The Cheapest States to Form an LLC in the U.S.
Bizee breaks down the cheapest states to form an LLC — comparing filing fees, annual fees, and long-term costs so you can pick the right state for your business.
Bizee Editorial Staff
Editorial Team
Introduction
The cheapest states to form an LLC include Kentucky ($40 filing fee), Arkansas ($45), and Missouri ($50 with no annual fee). But the lowest upfront cost isn't always the lowest long-term cost. Annual fees, franchise taxes, and ongoing compliance requirements vary widely by state and add up over time.
What makes a state cheap for LLC formation?
The total cost of forming an LLC in any state comes down to 2 numbers: the one-time filing fee you pay when you form the LLC, and the recurring fees you pay every year (or every other year) to keep it in good standing. A state with a $50 filing fee but a $300 annual report fee will cost you more over 5 years than a state with a $100 filing fee and no annual fee.
Here's what to look at when comparing states: the Articles of Organization filing fee, the annual report or biennial report fee, any franchise tax or minimum tax, and whether the state charges fees based on revenue or assets rather than a flat rate. Some states without annual LLC fees may still require periodic filings to stay in good standing — so "no annual fee" doesn't always mean no ongoing paperwork.
Most entrepreneurs focus on the filing fee and miss the annual cost entirely. That's the mistake that makes a "cheap" state expensive.
The cheapest states to form an LLC
The states below have the lowest combined filing and annual fees in the country. Fees listed are standard rates — expedited processing typically costs more. Always check the current fee schedule with your state's Secretary of State office before filing, as fees can change.
Kentucky — $40 filing fee
Kentucky has the lowest LLC filing fee in the country at $40. The state also charges a $15 annual report fee, keeping ongoing costs low. Kentucky offers small business incentive programs that can provide financial assistance to qualifying businesses, which makes it worth a closer look beyond the filing fee alone.
Arkansas — $45 filing fee
Arkansas charges $45 to file Articles of Organization and a $150 annual franchise tax report fee. The state has close to 260,000 small businesses and a growing formation rate. It's a low-cost option if you're based in the region and want to keep things simple.
Arizona — $50 filing fee
Arizona charges $50 to form an LLC and has no annual report fee — one of the few states where you pay once and don't face a recurring state fee to stay in good standing. Arizona does require a one-time publication requirement in some counties, which adds cost, so check whether your county requires it before assuming the total is just $50.
Mississippi — $50 filing fee
Mississippi charges $50 to file and $0 for an annual report, making it one of the most affordable states for long-term LLC ownership. The state has a low corporate tax rate and a workforce supported by 37 in-state colleges and universities.
Missouri — $50 filing fee
Missouri charges $50 to form an LLC and has no annual report fee. That combination — low upfront cost and no recurring state fee — makes Missouri one of the best long-term value states on this list. The low cost of living also helps if you're running a business there.
New Mexico — $50 filing fee
New Mexico charges $50 to file and has no annual report requirement for LLCs — one of the cleanest low-cost structures in the country. The state also has a business-friendly tax policy. New Mexico is worth considering if you want minimal ongoing compliance overhead.
Colorado — $50 filing fee
Colorado charges $50 to form an LLC and $10 per year for the periodic report — one of the lowest annual fees in the country. The state has a strong economy and attracts businesses across industries, from outdoor recreation to tech.
Hawaii — $50 filing fee
Hawaii charges $50 to file Articles of Organization and $15 per year for the annual report. The state has a supportive small business environment and a growing entrepreneurial community. Keep in mind that Hawaii's general excise tax applies to most business activity, so factor that into your overall cost picture.
Michigan — $50 filing fee
Michigan charges $50 to form an LLC and $25 per year for the annual statement. It's consistently ranked among the most affordable states to live and run a business in, which matters if you're weighing total operating costs alongside formation fees.
Iowa — $50 filing fee
Iowa charges $50 to file and requires a biennial report — meaning you file every 2 years rather than annually. The biennial fee is $30. That structure keeps the average annual compliance cost lower than most states on this list.
Montana — $70 filing fee
Montana's filing fee is higher than most states on this list at $70, but its annual report fee is just $15. If you're planning to keep your LLC active for many years, the low annual cost makes Montana competitive over time. Montana also has no sales tax, which can matter depending on your business type.
