Choosing the right state to form your LLC can save you time, money, and administrative headaches. For digital nomads, factors like state income tax, privacy protections, and low fees play a big role. However, tax obligations often depend on where you earn your income, so picking a "tax-friendly" state doesn’t always mean you’ll avoid taxes.
Here’s a quick look at five popular states for LLC formation:
- Wyoming: No state income tax, low fees, and strong privacy protections.
- Delaware: Known for its business-friendly legal system and privacy, but higher annual costs.
- Nevada: No state income tax and good privacy, but higher filing and annual fees.
- Texas: No state income tax and no annual fees, but limited privacy protections.
- Florida: No state income tax, affordable fees, and straightforward filings.
Each state has its pros and cons, so your decision should align with your business needs and budget. Below, we break down the details of each state to help you decide.
1. Wyoming
Wyoming is a top choice for setting up an LLC, thanks to its low costs, straightforward processes, and policies that cater to business owners. These features make it especially appealing for location-independent entrepreneurs looking for tax advantages and operational ease.
State Income Tax
One of Wyoming’s biggest perks is its lack of state income tax for both individuals and businesses. This means your LLC won’t owe state-level income taxes on its profits. However, keep in mind that federal taxes and any taxes in the states where you operate will still apply.
Formation and Annual Fees
Forming an LLC in Wyoming is budget-friendly. The state charges just a $100 filing fee to get started. For annual fees, you’ll pay either $60 or 0.0002 per dollar of business assets, whichever is higher. This is far more affordable compared to states like Delaware or Nevada. Plus, registered agent services in Wyoming can cost as little as $25 per year, keeping your overall maintenance costs impressively low.
Residency Requirements
Another advantage is Wyoming’s flexibility on ownership. The state doesn’t require LLC owners or managers to be residents. This means you can form and run your Wyoming LLC from anywhere in the world, making it a great option for digital nomads.
Administrative Simplicity
Wyoming also keeps things simple on the administrative side. The state offers an easy-to-use online filing system through the Wyoming Secretary of State‘s office. LLCs are typically processed within days, and the clear guidelines help minimize compliance headaches.
With no state income tax, affordable fees, and hassle-free administration, Wyoming allows entrepreneurs to prioritize growing their businesses instead of dealing with red tape.
2. Delaware
Delaware is a popular choice for forming LLCs, offering a mix of strong legal protections and a reputation for business credibility. For digital nomads, it provides a well-rounded option that balances privacy, legal advantages, and administrative ease.
State Income Tax
In Delaware, LLCs don’t pay state income tax directly. Instead, profits pass through to the members, who report the income on their personal tax returns. If you’re a nomad and don’t reside in Delaware, you won’t owe state income tax on your LLC’s earnings, which can simplify your tax obligations.
Privacy Protections
One of Delaware’s standout features is its focus on privacy. The state doesn’t require LLC formation documents to include the names of members, ensuring that your ownership remains confidential. Only the registered agent’s information is part of the public record. For those who value anonymity, especially digital nomads, this level of privacy is a significant advantage.
Formation and Annual Fees
Setting up a Delaware LLC costs $90, with an annual franchise tax of $300. Additionally, you’ll need a registered agent, which typically costs between $100 and $200 per year. While these fees are higher than in states like Wyoming, Delaware’s legal framework and credibility often justify the extra expense for many entrepreneurs.
Residency Requirements
Delaware imposes no residency requirements for LLC members or managers. This means you can form and run your Delaware LLC from anywhere in the world, making it an excellent choice for location-independent professionals.
Administrative Simplicity
Delaware’s system is designed with efficiency in mind. The Delaware Division of Corporations allows online filings, with approvals typically processed within 24–48 hours. If you’re in a rush, same-day processing is available for an additional fee. The state also has a well-established legal framework, including the renowned Court of Chancery, which specializes in business law and provides a high level of legal certainty. This streamlined process is especially appealing for entrepreneurs managing operations remotely.
