Which state is best to form an LLC in US? The answer are: 1) Wyoming, 2) Alaska, 3) South Dakota, 4) Florida, 5) Nevada, 6) Montana, 7) New Hampshire, 8) Utah, 9) Oregon, and 10) Indiana.
The decision on where to form a limited liability company (LLC) will depend on a number of factors, including taxes, regulatory burdens, and labor availability. In this article, we will take a look at the best states to start an LLC in terms of the overall business environment. If you are planning to form a
LLC, the map below shows the breakdown of the top 10 states that will form an LLC. The ranking considers important factors such as corporate tax rates, personal income tax rates, sales tax rates, average property tax rates, and state unemployment rates.
But, before we describe about it, maybe you can read a brief description of LLC below.
What is a limited liability company (LLC)?
On the one hand, there are privately owned and general partnerships that have no legal form. On the other hand, businesses are complex and require many legal documents. in the middle? You can find an LLC there. It is a flexible business structure that is relatively easy to set up and provides attractive protection features. The most common reason to form a
LLC is to protect your personal assets. If the LLC is sued, creditors can pursue business assets. Personal items such as houses, cars and bank accounts are prohibited. On the other hand, if you are a sole proprietorship or partnership, lenders can take whatever they want. The actual process of forming a
LLC is much cheaper, more complex, and easier to maintain than a legal entity. As an added bonus, LLCs also offer flexibility in their tax structure. Basically, LLCs are taxed the same way as a sole proprietorship or general partnership, where the owners report their income on individual tax returns rather than on separate corporate returns.
If you prefer your company to be taxed as an S or C corporation, you can, but this means your income is subject to “double taxation,” where both corporate and personal profits are taxed.
Which State is Best to Form an LLC in US?
Below are the top 10 states to start LLCs by overall ranking. Ratings are based strictly on the business environment and do not take into account lifestyle factors such as health care, education, infrastructure, crime rate, weather, etc.
Tax and unemployment rates quoted are as of June 2018. Corporate and individual tax rates are taken from the state website (link). Unemployment rates are from the Bureau of Labor Statistics. The average effective property tax rate is calculated by the smartasset program.
Top 10 State for Best to Form an LLC in US
Some states impose their own sales tax in addition to (or instead of) statewide sales tax by individual counties and municipalities.
#10 Indiana
- Corporate tax rate: 6 percent (to be reduced to 4.9 percent by 2021)
- Individual income tax rate: 3.23 percent + county tax rates from .01 to .021 percent
- Sales tax rate: 7 percent
- Average effective property tax rate: .87 percent
- Unemployment: 3.3 percent
#9 Oregon
- Corporate tax rate: 6.6 percent on first $1 million of income, 7.6 percent on income above $1 million
- Individual income tax rate: ranges from 5 percent to 9.9 percent, depending on income
- Sales tax rate: 0 percent
- Average effective property tax rate: 1.27 percent
- Unemployment: 4.0 percent
#8 Utah
- Corporate tax rate: 5 percent
- Individual income tax rate: 5 percent
- State sales tax rate: 4.7 percent (total sales tax rate in Salt Lake City is 6.85 percent)
- Average effective property tax rate: .67 percent
- Unemployment: 3.0 percent
#7 New Hampshire
- Corporate tax rate: 7.9 percent
- Business enterprise tax: .72 percent
- Individual income tax rate: 0 percent (5 percent on dividend and interest income)
- Sales tax rate: 0 percent
- Average effective property tax rate: 2.19 percent
- Unemployment: 2.7 percent
#6 Montana
- Corporate tax rate: 6.75 percent
- Individual income tax rate: ranges from 1 percent to 6.9 percent, depending on income
- Sales tax rate: 0 percent
- Average effective property tax rate: .87 percent
- Unemployment: 3.8 percent
#5 Nevada
- Corporate tax rate: 0 percent
- Individual income tax rate: 0 percent
- Sales tax rate: 6.85 percent (statewide—locally can be as high as 8.265 percent)
- Average effective property tax rate: .77 percent
- Unemployment: 4.7 percent
#4 Florida
- Corporate tax rate: 5.5 percent
- Individual income tax rate: 0 percent
- Sales tax rate: 6.00 percent
- Average effective property tax rate: 1.02 percent
- Unemployment: 3.8 percent
#3 South Dakota
- Corporate tax rate: 0 percent
- Individual income tax rate: 0 percent
- Sales tax rate: 4.50 percent
- Average effective property tax rate: 1.32 percent
- Unemployment: 3.2 percent
#2 Alaska
- Corporate tax rate: 9.4 percent
- Individual income tax rate: 0 percent
- Sales tax rate: 0 percent (municipalities can charge up to 7 percent)
- Average effective property tax rate: 1.19 percent
- Unemployment: 7.3 percent
#1 Wyoming
- Corporate tax rate: 0 percent
- Individual income tax rate: 0 percent
- Sales tax rate: 4.00 percent
- Average effective property tax rate: .61 percent (national average is 1.19 percent)
- Unemployment rate: 4.0 percent
With no corporate or individual income taxes and a low sales tax rate, Wyoming ranks as the number one state in the nation to form an LLC.
Read also: Where are states with at will employment?
Alternative: Your Own State
The alternative answer of which state is best to form an LLC is your own state. Most small LLC owners The truth is that the country you are personally living is the best place for your LLC. If you do not have plans to work in multiple weeks or to become a public company, you will be molded in your state and save more money and time. You can also avoid initial steps to find residents to change your agent and registration as a foreign LLC.
Wyoming, Alaska, South Dakota, Florida or Nevada are regularly advertised as “the best week for LLC formation” and should not be the default options for all business owners. Do not choose your formation status as they heard. Unless you have a specific, compelling reason to enroll in another state, your state is probably the best choice.
Still interesting about Which state is best to form an LLC in US?
