Forming an LLC in a State Other Than Your Own

Forming an LLC in a cheaper or better-known state does not remove your home state's rules. If you operate at home, you usually register in both places.

The core rule

A state's authority over your business depends on where you do business, not where you filed. If you live and work in State A but formed in State B, State A generally treats your LLC as a “foreign” LLC that must register to do business there. That means another filing, another registered agent, and often another annual fee.

Example

Texas charges an out-of-state LLC transacting business $750 to register (Texas SOS fee schedule). The cost of the extra registration can cancel out any savings from the other state's lower fees.

When forming elsewhere can make sense

You have no physical presence in your home state and are truly based elsewhere.
You hold passive assets or are following specific advice from an attorney or CPA.
Your investors or counterparties require a specific state's law (common for venture-backed companies, which often use Delaware corporations).

When it usually does not

For most freelancers, shops and local service businesses, forming in the home state is the simplest and often the cheapest approach. Compare any state to your own on the comparison tool.

Frequently asked questions

Is it cheaper to form my LLC in Wyoming or New Mexico?

Their filing and upkeep fees are low, but if you do business in another state you generally must register there too. Compare total cost, not one state's fee.

Do I still pay taxes in my home state?

Income earned from your home-state activity is generally taxable there regardless of where the LLC is formed. A CPA can advise.

Want someone else to handle the filing?

A formation service files the paperwork for a fee on top of the state fee and often includes a first year of registered agent service. It saves time, but you can file directly with the state for the state fee alone. Compare DIY and services.

General information, not legal or tax advice. See our methodology and disclosure.