If you’ve been interested in starting your own company in the form of an LLC (Limited Liability Company), you’ve most likely thought about starting it in your home state.
What if I told you that some states offer LLCs more financial advantages than others. Read on to discover the best states to form an LLC to weigh your options before filing in your home state.
What Factors Should I Be Looking For?
There are some deciding factors that you need to look for when deciding what’s the best state to create an LLC. You need to look at the rate percentages of corporate tax, unemployment insurance tax, property tax, sales tax and individual income tax. Let’s take a look at how these are deciding factors.
Corporate sales tax – This is a federally imposed tax levied on a company’s profit. A company’s operating earnings are calculated by subtracting the companies expenses, depreciation from revenue, and cost of goods sold. This percentage can be low, from 0% to a high 9.4%
Unemployment tax rate – An employer has to pay a portion of the state unemployment insurance tax rate. This rate can be from 0.96% to 7.2% depending on the year
Property tax – This is a tax that you pay on the assessed value that your business owns.
Sales tax – A company that sells a product or services in their state must impose a state sales tax. this can range from 0% to 8.5%
Individual income tax – This tax rate is the rate an individual pays when they file their income taxes
Here are The Best States to Form an LLC
- Oregon
• Sales tax – 0 percent
• Individual income tax – 5 percent to 9 percent
• Unemployment tax – 4 percent
• corporate tax – 6.6 percent - Utah
• Sales tax – 4.7 percent
• Individual income tax – 5 percent
• Unemployment tax – 3 percent
• corporate tax – 5 percent - Montana
• Sales tax – 0 percent
• Individual income tax – 1 percent to 7 percent
• Unemployment tax – 3.8 percent
• corporate tax – 6.75 - South Dakota
• Sales tax – 4.5 percent
• Individual income tax – 0 percent
• Unemployment tax – 3.2 percent
• corporate tax – 0 percent - Florida
• Sales tax – 6 percent
• Individual income tax – 0 percent
• Unemployment tax – 3.8 percent
• corporate tax – 5.5 percent - Alaska
• Sales tax – 0 percent
• Individual income tax – 0 percent
• Unemployment tax – 7.3 percent
• corporate tax – 0 percent - Wyoming
• Sales tax – 4 percent
• Individual income tax – 0 percent
• Unemployment tax – 4 percent
• corporate tax – 0
• Top ranked, for best state to create an LLC
So Which One is The Best?
On paper, Wyoming takes the cake for one of the best states to setup an LLC. With its low unemployment rate, little sales tax percentage mixed with no rates to pay on Individual and corporate tax makes this place hard to beat.
But, in order for this to work for you, you also have to consider if packing up shop is worth it for you. If you’re from the midwest, it might not be a big change for you. But if you’re from parts of the east coast or the west coast, it may make things difficult for you to adjust and move your entire business if you’re not just starting up.
Our suggestion, if Wyoming is close to you, that’s the best place to go, but if not, choosing any in this top 7 are the best states to form an LLC to get your start-up rolling in the right direction. Make sure check back with us for more great informative business articles.
