Which nine states charge no income tax on LLCs?
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no state income tax on individuals or pass-through entities like LLCs.
These nine states do not tax personal income, which means LLC profits that pass through to the owner's personal return are not subject to state income tax in these jurisdictions. For LLC owners who are residents of these states, this eliminates the state income tax layer entirely.
New Hampshire is a partial exception: it taxes interest and dividend income at 3% (being phased out by 2027) but does not tax earned income, wages, or LLC business income. For LLC owners, New Hampshire functions as a no-income-tax state for business profits.
The remaining 41 states and the District of Columbia impose state income taxes ranging from 1% (in the lowest brackets of states like North Dakota) to 13.3% (California's top bracket). Several states impose flat rates: Pennsylvania (3.07%), Illinois (4.95%), Colorado (4.4%), and North Carolina (4.5%).
| State | Income Tax | Formation Fee | Annual Fee | Other Business Taxes |
|---|---|---|---|---|
| Wyoming | 0% | $100 | $60 | None |
| Alaska | 0% | $250 | $100 | None for most LLCs |
| Florida | 0% | $125 | $138.75 | None for pass-through |
| Nevada | 0% | $75 + $150 BL | $150 + $200 BL | Commerce Tax (>$4M revenue) |
| New Hampshire | 0% (business) | $100 | $100 | Business Profits Tax 7.5% |
| South Dakota | 0% | $150 | $50 | None |
| Tennessee | 0% | $300 + $50/member | $300 min | Franchise/excise tax |
| Texas | 0% | $300 | $0 | Franchise tax 0.375-0.75% |
| Washington | 0% | $200 | $60 | B&O tax 0.138-3.3% |
Key fact: Wyoming has the lowest combined formation and annual costs among all nine no-income-tax states: $100 to form + $60/year with no franchise tax, no business license fee, and no gross receipts tax. The next cheapest option is South Dakota at $150 + $50/year.
Why is Wyoming the best no-income-tax state for LLCs?
Wyoming is the best no-income-tax state for LLCs because it combines zero income tax with zero franchise tax, the lowest annual fees ($60/year), the strongest single-member LLC asset protection, and full privacy for LLC members.
Zero State Business Taxes
Wyoming charges no state income tax, no corporate tax, no franchise tax, no gross receipts tax, no business license fee, and no inventory tax. The only recurring cost is the $60 annual report fee. No other state matches this combination of zero business taxes with low administrative costs. Learn more about Wyoming's no state tax advantage.
Strongest Asset Protection
Wyoming provides charging order protection for single-member LLCs (Wyoming Statute 17-29-503). A creditor cannot seize LLC assets, force distributions, or take control of the LLC. Wyoming is one of only a few states that extends this protection to single-member LLCs. Nevada and Delaware provide weaker protections for single-member LLCs. Read about Wyoming LLC asset protection.
Privacy Protection
Wyoming does not require LLC member names in public filings. Only the registered agent and organizer names appear in Wyoming Secretary of State records. This protects business owners from public disclosure. Nevada offers similar privacy but at higher cost. Florida and Texas require more public disclosure.
Lowest Total Cost
Wyoming's first-year cost is $100 (formation) + $25-$100 (registered agent) = $125-$200 total. Annual renewal is $60 + registered agent fee. The 10-year total cost of operating a Wyoming LLC is approximately $685-$1,060, the lowest among all 50 states for the combination of features offered.
Non-Resident Friendly
Wyoming allows citizens of any country to form and own LLCs without restriction. No US address, SSN, or visa is required. Formation is 100% online. Wyoming is the most commonly chosen state for non-resident LLC formation. Learn about the full benefits of Wyoming LLCs.
Form your Wyoming LLC in the best no-income-tax state. $297 flat fee includes formation, EIN, and bank account guidance.
Start on WhatsApp — FreeHow does Texas compare to Wyoming for LLCs?
Texas charges no state income tax but imposes a franchise tax (margin tax) of 0.375-0.75% on revenue exceeding $2.47 million, a $300 formation fee, and provides weaker single-member LLC asset protection than Wyoming.
Texas is popular for LLC formation due to its large economy and no income tax status. However, the Texas franchise tax adds a cost that Wyoming does not impose. The Texas formation fee ($300) is three times Wyoming's ($100). Texas requires a no-tax-due franchise tax report annually even for LLCs below the $2.47 million threshold, adding compliance burden.