With its strong privacy protections, business-friendly policies, and a legal system tailored for entrepreneurs, Delaware remains a top option for digital nomads seeking credibility and asset protection, even if it comes at a slightly higher cost.
3. Nevada
Nevada stands out as a top choice for digital nomads, offering no state income tax, strong privacy measures, and business-friendly policies that make it easy to manage a global operation.
State Income Tax
Nevada doesn’t impose any state income tax on individuals or businesses. For LLC owners, this means the pass-through income from your business is completely free of state taxation, potentially saving you a significant amount every year.
Privacy Protections
One of Nevada’s key advantages is its focus on privacy. When forming an LLC, you aren’t required to include member names in the formation documents. Additionally, the state allows the use of nominee services, where a third party can be listed as the manager in public records while you maintain full control of the business. For digital nomads who value discretion and need to operate seamlessly while traveling, this is a major perk.
Formation and Annual Fees
Starting an LLC in Nevada costs approximately $425, which includes the first-year business license. After that, annual fees run around $350, covering license renewals and required filings. While these fees may be higher than in some other states, many digital nomads find the tax savings and privacy benefits outweigh the initial and ongoing costs.
Residency Requirements
Nevada doesn’t have residency requirements for LLC members, managers, or even registered agents. This flexibility allows you to establish and manage your Nevada LLC from anywhere in the world, making it a practical choice for those constantly on the move.
Administrative Simplicity
The Nevada Secretary of State offers a streamlined online filing system, with standard processing times of 1-3 business days. If you’re in a rush, expedited processing is available for an extra fee. While you’ll need to maintain a registered agent and file annual reports, the state’s straightforward processes make compliance relatively hassle-free.
With its tax advantages and privacy-focused policies, Nevada is an attractive option for digital nomads. Up next, we’ll take a closer look at Texas to see how it stacks up in terms of flexibility and affordability for location-independent entrepreneurs.
4. Texas
Texas stands out as a top choice for digital nomads, thanks to its tax perks and business-friendly environment. Like Wyoming, Delaware, and Nevada, Texas offers a unique mix of advantages, including no state income tax for individuals and businesses.
State Income Tax
One of the biggest draws? Pass-through income from your LLC isn’t taxed at the state level. This means LLC owners can keep more of their earnings – a huge plus for those constantly on the move.
Privacy Protections
When it comes to privacy, Texas has some limitations. The state requires certain information to be disclosed on the Certificate of Formation and the annual Public Information Report. This includes:
- The LLC’s name
- The registered agent’s details
- The names and addresses of managers or members
Because of this, Texas doesn’t allow the creation of fully anonymous LLCs. However, there are ways to improve privacy:
- Use a third-party registered agent or a nominee organizer to keep your personal details off public records.
- Opt for a manager-managed LLC structure so only the managers’ information is public.
For an extra layer of privacy, you could set up an LLC-owned LLC. This involves forming an anonymous LLC in a state like Wyoming or Delaware and having it own your Texas LLC. Be cautious, though – this setup is legally complex and should only be pursued with guidance from a qualified business attorney.
Formation and Annual Fees
Texas keeps costs reasonable for small business owners. The state filing fee is typically around $300, and while services like a registered agent may add to expenses, Texas doesn’t impose heavy annual franchise taxes on most small LLCs. To stay compliant, you’ll need to file periodic reports.
Residency Requirements
Here’s some good news: Texas doesn’t require LLC members or managers to be state residents. This flexibility makes it a fantastic option for digital nomads and international entrepreneurs alike. You can manage your LLC from anywhere, as long as you maintain a registered agent in Texas.
Administrative Simplicity
The Texas Secretary of State offers an efficient online filing system that’s easy to navigate. Standard processing times are typically 5–7 business days, with expedited options available if you’re in a rush. Compliance is straightforward, requiring only periodic reports to maintain good standing.
Texas strikes a balance between tax benefits and ease of doing business. While achieving full privacy may take extra effort, the state’s overall accessibility makes it a solid choice for entrepreneurs on the go. Next, we’ll dive into what Florida has to offer for digital nomads.
