Affordable Business Formation: 15 Cheapest States to Form an LLC in the U.S.

Starting a business can be daunting — and it takes more than just having a low-cost idea or product. To launch a successful Limited Liability Company (LLC), you must understand your state’s formation fee and any recurring fees, including renewal, annual report, or franchise taxes.

So, let’s learn about the cheapest states where you can form your business and what you will need to get started.

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 financially assist small businesses.

• LLC filing fee: $40
• Annual fee: $15

Arkansas

Arkansas is the second cheapest state to start an LLC. This state of 3 million boasts nearly 260,000 small businesses employing 500,000 people, and small business formations are expected to grow.

• LLC filing fee: $45
• Annual fee: $150

Arizona

Although this state was hit hard during the pandemic, it’s now come back and has helped lead the country in job growth, making it a great state to start an LLC.

• LLC filing fee: $50
• Annual fee: $0

Mississippi

Known for its low corporate tax rate, this state also has a diverse and educated workforce, thanks to the 37 in-state colleges and universities.

• LLC filing fee: $50
• Annual fee: $0

Missouri

A strong community, low cost of living, and $0 annual fee are just a few reasons why many small businesses opt to form a Missouri LLC.

• LLC filing fee: $50
• Annual fee: $0

New Mexico

The temperate climate and business-friendly tax policy play a big part in why many entrepreneurs look to form an LLC in New Mexico.

• LLC filing fee: $50
• Annual fee: $0

Colorado

Known for its beautiful landscapes, this state also attracts millions of visitors annually, many of whom enjoy an outdoor lifestyle and the activities it offers. Meaning it’s a great place to start an outdoor-focused small business.

• LLC filing fee: $50
• Annual fee: $10

Hawaii

When it comes to LLC formation and starting a business, you’ll find lots of support in the Aloha State, not to mention great weather.

• LLC filing fee: $50
• Annual fee: $15

Michigan

Though Michigan ranks 9th in terms of the cost of business formation, it is the fourth most affordable state to live in.

• LLC filing fee: $50
• Annual fee: $25

Iowa

Unlike the rest of the states on this list that are required to pay annual fees, Iowa’s fee is paid every other year. Iowa is also one of the most affordable states, with reasonably priced housing, a low cost of living, and no personal property tax.

• LLC filing fee: $50
• Annual fee: $30 (every two years)

Montana

While the LLC filing fee in Montana may be rather high, its annual fee is low, making it a great place to form your business if you plan to stick around for the long haul.

• LLC filing fee: $70
• Annual fee: $20

Utah

Utah boasts a high quality of life, a low cost of living, and a flat tax of 4.95%, regardless of how much you earn, making it a no-brainer when it comes to forming a new business.

• LLC filing fee: $54
• Annual fee: $20

California

Though California’s annual fee is high (called a franchise tax), when you consider that the Golden State boasts a GDP of close to $3 trillion dollars, it may be where you want to form a business. After all, if California was its own country, it would have the fifth-largest economy!

• LLC filing fee: $75 (including $5 certification fee)
• Annual fee: $800

Delaware

In addition to being on this list for its cheap state filing fee, this state also boasts no sales tax, as well as privacy protections. Delaware LLCs are not required to include the personal information of board members, including names and phone numbers. Filings can effectively be made anonymously.

• LLC filing fee: $90
• Annual fee: $300

Indiana

Indiana rounds out the list, with 512,438 small businesses employing 1.4 million people—or 44.9% of the private workforce.

• LLC filing fee: $95
• Annual fee: $50

How to Start an LLC 

Are you thinking of starting your own LLC? Check out our handy state-by-state LLC guides on everything you need to know before setting up your LLC. Create your LLC now!

 

LLC Formation Checklist

If you plan on starting a business in one of the 15 states listed above, you are off to a great start for forming a low-cost LLC. However, California and Delaware’s annual fees are disproportionately higher than the other 13 states.

Here are other steps and filings that will require your attention:

• Naming Your Business: Ensure the name you want is available by checking through your Secretary of State website or using a business name search tool.
• Open a Business Bank Account: This should be dedicated to making and accepting payments for your business. It also helps with tax time.
• Get an EIN: An Employer Identification Number is essential for filing taxes.
• Name a Registered Agent: Your Registered Agent will handle important documents and ensure you do not miss critical filings and dates.
• Consider a Virtual Address Service: This provides privacy for your home address and allows you to run your business anywhere.
• File Your Articles of Organization: This officially creates your LLC.

Business Formation Services

Starting an LLC can be made easier with the help of professional formation services. Here are three top options:

 

 

 

 

Conclusion

Starting an LLC in one of the cheapest states can save money and help your business start strong. But remember, the cost is just one factor to consider. Take the time to research and choose the best state for your specific business needs. Working with a professional can help you navigate the formation process and meet all legal requirements.

Now that you know the cheapest and best states to start your business, it’s time to take the next step. Consider working with a service like Swiftfilings, Northwest Registered Agent, or Bizee to help navigate the business formation costs and filing process. These services can simplify the process and ensure your LLC is set up correctly.