Texas provides charging order protection for multi-member LLCs but the protection for single-member LLCs is less established than in Wyoming. Texas also requires more public disclosure of LLC member information compared to Wyoming. Read the full comparison at Wyoming vs Texas LLC.
| Factor | Wyoming | Texas |
|---|---|---|
| State income tax | 0% | 0% |
| Franchise tax | $0 | 0.375-0.75% (>$2.47M revenue) |
| Formation fee | $100 | $300 |
| Annual fee | $60 | $0 (but franchise tax report required) |
| Asset protection (single-member) | Strong (statutory) | Uncertain |
| Privacy | Members not disclosed | Managers disclosed |
| Non-resident friendly | Yes, fully online | Yes, but more paperwork |
How does Nevada compare to Wyoming for LLCs?
Nevada charges no state income tax but imposes a $200 annual business license fee, a Commerce Tax on revenue exceeding $4 million, and costs 3-5x more annually than Wyoming for LLC maintenance.
Nevada markets itself aggressively as a business-friendly state, but the total cost of operating a Nevada LLC exceeds Wyoming significantly. Nevada's first-year costs total approximately $425 ($75 formation + $150 business license + $200 initial list of managers). Annual renewal costs $350+ ($150 annual list + $200 business license).
Nevada provides good asset protection and privacy, similar to Wyoming. However, the cost difference makes Wyoming the clear winner for budget-conscious LLC owners, especially non-residents. Over 10 years, a Nevada LLC costs approximately $3,275-$3,575 more than a Wyoming LLC in state fees alone.
| Factor | Wyoming | Nevada |
|---|---|---|
| State income tax | 0% | 0% |
| Formation fee | $100 | $75 + $150 BL = $225 |
| Annual fee | $60 | $150 + $200 BL = $350 |
| 10-year total (state fees only) | $640 | $3,375 |
| Commerce tax | $0 | 0.051-0.331% (>$4M revenue) |
| Asset protection | Strong (single + multi) | Strong (multi), less clear (single) |
| Privacy | Members not disclosed | Managers disclosed (members private) |
How does Florida compare to Wyoming for LLCs?
Florida charges no state income tax on pass-through entities, costs $125 to form, charges $138.75/year for the annual report, and provides weaker single-member LLC asset protection than Wyoming.
Florida is the third most popular state for LLC formation in the US due to its large population and no income tax policy. Florida's LLC formation fee ($125) is close to Wyoming's ($100), but the annual report fee ($138.75) is more than double Wyoming's ($60). Over 10 years, a Florida LLC costs $1,373.75 in state fees compared to Wyoming's $640.
Florida does not provide charging order protection for single-member LLCs under the Florida Revised LLC Act. A creditor of a single-member Florida LLC can potentially force dissolution and asset seizure. This is a critical disadvantage compared to Wyoming, where single-member LLC assets are protected by statute.
Florida also imposes a 5.5% corporate income tax on C-Corporations (not pass-through LLCs) and a 6% state sales tax. For non-residents, Wyoming offers better privacy, lower costs, and stronger protections.
| Factor | Wyoming | Florida |
|---|---|---|
| State income tax | 0% | 0% (pass-through) |
| Formation fee | $100 | $125 |
| Annual fee | $60 | $138.75 |
| 10-year total (state fees only) | $640 | $1,373.75 |
| Asset protection (single-member) | Strong (charging order exclusive) | Weak (no charging order exclusivity) |
| Privacy | Members not disclosed | Members and managers disclosed |
How do Alaska, South Dakota, Tennessee, Washington, and New Hampshire compare?
Alaska, South Dakota, Tennessee, Washington, and New Hampshire each have no personal income tax but differ significantly in business taxes, formation costs, and LLC protections compared to Wyoming.
Alaska
Alaska charges $250 for LLC formation and $100 for the biennial report (every two years). Alaska has no state income tax, no sales tax, and no franchise tax. However, the higher formation fee and the state's remote location make it less popular for LLC formation. Alaska does not have specific single-member LLC charging order protection statutes.
