The Cheapest States to Form an LLC (2026 Rankings)

Many states advertise a low $50 filing fee to trick you into incorporating, only to hit you with a $300 hidden fee every year. To find the true cheapest states, you must look at the 5-year total cost of ownership.

Updated May 2026 • 9 min read

Quick Answer

The absolute cheapest state to form and maintain an LLC over a 5-year period is New Mexico ($50 total), followed by Colorado ($90 total), and Arizona ($50 total, no annual fee). However, unless you run an online business or live abroad, you must form your LLC in the state where you actually live and work, regardless of cost.

Key Points for 2026

Initial vs Annual: The initial formation fee doesn't matter as much as the Annual Report fee.
The Zero Annual Fee States: Arizona, Idaho, New Mexico, Ohio, South Carolina, and Texas have $0 annual LLC fees.
The Most Expensive States: California ($800/yr minimum), Massachusetts ($500/yr), and Nevada ($350/yr).

The Top 5 Cheapest States (5-Year Cost)

To give you an accurate picture, we calculated the total state fees to start an LLC and keep it running for 5 years.

1. New Mexico: $50 Total

Initial Fee: $50
Annual Fee: $0
Bonus: Excellent privacy laws.

2. Arizona: $50 Total

Initial Fee: $50
Annual Fee: $0
Note: Arizona requires you to publish your formation in a newspaper, which adds a local cost depending on your county, knocking it down to #2.

3. Colorado: $90 Total

Initial Fee: $50
Annual Fee: $10
Note: Colorado is incredibly cheap and easy to file online.

4. Ohio: $99 Total

Initial Fee: $99
Annual Fee: $0

5. Missouri: $50 Total

Initial Fee: $50
Annual Fee: $0

The Foreign Qualification Trap

If you live in Massachusetts (which charges $500 a year for an LLC) and try to save money by forming a $50 New Mexico LLC, you are breaking the law. Because you are managing the business from Massachusetts, you must register the New Mexico LLC in Massachusetts as a foreign entity. You will end up paying the New Mexico fees and the $500 Massachusetts fees.

What to Do Next

Accept Reality: If you operate a local, physical business, you must form the LLC in your home state.
Digital Nomads: If you are a digital nomad or non-US resident, form your LLC in New Mexico or Wyoming for the lowest long-term costs.

LLC Cost FAQs

Can I just pick the cheapest state and form my LLC there?

Only if you run a 100% online business and do not live in the US (or are a nomad). If you live in a specific state and operate your business from there, you must form the LLC in your home state, regardless of the cost.

What is the absolute cheapest state?

New Mexico is the absolute cheapest state. It costs $50 to form, and $0 a year to maintain, for a total 5-year cost of just $50 (plus registered agent fees).

Why shouldn't a Californian use a cheap state like New Mexico?

Because California law requires any resident managing an out-of-state LLC from within California to register it as a 'foreign entity.' You will end up paying the New Mexico fees PLUS the $800 minimum California franchise tax.

Is forming an LLC a one-time fee?

No. Almost all states require an 'Annual Report' fee to keep the LLC active. You must factor in these ongoing maintenance costs, not just the initial formation fee.