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Which state should you form in?
Four states, compared honestly — including the part most guides leave out, which is what happens when you form in one state and operate in another.
| Florida | Wyoming | New Mexico | Delaware | |
|---|---|---|---|---|
| Cost to form | Moderate | Low | Lowest of these four | Moderate |
| Ongoing cost | Annual report required, moderate fee | Annual report required, low minimum fee | None — no annual report for LLCs | Flat annual franchise tax — the highest of these four |
| Annual deadline | 1 May | First day of your anniversary month | No annual report for LLCs | 1 June |
| Franchise tax | None for LLCs | License tax based on in-state assets | None for LLCs | Flat annual amount for LLCs; corporations calculated separately |
| Owners on public record | Public | Private | Private | Private |
| State income tax | No personal income tax | No personal or corporate income tax | Applies to in-state income | No tax on income earned outside Delaware |
| Best for | Founders with real operations, customers, property or staff in Florida — and non-residents who want the state of formation to match where the business actually happens. | Non-resident founders with no U.S. physical presence who want low ongoing cost and ownership kept off the public record. | The cheapest ongoing option — no annual report and no annual fee for LLCs, with owners not listed publicly. | Companies raising institutional venture capital, or issuing multiple share classes. Investors expect it and their lawyers are set up for it. |
| Watch out | Managers and members are listed on the public record. The late fee for missing the annual report is substantial and is not waived for most for-profit entities. | Privacy is not anonymity — your registered agent knows who you are, and federal reporting obligations are unaffected by which state you pick. | Fewer practitioners and less case law than Delaware or Wyoming. Some banks and payment processors are less familiar with New Mexico entities, which can slow onboarding. | For everyone else this is usually the expensive wrong answer. You pay the franchise tax every year plus a registered agent, and if you operate anywhere else you must ALSO register there as a foreign entity — two sets of fees, two sets of filings, for no benefit. |
Read this first
The trap nobody explains: foreign qualification
Forming in one state does not exempt you from the others. If you have a physical presence, employees, or in some cases enough sales in another state, you generally have to register there as a 'foreign' entity — foreign meaning out-of-state, not out-of-country. That means a second filing fee, a second registered agent, a second annual report, and possibly a second tax return. A founder in Miami who forms in Delaware because a blog post said to has not saved anything; they have doubled their compliance and added a bill.
The short version
If you have a physical presence in a U.S. state, form there. If you have no U.S. presence at all, then cost and privacy become the deciding factors and Wyoming or New Mexico usually win. Delaware is for raising money.
Recommended when
Quick guide
Florida
- You live in or operate from Florida
- Your customers are mainly in Florida
- You want one state, not two
Wyoming
- You have no U.S. office, staff or property
- Cost and privacy matter most
- You are not raising venture capital
New Mexico
- You want the lowest possible running cost
- You have no U.S. presence
- You are comfortable with a less common choice
Delaware
- You are raising venture capital
- Investors have asked for it specifically
- You need sophisticated corporate governance
General information, not legal or tax advice for your situation. We'll talk it through with you free before you file anything.
Questions
About choosing a state
Probably not, unless you are raising venture capital. Delaware's advantages are real for companies with institutional investors and complex share structures. For a small business or a solo non-resident founder it usually means paying an annual franchise tax plus a registered agent, and then registering again in whatever state you actually operate in. That is two sets of obligations for one business.
Registering your out-of-state company to do business in another state. 'Foreign' here means out-of-state, not out-of-country. If you form in Wyoming but have an office and staff in Florida, Florida will generally expect you to register there too — with its own fee, its own registered agent and its own annual report. This is the single most expensive thing founders get wrong about state selection.
New Mexico has the lowest ongoing cost for LLCs — no annual report and no annual fee — with Wyoming close behind. But cheapest is only the right question if you have no U.S. physical presence. If you do, forming where you operate is almost always cheaper overall than forming somewhere else and then registering where you operate anyway.
No. This is a persistent myth. Your state tax exposure is driven by where you actually do business and where your income is earned, not by where the paperwork was filed. Federal tax obligations are entirely unaffected by state choice.
In Wyoming, New Mexico and Delaware, member and manager names are generally not part of the public formation record. Florida lists them. But privacy is not anonymity — your registered agent knows who you are, banks will perform full identity checks, and federal reporting requirements are unaffected by state choice.
Yes, through domestication, a merger, or dissolving and re-forming — but each has cost and tax consequences, and you may need a new EIN depending on the route. It is much cheaper to get this right at the start, which takes one conversation.
Still not sure? That's a ten-minute conversation.
Tell us where you live, where your customers are, and whether you'll have anyone on the ground in the U.S. That is usually enough to settle it.