Best States for US Incorporation: Choosing the Right State for Your Business

Where you incorporate your business in the U.S. can impact your taxes, legal protection strategy, and even how investors perceive you.

Now, each state has its own tax rules, privacy protections, and business-friendly policies that can either work for (or against!) you. For example, nearly 68% of Fortune 500 companies are incorporated in Delaware, even if they don’t operate there.

But here’s the thing: choosing the best state for US incorporation isn’t just a concern for big corporations. It matters for businesses of all sizes. 

Whether you’re a small business owner, a startup founder, or running a mid-sized company, picking the right jurisdiction can save you money, protect your assets, and set you up for long-term growth.

And the impact goes beyond just legal formalities. It can affect everything from expansion opportunities to tax advantages. That’s why understanding the best states for US incorporation is crucial before making a decision.

So, which state is the best fit for your business? Let’s break it down.

Why State Selection Matters When Incorporating a Business

Here’s why state selection is a critical business decision:

1. Tax Implications

• Corporate Tax Rates: Some states, like Nevada and Wyoming, have no state corporate income tax, while others, like California, impose high corporate tax rates (currently 8.84% in CA).

• Franchise Taxes: Some states, such as Delaware, charge an annual franchise tax, while others, like Wyoming, do not have one.

• Sales Tax Considerations: If you plan to sell physical products, states with no sales tax, like Oregon and Montana, could save you money.

2. Legal and Asset Protection Benefits

• Business-Friendly Laws: Delaware, for example, has a well-established Court of Chancery that specializes in business disputes, making legal processes smoother.

• Privacy Protections: States like Wyoming and New Mexico allow anonymous LLC formations, meaning your personal information isn’t publicly linked to your business.

• Liability Protections: Some states offer stronger protections for personal assets, shielding them from business lawsuits.

3. Ease of Business Operations

• Compliance Requirements: Some states require extensive annual reporting, disclosures, and filings, while others have minimal paperwork.

• Ongoing Costs: States like California charge an $800 minimum franchise tax, even for small businesses, making them expensive compared to Wyoming, where annual fees are as low as $60.

• Foreign Qualification Fees: If you incorporate in one state but operate in another, you may need to register as a foreign entity, which adds extra paperwork and fees.

4. Investor Appeal & Growth Potential

• Preferred by Investors: Many venture capital firms and private equity investors prefer businesses incorporated in Delaware because of its established corporate laws.

• Business Expansion: If you plan to expand nationwide, incorporating in a business-friendly state like Nevada, Wyoming, or Delaware could streamline future operations.

5. Residency & Physical Location Flexibility

• No Physical Office Required: You can incorporate in a state without having to live or work there, which means you can take advantage of favorable tax and legal structures even if you operate elsewhere.

• Registered Agent Requirement: States require you to have a registered agent in the state of incorporation, so you may need to hire one if you don’t have a physical presence.

Key Factors to Consider When Choosing a State for Incorporation

Before you make a decision and choose your preferred state of incorporation, here’s what you need to consider:

Taxation & Business-Friendly Policies

Some states, like Wyoming and Nevada, have no corporate income tax, while others, like California, impose high taxes.

Additionally, states like Delaware have business-friendly laws that attract investors. Consider state tax rates, franchise taxes, and overall ease of doing business.

Filing Fees & Ongoing Compliance Costs

Incorporation costs vary widely. Delaware and Nevada have higher annual fees, while Wyoming offers low-cost maintenance ($60 annual report). Some states also require extensive annual filings, adding administrative burdens.

Privacy & Asset Protection

States like Wyoming and New Mexico allow anonymous LLC formations, keeping owners’ identities private. Others offer strong liability protection, ensuring personal assets remain separate from business debts and lawsuits.

Business Regulations & Legal Considerations

Some states have complex business regulations, requiring detailed reporting, licensing, and operational restrictions.

Delaware’s Court of Chancery provides a streamlined legal system for corporations, making it a top choice for businesses seeking stability.

Best States for Incorporation & Their Benefits

Let’s explore the best states for US incorporation and why they stand out.

Delaware | The Corporate Hub

Delaware is often considered the best state for US incorporation, especially for startups and large corporations.

Key Benefits:

✔ No sales tax or corporate income tax for out-of-state businesses

✔ Strong investor appeal—venture capitalists prefer Delaware corporations

✔ Well-established legal system that favors businesses

Florida | Growing Business Opportunities

Florida is a top incorporation state due to its booming economy and entrepreneur-friendly policies. With a high population growth rate, it’s an excellent choice for businesses looking to expand.

Key Benefits:

✔ No state income tax for individuals

✔ Large customer base with access to Latin American markets

✔ Fast-growing economy, ideal for service-based and e-commerce businesses

Wyoming | Low Taxes & Privacy

If you’re looking for low costs and maximum privacy, Wyoming is an ideal choice. It allows anonymous LLC formations, meaning owners’ personal details are not publicly disclosed.

Key Benefits:

✔ No corporate or personal income tax

✔ Minimal reporting requirements—reducing paperwork and compliance hassles

✔ Strong asset protection laws, shielding personal assets from business liabilities

Nevada | Business-Friendly Environment

Nevada is another business-friendly state with no corporate income tax and strong liability protection. It’s particularly attractive to those who want to avoid high regulatory burdens.

Key Benefits:

✔ No state income tax or franchise tax

✔ Favorable corporate laws that protect business owners from personal liability

✔ No information-sharing agreement with the IRS, offering additional privacy

Texas | No State Income Tax & Economic Growth

Texas has a strong economy and a pro-business climate, making it a top choice for incorporation. The absence of a state income tax and affordable living costs attract both businesses and employees.

Key Benefits:

✔ No personal or corporate income tax

✔ Robust infrastructure supporting logistics, tech, and manufacturing industries

✔ One of the fastest-growing economies in the U.S.

Simplify US Incorporation With doola

doola simplifies U.S. incorporation for entrepreneurs worldwide by offering an all-in-one platform that handles every step of the process. 

Here’s how doola makes U.S. incorporation easy:

1. Comprehensive Company Formation Services

Our experts assist in forming your business in any U.S. state, providing essential documents like operating agreements and articles of organization. We also offer registered agent services to ensure your business remains compliant. 

2. Employer Identification Number (EIN) Acquisition

Obtaining an EIN is crucial for tax filings and opening a U.S. bank account. doola facilitates this process, ensuring you have all necessary documentation to operate legally. 

3. U.S. Banking Setup

doola guides you in setting up a U.S. bank account, even if you’re a non-resident, making it easier to manage finances and conduct business transactions. ​

4. Compliance and Tax Support

doola offers services like sales tax setup, reseller certificates, bookkeeping, and annual tax filings to keep your business in good standing. ​

Schedule a free consultation with a doola expert today to discuss your business plans and ensure you have the legal foundation for success!

FAQs

Do I need to live in the state where I incorporate my business?

No, you can incorporate in any state regardless of where you live. Many entrepreneurs choose states like Delaware or Wyoming for their business-friendly laws.

What are the annual compliance requirements for incorporated businesses?

Annual requirements vary by state but typically include filing an annual report, maintaining a registered agent, and paying state fees or franchise taxes.

Can a foreign entrepreneur incorporate a business in the US?

Yes, non-U.S. residents can incorporate in the U.S. without needing a physical presence. However, they may need an EIN, a U.S. registered agent, and a U.S. business bank account.