Can I register an LLC in a state different from where I live or do business?
Most new business owners assume that they must register their business in either:
- The state where they live.
- The state where their business operates.
Every business and business owner has unique circumstances that will affect the decision about where to form their business entity. Many, or most, business owners do business in the same state where they live, but this is not always true. Some people may live on one side of a state line and operate a business on the other side, such as a person who lives in Kansas and runs a business in the Kansas City, Missouri area or someone who lives in Kentucky and has a startup in Cincinnati, Ohio.
Registering your business in the state where you live or do business may offer certain benefits, such as the convenience of being registered and doing business in the same jurisdiction. In addition, your state might provide incentives for new businesses, such as corporate income tax breaks. You may also find that your state has a welcoming business climate.
Keep in mind that you will have to register in any state where you do business. While you will form a business entity in one state, you must register as a foreign entity in every other state where your business operates. Each state charges fees, and many require annual filings. This adds to your expenses and paperwork.
If you plan on starting a small business with a local clientele, it might not be worth it to register outside of the state where you operate. However, if you plan on doing business over a larger area, you might consider whether registering in another state offers more benefits than drawbacks.
What can I consider before deciding where to start my business?
Getting a new business up and running is difficult no matter where you live or work. However, some states make registering and starting an LLC or corporation even harder. The following factors can help you decide which state might be best for your business.
Business taxes
Your personal income taxes may affect business taxes in some states but not in others. Consider the following questions when evaluating the state where you live or do business:
- Does the state have a favorable tax rate for certain types of businesses?
- Does it offer tax breaks or other incentives for certain types of businesses or activities?
- What is the individual tax rate?
- What is the corporate tax rate?
- What is the sales tax rate?
- What is the property tax rate if the business owns or will own real estate?
Some states, such as Nevada and Wyoming, have no state income tax. This might seem like a great benefit for businesses, but it is important to look closer. States with no income tax might generate revenue in other ways, like property tax, which can offset any savings a business might get from not paying state income tax.
States with state income tax typically charge tax to any businesses that operate business locations within their borders. Choosing to register your business in a state with no state income tax might not prevent you from owing income tax in another state if you do business there.
Business regulations
Regulations are an important part of a state’s overall business environment. County or city governments may impose additional regulations. Depending on the type of business you are starting, you might need to consider:
- Zoning laws.
- Licensing requirements.
- Permitting requirements.
- Hiring standards and other employment laws.
- Health regulations.
- Environmental regulations.
- Workplace safety regulations.
- Minimum wage and overtime laws.
- Laws or regulations that favor “domestic” businesses over out-of-state ones.
Employment laws, for example, can vary widely from one state to another. While the federal minimum wage is $7.25 per hour, many states have enacted higher minimum wages. As of 2024, the District of Columbia has the highest minimum wage in the country at $17.50 per hour.
Business costs
The cost of forming and maintaining a business entity varies from state to state. Every state charges a filing fee to register an LLC or corporation. In 2024, the lowest filing fee is $35 in Montana, while the highest is $500 in Massachusetts.
Some states charge ongoing annual fees to maintain business registration. They may also require an annual report. Arizona does not charge an annual fee or require an annual report, while California charges an annual fee of at least $800.
State and local governments may charge additional fees for businesses to obtain and maintain licenses and permits. These may be based on the location of the business or its business activities.
A state’s cost of living is also a critically important factor to consider, as it will affect labor costs, the cost of goods and services, and other business expenses.
Convenience
It might be convenient to register your business in your state. You might be familiar with your state’s business laws and regulations, allowing you to save time by not having to learn the laws of a new state. It can also be helpful to be located closer to state and local regulators.
State-specific factors
Some states can be more welcoming to new businesses than others. A state’s business climate might include incentives intended to attract new businesses to the state or particular areas within it. These incentives might involve tax breaks, grants, or other forms of assistance.
New business owners might also consider the business survival rate in the state or states they are thinking about. Some states provide more support to help businesses succeed than others. The Small Business Administration and the Bureau of Labor Statistics track business survival rates across the country.
What are the top 5 states to start a business in 2025?
In determining our estimation of the five best states to start a business, we looked at various metrics, including the business survival rate, corporate tax rate, cost of registering a business, and cost of living in each state. The following are our top 5 states for new businesses:
- California.
- West Virginia.
- Indiana.
- Texas.
- South Dakota.
California
California may not be the cheapest state to live in or start a business, but it boasts one of the highest business survival rates in the country. After one year, nearly 87% of new businesses remain in operation, and more than 55% are still around after five years.
The state is also home to America’s largest economy, which means it has a vast talent pool. What it may lack in cost savings, it more than makes up for with talent and innovation.
West Virginia
West Virginia boasts strong 1-year and 5-year business survival rates, along with a moderate corporate tax rate. The state’s fees for starting and operating a business are relatively low, and its cost of living is well below the national average.
Indiana
Indiana has a high business survival rate compared to much of the country. More than 80% of startups make it past their first year. The state’s business tax rate is relatively low, with a flat personal income tax rate of 3.23%. Living costs are reasonable, and starting a business is fairly inexpensive.
Texas
Texas often tops lists of the best states to start a business. Many cities offer resources for new businesses, which contributes to the state’s high survival rate. As the second most populous state in the country, Texas also offers a substantial talent pool.
The cost of living is below average statewide but can be relatively high in many cities. However, the lack of a state income tax for individuals or businesses can offset some of this extra expense.
South Dakota
South Dakota has a reputation for being a business-friendly state. It has no state individual or corporate income tax and a low cost of living. The cost of starting a business is relatively low, and more than half of new businesses in South Dakota remain in business after five years.
How can I get help filing my formation paperwork?
Rocket Lawyer business service specialists have extensive experience helping all kinds of business owners—from new business owners just getting started, to seasoned entrepreneurs ready to register their businesses and get to work. Whether you’re choosing a business structure, deciding where to register your business, or filing the necessary paperwork, Rocket Lawyer is here to help.
Once you have formed your business entity—whether it is a corporation, LLC, partnership, or nonprofit—Rocket Lawyer will still be there to assist. You may need assistance with staying in compliance with state laws, protecting business names, brands, and logos with trademarks, and keeping up with business and payroll tax obligations. Rocket Lawyer also offers a wide range of customizable business documents and contracts to help your business thrive.
If you have questions about where to start your new business, contact a Rocket Legal Pro for affordable, confidential legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
