Which State Is Good for Company Registration in USA?

Which state is good for company registration in the USA? The honest answer is the one that fits your business, not the one that is famous. A freelancer in India, a founder who wants venture money and a shop owner in Texas should not all pick the same state. This guide helps you decide in five questions, then gives a pick for the most common situations. For a review of each popular state, read our guide to the best state for company registration in the USA, and see the comparison tables on our best state to form a business in the USA page.

Key takeaways

• If you will operate in one state (an office, staff, a shop), register in that state.
• If you are a non-resident running an online business, a low-cost state such as Wyoming, New Mexico or Delaware is the usual choice.
• If you plan to raise money from investors, choose Delaware and a C-corporation.
• The state you form in does not change your federal tax.

Five questions that decide the state

1. Where will you actually work?

The state where you have an office, staff, inventory or customers in person matters most. A company with a real presence in a state usually has to register there as a foreign company, even if it was formed elsewhere. Forming in a different state then means paying fees in two states. If you work remotely and have no US presence, you can form in any state.

2. Do you live in the US?

A non-resident does not need to live in the US or visit it to form a company, and no state requires it. Non-resident owners tend to choose on cost and simplicity. See LLC formation for non-residents.

3. Will you raise money from investors?

If yes, investors and their lawyers usually expect a Delaware C-corporation. If you are bootstrapping, an LLC in a low-cost state is simpler.

4. What does the business do?

Online services and products can sit in almost any state. Real estate belongs where the property is. Licensed trades, clinics, restaurants and salons are tied to the state that licenses them.

5. What will it cost every year?

Compare the yearly fee or tax of each state, plus a registered agent. A state with a cheap start can cost more over three years. See LLC filing fees by state.

Which state for which situation

Formation state vs operating state

The formation state is where the company is created. The operating state is where it does business. They can be the same or different. When they differ, the company generally registers in the operating state too (called foreign qualification), which adds a fee and sometimes a yearly report. This is why a business with a real local presence often does best forming in its own state, and why a purely online business with no US presence has more freedom to choose.

Does the state affect your tax?

It affects state fees and state tax. It does not change federal tax. A single-member LLC is usually taxed the same way everywhere, and a foreign-owned one files Form 5472 each year whichever state it is in. See the IRS page on Form 5472. A state with no income tax is not tax-free: federal tax, sales tax and your home country's tax still apply. For tax that depends on your own facts, speak to a tax adviser.

What if you choose the wrong state?

It is not a disaster, but it costs money and time. You can form a new company in the better state, or formally move the existing one, and either route involves fees and paperwork. The cheaper fix is to ask before forming.

Frequently asked questions

Which state is best for a non-resident?

Wyoming, New Mexico and Delaware are the common picks, because they keep cost and paperwork low and do not need a US presence.

Is it better to form in my own state?

If you live in the US and operate there, usually yes, because you would have to register there anyway.

Does the state change my EIN?

No. The IRS issues an EIN the same way for every state. See EIN for your company.

Do I need a registered agent?

Yes, in every state, with a street address in that state. See our registered agent service.

LLC or C-corporation?

An LLC for most small businesses, a C-corporation for founders raising investor money. See LLC vs C-Corp.

Ready to register?

Tell us what the business does and where you work from, and we will help you choose the state and form the company: see the best state for your business. This is general information, not legal, tax or financial advice.