South Dakota
South Dakota charges $150 for LLC formation and $50 for the annual report. South Dakota has no income tax, no franchise tax, and no business taxes for most LLCs. South Dakota is the second-most cost-effective option after Wyoming, but it lacks Wyoming's established reputation for LLC formation and has a smaller body of LLC case law.
Tennessee
Tennessee eliminated its Hall Tax (interest and dividend income tax) in 2021. However, Tennessee imposes a franchise tax ($0.25 per $100 of net worth, minimum $100) and an excise tax (6.5% on net earnings) that directly affect LLCs. These business-level taxes make Tennessee one of the most expensive "no income tax" states for LLCs. Formation costs $300 plus $50 per member.
Washington
Washington charges $200 for LLC formation and $60 for the annual report. Washington imposes a Business & Occupation (B&O) tax on gross revenue (no deductions for expenses), with rates ranging from 0.138% to 3.3%. A service-based LLC earning $200,000 in Washington pays approximately $3,000 in B&O tax. This makes Washington expensive despite having no income tax.
New Hampshire
New Hampshire charges $100 for LLC formation and $100 for the annual report. While New Hampshire has no personal income tax on wages, it imposes a Business Profits Tax of 7.5% on business income exceeding $50,000 and a Business Enterprise Tax of 0.55%. For LLCs earning above $50,000, New Hampshire effectively taxes business income at 7.5%, making it among the worst "no income tax" states for LLC owners.
Bottom line: Among the nine no-income-tax states, only Wyoming and South Dakota impose truly zero business taxes on LLCs (beyond minimal annual report fees). All other states charge franchise taxes, gross receipts taxes, or business profits taxes that create a meaningful tax burden for LLC owners.
Ready to form your LLC in the best no-tax state? Get started with a free WhatsApp consultation.
Start on WhatsApp — FreeHow does state income tax affect non-resident LLC owners?
Non-resident LLC owners who form in Wyoming pay $0 in state income tax and have no state tax filing requirements, while forming in states like California or New York creates state tax obligations even for non-residents.
When a non-US resident forms an LLC, the state of formation determines whether state-level taxes and filing requirements apply. Wyoming imposes no state income tax and requires no state tax return. The only state filing is the $60 annual report.
If a non-resident forms an LLC in California, the state imposes an $800 minimum franchise tax regardless of income, plus California income tax on any California-source income. If a non-resident forms an LLC in New York, the state requires a filing fee based on New York-source gross income. These obligations create unnecessary complexity and cost.
Non-residents should also understand that forming in a no-income-tax state does not eliminate US federal tax obligations. Foreign-owned LLCs must file Form 5472 regardless of the state of formation. The state-level advantage is limited to state taxes and filing requirements. Learn more about the best state for non-resident LLCs.
| State of Formation | State Tax for Non-Residents | State Filing Required |
|---|---|---|
| Wyoming | $0 | Annual report only ($60) |
| California | $800 minimum + income tax | Franchise tax return + annual fee |
| New York | Filing fee + possible income tax | Partnership return + publication |
| Delaware | $300/year franchise tax | Franchise tax report |
| Texas | Franchise tax report | Franchise tax report (annual) |
What are nexus rules and how do they affect your LLC?
Nexus is the legal connection between your business and a state that creates tax and filing obligations in that state, and it applies regardless of where your LLC is formed.
Forming a Wyoming LLC does not create nexus in Wyoming for income tax purposes (because Wyoming has no income tax). However, if your Wyoming LLC has employees, property, or significant sales in another state, that state establishes nexus and requires tax filings.
Physical nexus occurs when a business has a physical presence in a state: an office, warehouse, employee, or inventory. Economic nexus occurs when a business exceeds a state's revenue or transaction threshold for sales in that state (commonly $100,000 in sales or 200 transactions for sales tax nexus after the 2018 South Dakota v. Wayfair Supreme Court decision).
For non-residents operating entirely outside the US, nexus in any US state is unlikely. The Wyoming LLC exists in Wyoming for legal purposes, but the business activities occur outside the US. This is the ideal scenario for non-resident LLC owners.
