Business Startup Costs: 15 Cheapest States to Start a Business

Many Americans dream of starting a business and maybe you might be one of them. Regardless of the reason behind your motivation to jumpstart your dream, good for you for taking the first steps!

But you will soon realize that starting a business is daunting and it takes more than just having a low-cost idea or product. To launch a successful Limited Liability Company (LLC), generally the quickest way to form a legal entity, you’ll need a fair understanding of your state’s business ecosystem and investment costs. The incorporation fee for forming an LLC can greatly vary by state and have an impact on your business startup costs.

So, let’s take the first step and learn about the best and cheapest states where you can form your business and what you will need to get started.

What Is the Cheapest State to Start a Business? 

Have a business idea that requires less than $500 to get going? Excellent! It’s totally understandable if you are thinking, “Which state in the U.S. is best for startups?” 

If we just look at costs, Kentucky has the lowest, one-time registration fee of $45. The LLC renewal fee, which is an ongoing cost associated with starting a business, is an affordable $15.

But that isn’t the complete picture. Unfortunately, not all states are created equal…at least not when it comes to business formation rules, tax environment and fees. For aspiring entrepreneurs, these can impact the realities of starting a business more than you can imagine. 

There are two things to pay attention to while looking for the cheapest state to start a business:

• Incorporation/formation fees
• Renewal/maintenance fees (including Annual Report filing)

While some states have low incorporation fees, the renewal fees can be high — a case in point is California. Others might have a slightly higher filing fee and no renewal fee. 

15 Cheapest States to Form an LLC

The most expensive state to form a business in is Massachusetts, with a filing fee of $520 and an annual renewal fee of another $500. But don’t worry. Not all states are created equal…at least not when it comes to business formation and renewal fees. Here’s a list of the cheapest states to start a business and some reasons why they may be an ideal place for a business formation.

Source

LLC Formation Checklist

If you are planning on starting a business in one of the 15 states listed above, then you are off to a great start for forming a low-cost LLC. Granted, the renewal fee for California and Delaware are disproportionally higher when compared to the other 13 states.

Other items and fillings that will require your attention as you lay the foundation of starting your own business will include:

• Naming your business. Make sure that the name you have in mind is not already taken. Conduct a quick check through your Secretary of State website or use Incfile’s Business Name Search Tool. Make sure the name of your business is catchy and, above all, available!
• Open up a business bank account. This should be dedicated to your business where you can make and accept payments. Having a separate bank account for your business will also be a big help when it comes to tax time.
• Get an EIN — Employer Identification Number. You’ll need it for your business, especially when it comes to filing your taxes.
• Name a Registered Agent. Your Registered Agent will receive all of your important documents and make sure that you do not run afoul of any filings and miss important dates. Your agent will also receive any legal summons or actions, sparing you from dealing with any hassle, such as the delivery of a lawsuit in front of clients or customers.
• Consider setting up a virtual address service. This will help you run your business from any location and will provide privacy for your own home address.
• File your Articles of Incorporation with your state. This will officially create your legal business.

Which State in the U.S. Is Best for Startups?

In the perfect scenario, your startup can grow anywhere you want it to. However, the state you opt for your LLC can have a significant impact on your accessibility to resources, ease of doing business, success rate and startup costs.

Now that we’ve helped you identify the cheapest and best states to start your business, it’s time to take the next step by working with a professional to help navigate you through the business formation costs and filing process. Incfile has helped over 1,000,000 small business owners form an LLC for $0+ state formation fees.