Fast filing, $90 | Low-cost, fast filing ($100 | Higher costs, $425 | Fast filing, $150 |
| Best For | Large businesses, investors, companies seeking legal advantages | Small businesses, asset protection, lowest fees | High-risk businesses, asset protection, no corporate income tax | Simple LLCs, tax efficiency, no personal income tax |
Key Takeaways:
- Delaware is best for companies seeking legal advantages, strong court protection, and investment opportunities.
- Wyoming offers the lowest fees and strong privacy protections, making it great for small businesses.
- Nevada has zero business taxes but higher startup costs, making it ideal for high-risk businesses.
- South Dakota is tax-efficient with no personal income tax but lacks strong privacy protections.
There are several tax-friendly states for LLC formation. Your business goals and priorities should be examined to determine which state is right for your entity. If you need assistance, you can always contact a tax expert here at US Tax Team!
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