Which state should I form my U.S. company in?

Where the company actually operates. Most businesses do best forming in that state. If you form in Delaware or Wyoming but operate somewhere else, you'll usually have to register as a foreign entity (foreign qualification) in the state where you operate, which means paying two states' fees and filing two states' annual reports.

Doing business in a state generally means having an office, employees or inventory there. Occasional mail-order sales into a state usually don't count. Income tax and sales tax nexus follow different rules, though, and sales volume alone can trigger them, so treat those separately.

Before picking a state, answer three questions:

• Where will the company have an office, employees, a warehouse or inventory?
• Will you raise money from investors or issue stock?
• Does the owner live outside the U.S., with no physical operations here?

Read from the top; follow the first row that fits.

Your situation	Usual choice
The company will have an office, employees or inventory in a U.S. state	Form in that state (a North Carolina business forms in North Carolina), with no out-of-state detour
No, but you plan to raise money from investors or issue stock	A Delaware C corporation is the usual choice, with a foreign qualification later in whichever state you start operating
No, and no fundraising; the owner is outside the U.S., with no physical operations here	Wyoming ($100 filing fee, online filings can take effect immediately) or Delaware are common choices

Whatever state you pick, once you start doing business in another state, register there as a foreign entity.

In 2026, LLC filing fees across these 7 states range from $70 (California) to $300 (Texas), so the upfront cost isn't where states really differ. The gap is in the recurring cost: $800 a year for a California LLC, $400 a year for a Delaware LLC, $203 for a North Carolina LLC annual report filed online, and as little as $60 in Wyoming.

A few things people miss:

• California: The $800 LLC tax applies from the first year. The first-year exemption only covered LLCs formed in 2021 through 2023 and has ended. Corporations still get a first-year exemption from the $800 minimum franchise tax, but still have to make estimated payments. Both LLCs and corporations file a Statement of Information within 90 days of forming, and missing it can cost $250.
• New York: Within 120 days of forming, an LLC must publish a notice in two newspapers for six weeks in a row and then file a Certificate of Publication ($50), or its authority to do business is suspended. Publication costs vary by county and often exceed the filing fee itself.
• Texas: There's no state annual report, but a franchise tax report or information report is due every May 15. For the 2026 report year, entities at or under $2.65 million in revenue don't file a franchise tax report, but they still file a Public Information Report (PIR) or Ownership Information Report (OIR).
• Florida: The annual report is due between January 1 and May 1. File after May 1 and there's a $400 late fee that can't be waived.

The full comparison is in the table below. For annual report due dates and what happens if you miss one, see our state annual report guide (yclcpa.com/annual).

Delaware suits C corporations that plan to raise money, issue stock and bring in investors. Wyoming suits owners abroad with no physical U.S. operations: a $100 filing fee in 2026, online filings that can take effect immediately, and LLC articles that don't list members or managers.

Delaware:

• As of August 1, 2026, the filing fee is $110 for an LLC and from $109 for a corporation (higher with more authorized shares). Plenty of third-party sites still show the old fees, so go by the state's fee schedule.
• Corporations file an annual report ($50) and pay franchise tax by March 1. The minimum is $175 under the authorized shares method or $400 under the assumed par value capital method, and a poorly chosen share structure can make the bill much higher.
• LLCs pay an annual tax by June 1. It's $400 from tax year 2026 (first due at the new amount on June 1, 2027), up from $300. LLCs don't file an annual report.
• If you're not in Delaware, you'll need a Delaware registered agent.

Wyoming:

• The annual report is due on the first day of the company's anniversary month, and can be filed up to 120 days early. The license tax is 0.0002 times the company's assets in Wyoming, with a $60 minimum.
• If it's still unfiled 60 days after the due date, the state administratively dissolves the company. This is the step owners abroad miss most often.
• Privacy: LLC articles list the company name, registered agent and addresses, not the members or managers. The annual report does list officers and directors. Some commercial registered agents let the company use the agent's address as its principal and mailing address.
• Paper filings can take up to about 15 business days. Since July 1, 2026, paid expedited service is also available: next business day for $700, same day for $1,400.

For choosing a registered agent, see our registered agent guide (yclcpa.com/ra).

