When you start a business, the state you choose to do it in can determine your success. States with low LLC state fees will help you save money that you can put toward the business itself. This is one of the primary reasons why we’ve ranked today’s top 10 states with the lowest LLC state fees.
10 States with the Lowest LLC State Fees: A Complete Guide
What is an LLC?
An LLC (limited liability company) is a type of business entity that offers limited liability protection and tax benefits. It is a hybrid between a corporation and a partnership.
An LLC is structured like a corporation, with its own legal identity separate from its owners. Each member of an LLC has limited liability, which means that they are not personally responsible for any debts or liabilities incurred by the business. This differs from being an individual partner in a partnership, where all partners share equally in any debts or liabilities incurred by the business.
However, an LLC can’t file as an employer with the IRS, which would require it to pay taxes on wages paid to employees. Instead, it needs to file as a sole proprietorship or partnership for this purpose.
LLCs also don’t pay federal income tax on profits until profits exceed $400,000 per year for tax purposes (or $150,000 if you’re married filing separately). And if you own more than one LLC at once, each one counts as its entity for tax purposes—so there’s no need to worry about reporting multiple sets of financial records!
Benefits of Forming an LLC for Small Businesses
The main benefit of forming an LLC for small businesses is that it shields the business from personal liability. In other words, if something goes wrong in your business and someone gets hurt, or property damages are inflicted upon you, the only people who can be held liable are the LLC members.
Additionally, there are tax benefits to forming an LLC. You can deduct any business expenses that you incur while running the company (including legal fees) from your income. This can substantially reduce your tax liability, which can save you money.
Finally, forming an LLC also allows you to get creative with how you handle your finances. If you have been operating as a sole proprietorship or partnership, you have been limited in what kind of accounts and financial transactions you could make without getting approval from another party. With an LLC however, this is no longer true, you have more flexibility when it comes to handling your finances because all of these details can be handled by your company’s structure instead of yours personally.
10 States with the Lowest LLC State Fees
An LLC is an inexpensive and popular way to register a business in the United States, with numerous tax benefits. Forming an LLC in a state with low LLC state fees will help you save money that you can put toward the business itself. Here are the 10 states with the lowest LLC state fees:
Kentucky ranks first among the states with the lowest LLC state fees. As a result of its new financial incentive programs, Kentucky small business owners now have more opportunities to start, grow and succeed thanks to the state’s $40 state filing fee and $15 annual renewal fee.
Arkansas has quickly become one of the nation’s top business-friendly states. To form an LLC in Arkansas, you must pay a $45 LLC state filing fee with an annual renewal fee of $150.
Arizona is one of the states with the lowest LLC state fees for forming an LLC. The state charges a $50 filing fee, but there is no renewal fee. Arizona ranked fourth in Chief Executive Magazine’s list of “Best States For Business” and fifth on SmartAsset’s “Best States for Business.”
Mississippi’s business-friendly climate and low corporate tax rate have made it a popular location for incorporations, who can benefit from the state’s low cost of doing business. Mississippi offers a $50 state filing fee with no annual renewal fee.
A low-cost, pro-business environment is one of Missouri’s most recognizable characteristics. The state also has a low LLC state fee of $50 with no annual renewal fee.
According to a WalletHub study, New Mexico is one of the cheapest states in which to form an LLC. The study also found that New Mexico is one of the 18 best states in which to start a business in the United States. To start a New Mexico LLC, you must pay a $50 filing fee with no annual renewal fee.
Colorado ranks seventh among the states with the lowest LLC state fees. Colorado has been deemed one of the best places in the U.S. to do business, as it’s extremely business-friendly and a hub for growing businesses and startups. The state’s $50 filing fee with a ten renewal fee has earned it a high ranking from small business experts, who consider it one of the best business climates in the country.
Hawaii is one of the least expensive states in which to form an LLC, with a $50 filing fee for articles of organization and a $15 annual renewal charge.
If you are starting a business and want to start small, Michigan is a good place to do so. With a $50 filing and $25 renewal fee, it’s very inexpensive to get started in the state.
The Blueprint reported that Montana ranks best for starting a small business. Among the best states for starting a small business, Montana topped the list in a new report by Nation’s Business magazine. Montana has no annual filing fee and charges a $70 filing fee for articles of organization.
When it comes to running a business, there are a lot of things that you need to be aware of. Taxes and compliance are two aspects that you should always consider whenever you decide that you want to start a business venture. Doing your research will help you make smart decisions, which may reduce any negative impact on your bottom line.