Types of Nexus
| Nexus Type | Trigger | Tax Impact |
|---|---|---|
| Physical nexus | Office, employee, inventory in state | Income tax + sales tax in that state |
| Economic nexus | $100K+ sales or 200+ transactions | Sales tax collection in that state |
| Domicile nexus | Owner lives in the state | State income tax on worldwide income |
| No nexus (non-residents) | No US physical or economic presence | No state tax obligations |
Important: If you are a US resident living in California, New York, or any state with income tax, that state taxes your worldwide income including Wyoming LLC profits. Forming a Wyoming LLC does not eliminate your home state's income tax. Wyoming's no-income-tax benefit applies to Wyoming residents and non-US residents who have no nexus with income tax states.
How do you choose the best no-income-tax state for your LLC?
Choose Wyoming for the lowest total cost, best asset protection, and strongest privacy. Choose your home state only if you are a US resident and need in-state banking or licensing that requires a local LLC.
Decision Criteria
- Total annual cost: Wyoming ($60) beats Nevada ($350), Florida ($138.75), Tennessee ($300+), and Texas (franchise tax report)
- Asset protection: Wyoming provides the strongest statutory protection for single-member LLCs
- Privacy: Wyoming and Nevada keep member names private; Florida and Texas disclose them
- Business taxes: Wyoming and South Dakota have zero business taxes; others have franchise/B&O/excise taxes
- Non-resident access: Wyoming accepts non-residents with no restrictions and 100% online formation
- Banking access: Mercury and Relay accept Wyoming LLCs from non-residents; bank access does not depend on formation state
- Stripe access: Stripe accepts any US LLC regardless of formation state
- Legal precedent: Wyoming has the oldest LLC statute in the US (enacted 1977) with the most established case law
State Comparison Summary
| State | Best For | Avoid If |
|---|---|---|
| Wyoming | Non-residents, privacy, asset protection, lowest cost | You need a state-specific license |
| South Dakota | Budget alternative to Wyoming | You need strong LLC case law precedent |
| Nevada | US residents wanting privacy (if budget allows) | You want lowest costs |
| Florida | Florida residents | You need single-member asset protection |
| Texas | Texas residents, large businesses | You want to avoid franchise tax reporting |
Form your Wyoming LLC in the best no-tax state. $297 flat fee includes formation, EIN, operating agreement, and bank account guidance.
Start on WhatsApp — FreeFrequently Asked Questions
Which states have no income tax for LLCs?
Nine US states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire taxes only interest and dividend income, not business income from LLCs.
Does no state income tax mean no state taxes at all?
No. States without income tax often collect revenue through other taxes. Texas charges a franchise tax of 0.375-0.75%. Nevada charges a $200 business license fee. Washington imposes a B&O tax. Wyoming has the fewest additional taxes among no-income-tax states.
Why is Wyoming the best no-income-tax state for non-resident LLCs?
Wyoming charges no income tax, no franchise tax, no gross receipts tax, and has the lowest annual cost ($60/year). Wyoming also offers the strongest asset protection for single-member LLCs, privacy protections, and a simple formation process that accepts non-resident owners without restrictions.
Does Texas charge any business tax on LLCs?
Yes. Texas charges a franchise tax of 0.375% for wholesale/retail businesses or 0.75% for other businesses on revenue exceeding $2.47 million. LLCs below this threshold pay $0 but must still file a franchise tax report. Texas also charges a $300 LLC formation fee.
Does Nevada charge any business tax on LLCs?
Nevada charges a $200 annual business license fee for all LLCs and a Commerce Tax on gross revenue exceeding $4 million. The combined first-year cost for a Nevada LLC is $225 plus $350 annual renewal, making Nevada significantly more expensive than Wyoming.
Can I avoid all state taxes by forming an LLC in a no-income-tax state?
Not necessarily. If you are a US resident living in a state with income tax, your home state taxes you on worldwide income regardless of where your LLC is formed. Non-residents benefit most because they have no US state tax obligations.
How does Florida compare to Wyoming for LLC formation?
Florida charges $125 for LLC formation and $138.75/year for the annual report. Florida does not offer the same single-member LLC asset protection as Wyoming. Wyoming charges $100 for formation and $60/year, making it $78.75/year cheaper than Florida.
Does Washington state charge any business tax on LLCs?
Yes. Washington charges a B&O tax ranging from 0.138% to 3.3% depending on business activity, applied to gross revenue with no deductions for expenses. Washington also charges $200 for LLC formation and $60/year for the annual report.