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5. Florida
Florida draws digital nomads with its lack of state income tax and a business-friendly setup, making it a prime choice for professionals who work from anywhere.
State Income Tax
One of Florida’s standout perks is its zero state income tax. For LLC owners, this means no state taxes on pass-through income, allowing them to keep more of what they earn. For digital nomads juggling income from multiple sources, this can lead to significant savings compared to states like California or New York, where taxes can eat into profits.
Privacy Protections
When forming an LLC in Florida, the state requires you to list the LLC’s name, a registered agent, and the organizer – but not the names of members or managers. To further safeguard your privacy, you can hire a registered agent service, ensuring your personal address stays off public records.
Formation and Annual Fees
Starting an LLC in Florida is relatively affordable. The state filing fee is $125, and the annual report comes with a $138.75 fee. This straightforward and predictable fee structure keeps ongoing compliance costs manageable for entrepreneurs.
Residency Requirements
Florida does not require LLC members, managers, or organizers to be state residents. As long as you maintain a registered agent with a Florida address, you can run your business from anywhere.
Administrative Simplicity
Florida’s Sunbiz online system makes filings simple and efficient, typically processing them within 5–10 business days. Expedited options are also available. Filing the annual report is quick and hassle-free, requiring only basic information and a few minutes of your time online.
With its tax advantages, affordable fees, and easy administration, Florida stands out as a top choice for nomadic entrepreneurs. These benefits make it worth comparing to other states that cater to location-independent professionals.
State Comparison: Pros and Cons
When deciding on the best state for forming an LLC, digital nomads need to weigh several factors. Below is a comparison of key aspects across popular states, followed by an analysis to help you make an informed choice.
| State | State Income Tax | Privacy Protections | Formation & Annual Fees | Residency Requirements | Administrative Simplicity |
|---|---|---|---|---|---|
| Wyoming | No state income tax | Strong privacy; member identities aren’t disclosed | About $100 filing + ~$60 annual fee | None required | Simple online filing with minimal reporting |
| Delaware | Member tax implications may apply | Moderate privacy; requires a registered agent | Around $90 filing fee + ~$300 annual franchise tax | None required | Renowned business court system, but more complex reporting |
| Nevada | No state income tax | Strong privacy; ownership data remains confidential | About $425 filing + ~$350 annual fee | None required | Straightforward process with annual list requirement |
| Texas | No state income tax | Basic privacy protections | Approx. $300 filing fee, no annual fee | None required | Simple online system, no annual reports |
| Florida | No state income tax | Good privacy; member names aren’t publicly disclosed | About $125 filing fee + ~$138.75 annual fee | None required | Efficient Sunbiz system with fast processing (5–10 business days) |
Key Insights:
- Wyoming stands out as the most affordable option, with the lowest combined formation and annual fees (around $160 for the first year). Its privacy protections are among the strongest, offering excellent confidentiality and asset protection.
- Delaware is the priciest choice due to its $300 annual franchise tax and potential member tax implications. However, it boasts an advanced legal framework and a well-regarded business court system. While these advantages attract larger companies, the administrative complexity may be overwhelming for first-time business owners.
- Nevada offers robust privacy features, including confidentiality of ownership data, but its higher annual fees make it less cost-effective than Wyoming. Privacy protections are strong but not as extensive as Wyoming’s.
- Texas has a higher initial filing fee but no recurring annual fees, which can be appealing for those looking to minimize long-term costs. However, the upfront expense may deter those on a tighter budget.
- Florida strikes a balance with moderate fees and an efficient filing system. Its Sunbiz platform ensures quick and seamless processing, making it ideal for entrepreneurs who need to set up their business quickly.
Administrative Considerations:
Wyoming and Texas require minimal ongoing compliance, making them attractive for simplicity. Delaware, on the other hand, involves more detailed reporting, which could be a hassle for smaller businesses. Florida offers an efficient online filing system, while Nevada requires an annual list, adding a minor administrative step.
