In this article, we will take a look at the 5 best states to start an LLC. If you want to read our detailed analysis of limited liability companies, you can go directly to 10 Best States to Start an LLC.
5. Idaho
Business Tax Climate Score: 5.33
Cumulative 10 Year Job Growth Rate: 34.8%
According to our methodology, Idaho is among the best states to form a limited liability company. The state offers an unmatched business infrastructure and a tax-friendly environment to LLCs. It costs only $100 to form a limited liability company in Idaho. Limited liability companies in Idaho are treated as pass-through entities, therefore, the LLC itself is not liable to pay any taxes in Idaho. Instead, members pay income tax on their earnings from the LLC.
4. Tennessee
Business Tax Climate Score: 5.44
Cumulative 10 Year Job Growth Rate: 30.1%
Tennessee is among the best states to start a limited liability company. It is very easy to form a limited liability company in Tennessee and the formation costs are only $309. Limited liability companies in Tennessee are taxed as pass-through entities, meaning the entity is not liable to any federal taxes directly. Instead, LLC members are supposed to pay federal income taxes on their earnings from the limited liability company. Tennessee also offers asset protection to limited liability companies.
3. Utah
Business Tax Climate Score: 5.64
Cumulative 10 Year Job Growth Rate: 38.8%
Utah is another great option to start a limited liability company. It is comparatively easier to file an LLC and carry out paperwork in Utah, primarily due to established LLC laws at the state level. At a business level, the entity does not have to pay any federal taxes. However, LLC members must pay federal and state personal income tax along with a self-employment tax. The formation costs of a limited liability company in Utah are as low as $76.
2. Nevada
Business Tax Climate Score: 5.93
Cumulative 10 Year Job Growth Rate: 35.7%
Nevada is among the best states to start an LLC. As per the law in Nevada, the state does not imply any federal tax on income for limited liability companies. Members are supposed to pay personal income and self-employment taxes on their personal earnings from the LLC. It costs $75 to form a limited liability company in Nevada. Along with tax-friendly policies, the state enjoys a business-friendly environment as well. However, a limited liability company must pay a commerce tax if it is earning more than $4 million in gross revenue.
1. Florida
Business Tax Climate Score: 6.85
Cumulative 10 Year Job Growth Rate: 38.8%
Florida is a very tax-friendly state and is therefore one of the best states to start a limited liability company. Florida does not impose a state income tax on limited liability companies, however, you may pay a sales tax on your products. The state filing fee for a limited liability company in Florida is $125. A single-member LLC will follow the same tax laws designated for a sole proprietorship. For a multi-member LLC setup, the taxes will automatically be treated like they are for a partnership. As for an S-corp, the LLC will be passed as an entity exempting them from corporate income tax. However, LLCs must pay an annual reporting fee of $138.75 in Florida.
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