Utah — $54 filing fee
Utah charges $54 to form an LLC and $18 per year for the annual renewal. The state has a flat income tax rate of 4.65% regardless of income level, a low cost of living, and a strong business environment — particularly for e-commerce and tech-adjacent businesses.
Upfront cost vs. long-term cost
The filing fee is a one-time cost. The annual fee is forever — or at least for as long as your LLC is active. That distinction matters more than most people realize when they're comparing states.
A state with a $40 filing fee and a $100 annual report costs $540 over 5 years. A state with a $100 filing fee and no annual fee costs $100 over the same period. The math isn't complicated, but it's easy to miss when you're focused on getting started.
Some states charge annual fees based on revenue or assets rather than a flat rate. If your business grows, those fees grow with it. Flat-fee states like Missouri, Mississippi, and New Mexico — which charge $0 annually — give you predictable costs no matter how the business performs. States without annual LLC fees may still require periodic filings to maintain good standing, so "no annual fee" doesn't always mean zero ongoing compliance work.
The right state for your LLC depends on where you actually do business, not just where the fees are lowest. If you're operating in California, you'll likely need to register there regardless of where you formed — and that means paying California's $800 minimum franchise tax on top of your home state's fees. Foreign qualification fees add another layer of cost that can wipe out any savings from forming in a cheaper state.
Should you form your LLC in your home state?
For most small business owners, forming an LLC in your home state is the right move — even if the filing fee is higher than Kentucky or Missouri. Here's why: if you operate in your home state, you'll need to register there anyway. Forming in a different state to save on fees and then registering as a foreign LLC in your home state means paying 2 sets of fees, 2 registered agents, and 2 annual reports.
The "form in Delaware or Wyoming" strategy makes sense for specific situations — investors who require it, businesses with no physical presence in any state, or multi-state operations with particular legal needs. For a single-owner LLC running a local service business or an online store, the home state is almost always the cheaper and simpler choice.
A tax professional can help you figure out whether forming out of state makes sense for your specific situation. The fee savings rarely justify the added complexity for most entrepreneurs starting out.
FAQ
Kentucky has the lowest LLC filing fee in the country at $40, followed by Arkansas at $45. But the cheapest state to form an LLC long-term depends on annual fees too. Missouri, Mississippi, and New Mexico all charge $50 to file and $0 in annual fees — making them the most affordable over time for businesses that stay active for several years.
The cheapest way to form an LLC is to file directly with your state's Secretary of State office and pay only the state filing fee. In states like Kentucky ($40), Missouri ($50), or New Mexico ($50), you can form an LLC for the cost of the state fee alone. You'll still need a registered agent, which you can handle yourself if you have a physical address in the state.
No. Every state charges a filing fee to form an LLC. The lowest is Kentucky at $40. Some states have no annual report fee — Arizona, Mississippi, Missouri, and New Mexico among them — but there is no state that allows you to form an LLC for free. You'll always pay at least the state's Articles of Organization filing fee.
It depends on whether you mean cheapest upfront or cheapest over time. For the lowest filing fee, that's Kentucky at $40. For the lowest total cost over 5 years, states with no annual fee — Missouri, Mississippi, and New Mexico — come out ahead. If you're operating in a specific state, forming there avoids foreign qualification fees that would otherwise cancel out any savings.
No. Several states charge no annual report fee for LLCs, including Arizona, Mississippi, Missouri, and New Mexico. Some states require periodic filings to stay in good standing even without a fee attached. Iowa requires a biennial report every 2 years instead of annually. Check your state's Secretary of State website for the current requirements — fee structures do change.
Generally, no — not for most small business owners. If you operate in your home state, you'll need to register there as a foreign LLC anyway, which means paying 2 sets of fees and maintaining 2 registered agents. The savings from a lower filing fee in another state usually disappear once you add foreign qualification costs. Forming in your home state is simpler and often cheaper in practice.
Kentucky has the lowest filing fee at $40, making it the cheapest state to form an LLC upfront. For the lowest total cost over multiple years, Missouri and New Mexico are strong options — both charge $50 to file and $0 in annual fees. The right answer depends on where you're based and how long you plan to keep the LLC active.