Each state has its strengths, so the best choice depends on your priorities – whether it’s cost, privacy, or ease of management.
Conclusion
Choosing the right state to form your LLC as a digital nomad involves weighing your priorities against your long-term business goals. For instance, Wyoming’s five-year average cost sits at just $340, while Delaware’s comes in significantly higher at $1,290 – a price that reflects Delaware’s advanced legal framework and business-friendly court system.
For many location-independent entrepreneurs – especially those running smaller, steady businesses – Wyoming is often the go-to option. In 2024 alone, Wyoming saw over 28,000 new business filings, with 87% being LLCs. Its affordability and simplicity make it particularly attractive for digital nomads.
On the other hand, Delaware is a strong choice for those planning to scale their businesses or attract investors. Its well-established legal framework and specialized business courts justify the higher fees for entrepreneurs with growth on their minds.
Texas, meanwhile, offers a balanced option for digital nomads serving international clients. With an initial filing fee of $300 and no annual fees, Texas is cost-effective. Plus, over 90% of Texas LLCs avoid franchise taxes because they earn less than $2.47 million annually. Each state has its pros and cons, so it’s essential to assess them based on your unique business needs.
To get started, align your state choice with your business goals. Whether you’re prioritizing cost savings, privacy, or growth potential, make sure to engage a registered agent to handle mail forwarding and compliance tracking. Set up remote-friendly banking solutions with platforms like Relay, Mercury, or Wise, and manage corporate records and taxes using cloud-based tools.
Another critical step is building a network of experts early on. Work with tax advisors experienced in international operations and attorneys who understand cross-border compliance. These professionals can help you navigate the complexities of running a location-independent business.
The fact that LLC formations among U.S. freelancers have grown by 36% highlights a clear trend: more entrepreneurs are choosing business structures that offer both flexibility and protection. With most states now offering online filing, there’s no better time to set up your nomad-friendly LLC and streamline your business operations.
FAQs
What should digital nomads consider when choosing a U.S. state to form an LLC?
When setting up an LLC as a digital nomad, there are a few important factors to keep in mind:
- Costs: States like Wyoming and Delaware are known for having lower formation and annual maintenance fees, which can help keep your expenses manageable.
- Privacy Protections: Some states let you keep personal details – like the names of members or managers – out of public records, offering an added layer of confidentiality.
- Tax Benefits: States such as Wyoming, Nevada, and Texas stand out because they don’t impose state income taxes, making them appealing options for entrepreneurs.
- Ease of Setup and Maintenance: Opt for states with simple registration processes and minimal ongoing compliance requirements to save yourself time and hassle.
Weighing these factors can help you pick a state that fits your business needs and makes managing your LLC simpler while you’re on the go.
What privacy protections do Wyoming, Delaware, and Nevada offer for LLC owners?
Wyoming is notable for its robust privacy measures, as LLC owners aren’t required to reveal the names of members or managers in public filings. This ensures a high degree of anonymity. On the other hand, Delaware requires LLCs to provide member identities to the state, though this information remains confidential and isn’t shared publicly. Nevada strikes a middle ground by allowing owners to keep their information private in public records but still mandates disclosure to the state for internal use.
For digital nomads and entrepreneurs who place a premium on privacy, Wyoming often emerges as the top choice thanks to its minimal disclosure rules.
If I register an LLC in a state with no income tax, will I still owe taxes in other states where I do business?
Forming an LLC in a state without income tax might seem appealing, but it doesn’t mean you’re off the hook for taxes elsewhere. Taxes are typically owed in any state where your business earns income or has significant operations. So, even if your LLC is registered in a tax-friendly state, you might still need to file and pay taxes in other states where you conduct business.
Keep in mind, your tax responsibilities are tied to where your business operates, not just where it’s registered. To navigate these requirements effectively, it’s a good idea to work with a tax professional who can guide you through the specific obligations for each state.
