Best state and entity type for your business in the USA

Find your business in the first table for the states to consider, compare the popular states in the second, and see whether an LLC or a C-Corp fits one owner or several in the third. The sections after the tables explain each choice.

At a glance: the best state by business type

Compare the popular states side by side

For the formation fee and yearly cost of every state, see LLC filing fees by state.

LLC vs C-Corp: single owner and multiple owners compared

An S-corporation is generally not open to a non-resident owner. See LLC vs C-Corp for the full comparison.

How to choose a state and a structure

Two choices decide most of the cost and the paperwork of a US company: the state you form it in and the structure (an LLC or a C-Corp). No state is best for everyone. The right pick depends on what the business does, where its customers and staff are, who owns it and whether you plan to raise money. Ask yourself four questions first:

1. What does the business do? Services, selling products, software, property, trading or something that needs a licence.
2. Where are the customers, staff and stock? A business that operates in a state usually has to register there too.
3. How many owners are there? One owner and several owners are taxed and organised differently.
4. Will you raise money from investors? That one question often decides LLC or C-Corp.

Any state is open to a non-resident owner, and the company needs a registered agent with a street address in the state it is formed in. The notes below are general information; fees and rules change, so check each state's official site.

Benefits of forming a company in the USA

• Limited liability. A properly run LLC or corporation keeps the owners' personal assets separate from the company's debts.
• Credibility. Customers, marketplaces and payment platforms are used to dealing with US companies.
• Banking and payments. A US company with an EIN finds a US business account, a payment processor and a marketplace seller account easier to open.
• Access to the US market. You can sell in dollars to US customers and contract with US businesses.
• Remote setup. The owner can live anywhere: the filing, the agent and the EIN can all be done online.
• Flexibility. One owner or many, simple rules for an LLC, and a structure investors know for a C-Corp.

The trade-offs are the yearly filings and costs, and tax in the owner's own country. See LLC registration in the USA for non-residents.

The best state for your type of business

Freelancers, consultants and online service businesses

Consider Wyoming, New Mexico or Delaware. Wyoming is known for low costs and a simple yearly filing. New Mexico does not require an LLC to file an annual report, which keeps yearly work low. Delaware is the best known and the safe choice if you may grow or raise money later. Pick on the formation fee and the yearly cost together. See LLC filing fees by state.

E-commerce and online sellers

Consider Delaware, Wyoming or the state where your stock sits. The state of formation matters less than where you hold inventory and which states you collect sales tax in. If you keep stock in a US warehouse, you may have to register in that state as well. Texas and Florida are common when stock or staff are there. Remember that sales tax is separate from the formation state.

Software, apps and startups that will raise money

Delaware, as a C-Corp. Most US investors and lawyers expect a Delaware C-Corporation, because of its well-developed company law and familiar documents. It also suits issuing stock options. See the structure section below.

Import-export and trading businesses

Consider Delaware or Wyoming for the company, and the state of your port or warehouse for operations. A trading company's main extra work is customs and product rules, not the state choice. Check the import and export rules for your product.

Agencies, marketing and content creators

Consider Wyoming, New Mexico or Delaware. A business that earns from clients abroad and has no US staff can usually pick on cost. If you hire in the US or have a US office, you will need to register in that state.

Real estate and rental property

The state where the property is. A company that owns property in a state generally has to register to do business there, so forming in another state can mean paying twice. Ask a US adviser about the tax on foreign owners of US property before you buy.

Local businesses (shops, restaurants, clinics, salons)

The state where you operate. A business that works in one state is normally formed and licensed there. Regulated and licensed professions, such as medical or legal practices, may need a special type of company, so check the state's rules.

Which states have no state income tax?

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming do not tax personal income, and Delaware generally does not tax an LLC's income earned outside Delaware. "No income tax" does not mean no tax: some of these states charge a franchise, gross-receipts or business tax, and federal tax and the tax where you live still apply. See the full list on LLC filing fees by state.

A state to be careful with

California. It has a yearly minimum franchise tax on LLCs, so it is usually a poor choice for a company that does little business there, unless you operate in California. Compare the costs before you choose.

Which to open: an LLC or a C-Corp?

In short, an LLC suits most small businesses, and a C-Corp suits a company that will raise investor money or sell shares. The side-by-side comparison is on our LLC vs C-Corp page. The answer also depends on how many owners there are.

If you are a single owner

• A single-member LLC is the usual choice. For US tax it is normally treated as a disregarded entity, so it pays no separate federal income tax. A foreign-owned single-member LLC still files Form 5472 with a pro forma Form 1120 every year, even with no income.
• A C-Corp with one owner pays its own corporate tax, and dividends paid to a foreign owner can be subject to US withholding. It makes sense only if you plan to raise money from investors, give stock options or sell the company.
• An S-corporation is generally not open to a non-resident owner, so it is not an option for most foreign founders.

If there are two or more owners

• A multi-member LLC is normally taxed as a partnership. It files a partnership return and gives each owner a statement of their share. Foreign owners can have US tax withholding on their share of US business income, so check this with a US tax adviser. A written operating agreement is important: it sets each owner's share, roles, how profit is paid out and what happens if someone leaves.
• A C-Corp with several owners splits ownership by shares. It suits co-founders who expect investors, want to give shares to employees, or want a clear way to bring in and remove owners. It has more formalities: a board, shareholder records and meetings.
• Co-founders who plan to raise money should usually start as a Delaware C-Corp, so investors do not ask them to convert later.

Quick picker

• One owner, services or online sales, no investors: single-member LLC.
• One owner, building a startup to raise money: Delaware C-Corp.
• Two or more owners, a small business, no investors: multi-member LLC with an operating agreement.
• Two or more co-founders, startup, investors expected: Delaware C-Corp.
• Property or a local business in one state: an LLC in that state.

What it costs

You pay the state formation fee and, if a company files for you, a service fee. Then every year there is the state's annual fee or report, a registered agent renewal and the yearly IRS filing for a foreign-owned company. Compare the states on our LLC filing fees by state page, and see the yearly costs on our annual report and US LLC tax filing pages.

Next steps

Once you have chosen, register your LLC as a non-resident, or read about company formation in the USA. Founders in India can start with register a company in the USA from India. For official information, see the state sites: Delaware, Wyoming, New Mexico, Nevada and Texas, and the US Small Business Administration. This is general information, not legal or tax advice.