The best states to incorporate in are Delaware, Wyoming, and Nevada. These states have low tax requirements, business-friendly laws, and good court systems. Delaware remains affordable for forming an LLC or incorporation. Filing fees are lower compared to other states. Over 50% of publicly-traded companies and 63% of Fortune 500 firms incorporate in Delaware. Delaware provides liability and privacy protection.
Delaware’s Tax Incentives
- No sales tax
- No tax on transactions
- No capital stock transfer tax
- Avoid state income tax if you register in Delaware but locate the headquarters elsewhere
- No inventory tax
Note that if your business location differs from the state of incorporation, you still must file reports, pay fees, and appoint a registered agent in that state.
Other State Options
In addition to Delaware, Wyoming, and Nevada, South Dakota also lacks corporate or individual income taxes. While its sales tax is higher, business owners benefit from tax savings. Other options to consider include North Carolina and Kentucky.
Kentucky is the cheapest state to form an LLC, with a filing fee of just $40. The state also offers business owners incentive programs that provide small businesses with financial assistance.
Key Considerations
- The best state to incorporate in is determined by the formation fees, annual filing fees, taxes, and legal structure.
- Most small firms should incorporate where they are located to avoid complications.
- Incorporate in Wyoming for lower state fees, useful for non-resident entrepreneurs.
- Incorporate in your home state for simplicity.
Your home state may not be the cheapest to start a business and incorporate, but it could still be the most cost-effective choice for various reasons.
The cheapest state to start a business is Wyoming. Making the right decision for your business location and incorporation state is crucial for its success and growth.