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'll first need a fair understanding of your state’s incorporation fee and its annual fee, sometimes called a renewal fee, an annual report fee, or a franchise tax.
So, let’s learn about the cheapest states where you can form your business and what you will need to get started.
1. 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. Learn more about Kentucky LLCs with our guide.
- LLC filing fee: $40
- Annual fee: $15
2. Arkansas
The second cheapest state to start an LLC is in Arkansas. This state of 3 million people boasts close to 260,000 small businesses employing 500,000 people and small business formations are expected to grow.
- LLC filing fee: $45
- Annual fee: $150
3. 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. Learn more about Arizona LLCs.
- LLC filing fee: $50
- Annual fee: $0
4. 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
5. 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
6. New Mexico
The temperate climate and business-friendly tax policy play a big part in why many entrepreneurs look to an LLC in New Mexico.
- LLC filing fee: $50
- Annual fee: $0
7. 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
8. 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
9. Michigan
Though this state ranks at number nine when it comes to the cost of a business formation, Michigan is ranked as the fourth most affordable state to live in.
- LLC filing fee: $50
- Annual fee: $25
10. Iowa
Unlike the rest of the states on this list that are required to pay for annual fee, Iowa’s annual fee is paid every other year. Iowa is also one of the most affordable states to live in, with reasonably priced housing, a low cost of living, and no personal property tax.
- LLC filing fee: $50
- Annual fee: $60
11. 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: $50
- Annual fee: $20
12. 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: $15
13. 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! Learn more about starting a California LLC.
- LLC filing fee: $75 (including $5 certification fee)
- Annual fee: $800
14. 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
15. Indiana
Rounding off the list is Indiana, with 512,438 small businesses employing 1.4 million people — or 44.9% of the private workforce.
- LLC filing fee: $95
- Annual fee: $50
What Is the Cheapest State to Start a Business?
Kentucky is the cheapest state to start a business, with a one-time registration fee of $45. The LLC annual fee, which is an ongoing cost associated with starting a business, is an affordable $15.
There are two things to pay attention to while looking for the cheapest state to start a business:
- Incorporation and formation fees
- Annual renewal or maintenance fees (including Annual Report filing)
While some states have low incorporation fees, the renewal fees can be high — a case in point is California. Others might have a slightly higher filing fee and no annual fee.
LLC Formation Checklist
If you are planning on starting a business in one of the 15 states listed above, then you are off to a great start for forming a low-cost LLC. Granted, the annual fee for California and Delaware are disproportionally higher when compared to the other 13 states.
Other items and fillings that will require your attention as you lay the foundation of starting your own business will include:
- Naming your business. Make sure that the name you have in mind is not already taken. Conduct a quick check through your Secretary of State website or use Incfile’s Business Name Search Tool. Make sure the name of your business is catchy and, above all, available!
- Open up a business bank account. This should be dedicated to your business where you can make and accept payments. Having a separate bank account for your business will also be a big help when it comes to tax time.
- Get an EIN — Employer Identification Number. You’ll need it for your business, especially when it comes to filing your taxes.
- Name a Registered Agent. Your Registered Agent will receive all of your important documents and make sure that you do not run afoul of any filings and miss important dates. Your agent will also receive any legal summons or actions, sparing you from dealing with any hassle, such as the delivery of a lawsuit in front of clients or customers.
- Consider setting up a virtual address service. This will help you run your business from any location and will provide privacy for your own home address.
- File your Articles of Incorporation with your state. This will officially create your legal business.
Now that we’ve helped you identify the cheapest and best states to start your business, it’s time to take the next step by working with a professional to help navigate you through the business formation costs and filing process. Incfile has helped over 1,000,000 small business owners form an LLC for $0+ state formation fees.
Peter Mavrikis
Peter Mavrikis is an author and editor with over 25 years of experience in publishing. He has worked as the Editorial Director for Barron’s Educational Series, as well as Kaplan Test Prep, where he ran the test prep, foreign language, and study guide divisions. Peter has also written several books on history, exploration, science, and technology.
