How to actually choose a state for your LLC

A founder forming an LLC in 2026 will be told three things at every step: Delaware is the standard, Wyoming is cheaper and more private, and your home state is the boring choice. All three are partially true. The version that matters for your specific business depends on facts most "best state for LLC" articles never ask you about.

This guide walks through the four states that actually matter for most founders, the four questions that determine which one fits you, and the math behind the trade-offs. We have helped form 220,000+ businesses, across all 50 states + DC since 2017, and the pattern is consistent: most people who pay extra for Delaware or Wyoming would have been better off forming where they live.

Question 1: Where will you actually do business?

This is the question that breaks the "form in Delaware" advice for 80% of founders. If you have a physical office, employees, or sustained customer activity in a state, that state usually requires you to either form there or register as a "foreign LLC" doing business there. A foreign-LLC registration costs $100 to $500 depending on the state, plus annual report fees, plus a registered agent in that state. So if you form in Delaware and operate in California, you are paying for two states.

There is a narrow exception for digital-only businesses with no physical presence anywhere · pure SaaS founders, consultants who travel, online creators. They have real flexibility on state choice. Almost everyone else is choosing between "form in my home state" or "form in another state and also register in my home state."

Question 2: Are you taking outside investment?

If you intend to raise venture capital, Delaware is not actually optional. Almost every US VC firm requires the company they invest in to be a Delaware C-Corp (not LLC) by the time the term sheet is signed. The reasoning has more to do with familiarity and the Delaware Court of Chancery's expertise in corporate disputes than tax. If a VC fund knows your articles of incorporation will be interpreted by a court that handles 200+ corporate cases a year, due diligence is cheaper.

If you are not raising and are not building toward a priced round, Delaware's advantages mostly disappear. The chancery court does not care about your three-person LLC's operating dispute. The franchise tax bill does.

Question 3: How much privacy do you need?

Most states require LLC formation documents to list members or managers by name. That information appears in the state's public business registry. If you search for the LLC, anyone can see who runs it. For most businesses this is fine. For some · domestic violence survivors, people in litigation-heavy industries, founders with public profiles · it is not.

Wyoming, Nevada, New Mexico, and Delaware do not require member names in the public filing. Wyoming and Nevada do not even require a manager. You can form an LLC where the only name visible publicly is your registered agent's. If privacy matters, that capability is real. It does not, however, make your LLC anonymous to the IRS, to banks, or to law enforcement · beneficial ownership reporting still applies to foreign-formed entities, and banks under federal regulation will know who the beneficial owners are no matter what state you formed in.

Question 4: What is your annual revenue going to look like?

California's $800/year LLC franchise tax applies regardless of revenue. (Note: California waived the franchise tax for the first taxable year of new LLCs formed in 2021-2023 under AB 85; the waiver expired and franchise tax applies in year one for LLCs formed 2024 onward.) New Mexico's $0 annual report fee applies regardless of revenue. For a business projecting $50K in profit, $800 is a 1.6% drag. For a business projecting $5M, the same $800 is a rounding error. The smaller your projected business, the more the home-state cost differential matters.

Inversely: the larger and more interstate your business, the less the formation state matters because you will end up registered in multiple states anyway.

The four states that actually matter

Delaware

Formation: $110. LLC annual: $300 franchise tax (flat). C-Corp annual: $400 minimum, can scale to $200,000+ using the assumed par value method.

Pick it when: You are raising venture capital. You want courts experienced in corporate disputes. You have multi-state operations and Delaware's slightly more favorable creditor-debtor case law matters to you. Skip it when: You are a single-state, single-founder business. The $300 LLC franchise tax + Delaware registered agent + home-state foreign registration adds up fast.

Wyoming

Formation: $100. LLC annual: $60 (or $0.0002 per dollar of in-Wyoming assets, whichever is higher).

Pick it when: Privacy matters, you have no employees or physical operations elsewhere, and you can stomach being a "foreign entity" in your home state. Skip it when: You are doing physical business somewhere else · you will pay foreign registration in that state on top of Wyoming, and the Wyoming part is no longer cheaper.

Nevada

Formation: $425. LLC annual: $350.

Pick it when: You have a Nevada-specific reason. The state's marketing positions it as a low-tax haven, but the actual annual cost is higher than Wyoming and the privacy is no better. For most founders, Nevada is the answer to a question they did not ask.

Your home state

Pick it when: You have physical operations there. You are a solo founder. You are not raising. You want one set of state filings instead of two. For most founders this is the right answer and the only reason it does not feel like a "real" choice is that the LLC formation industry makes more money selling Delaware and Wyoming.

The math behind the trade-off

Consider a consulting LLC based in California that earns $200K/year in profit. Two formation options:

Option A: Form in California. $70 to form. $800 California franchise tax annually. $20/year statement of information. Total year-one: $890. Year three: $2,470.

Option B: Form in Wyoming, register as foreign LLC in California. $100 Wyoming formation + $60/year Wyoming annual. $70 California foreign LLC registration + $800 California franchise tax + $20 statement of information annually. Plus $125/year for a Wyoming registered agent. Total year-one: $1,175. Year three: $2,955.

Option B costs $485 more over three years for the same operational outcome. You also have two sets of compliance to track, two states whose rules might change, and a more complex annual reporting picture.

When the Delaware/Wyoming setup actually pays off

It pays off mostly in two scenarios. First, when the founder's home state is so expensive (California, Massachusetts, Tennessee) that even the foreign-registration overhead is cheaper than just paying that home state's annual fees. Second, when the business has a real, specific reason to be domiciled in a state with different case law than the home state · typically because the business plans to operate in multiple states from day one, and Delaware's predictability across jurisdictions is worth more than the duplication cost.

For everyone else, the boring answer wins.

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