No state is set up specially for e-commerce sellers. You'll generally still form where you live, work or keep inventory. Forming in Wyoming or Delaware doesn't get you out of registering, or collecting sales tax, in the states where you have inventory or employees.

Amazon and other marketplace sellers should pay close attention to where their inventory sits. Inventory in a state usually means you're doing business there, and sales tax nexus can also be triggered by sales volume alone, regardless of where the company was formed. For North Carolina registration and filing, see our NC sales tax guide (yclcpa.com/salestax).

You register as a foreign entity (foreign qualification) in the state where you actually operate, which authorizes you to do business there. Skip it and the state can collect back fees and penalties, and may bar the company from suing in its courts.

2026 state fees for foreign qualification:

For California and Texas, we confirm the current foreign registration fees on the state sites when we file.

Two examples:

• An out-of-state company doing business in Wyoming without authority faces a $5,000 penalty, plus fees, license tax, 18% interest, audit costs and attorney's fees.
• A company formed elsewhere that does business in California still has to register there and pay the $800 a year.

Foreign qualification usually requires documents from the home state, such as a Delaware certificate of good standing (short form $50 as of August 2026) or a certified copy of the certificate of incorporation. Requirements vary by state.

An LLC is flexible and low-maintenance, and fits most small businesses. A C corporation is the norm if you'll raise money from investors. An S corporation isn't a separate kind of company but a tax election, and it only works when every shareholder is a U.S. tax resident.

• LLC: Taxed as a pass-through by default. A single-member LLC owned by an individual is reported on the owner's personal return, and a multi-member LLC is taxed as a partnership. It can elect to be taxed as a corporation if that makes sense.
• C corporation: Pays tax at the company level, and shareholders pay tax again on dividends. Investors generally expect a C corporation, most often in Delaware. Foreign shareholders can own one.
• S corporation: Elected on Form 2553. A new company generally files within 75 days of formation, and an existing company by the 15th day of the third month of the tax year the election should start. An S corporation can have only one class of stock and no nonresident alien shareholders.

EINs are free from the IRS. If the responsible party has an SSN or ITIN and the principal business is in the U.S., you can apply online and get the number right away. If the principal business is outside the U.S., you can't apply online and have to apply by phone, fax or mail.

• The IRS online application is open (Eastern time) Monday through Friday from 6 a.m. to 1 a.m. the next day, Saturday from 6 a.m. to 9 p.m., and Sunday from 6 p.m. to midnight.
• Each responsible party can get only one EIN per day.
• Drop commas and periods from the company name. The online system only accepts - and &.
• You can open a bank account with the EIN right away. Some IRS e-file and e-payment systems may not recognize the number for about two weeks.
• Companies formed in the U.S. have been exempt from FinCEN beneficial ownership (BOI) reporting since March 2025. Companies formed abroad and registered to do business in a U.S. state still have to report.

Read from the top, one step at a time.

Step	What to do	Note
1. Name search	Confirm the name is available on the state's site	—
2. File formation documents	The state approves	Wyoming online filings can take effect immediately; other states per current processing times
3. Get an EIN	Free	With an SSN or ITIN, online and immediate; principal business abroad: by phone, fax or mail
4. Open a bank account	Bring the formation documents and the EIN confirmation letter	If asked, a certificate of good standing
5. Within 75 days of formation	File Form 2553 if you want S corporation status	Not available with foreign shareholders
6. First annual filings and tax returns	Annual report or tax by the state's due date; the federal return the next year	Foreign-owned single-member LLC: pro forma Form 1120 with Form 5472

Foreign owners can form an LLC or a C corporation in the U.S., but can't be S corporation shareholders. A foreign-owned single-member LLC files a pro forma Form 1120 with Form 5472 every year, even with no income, and each missed Form 5472 carries a $25,000 penalty.

• Form 5472 can't be e-filed, so it has to go in on paper, on time.
• If it's still not filed 90 days after an IRS notice, another $25,000 is added for every 30 days, with no cap.
• If the responsible party has no SSN or ITIN, or the principal business is abroad, the EIN can't be done online and goes by phone, fax or mail. If you need an ITIN, see our ITIN guide (yclcpa.com/itin).
• The state you form in doesn't change your federal filing obligations. For owners abroad with no physical U.S. operations, Wyoming and Delaware are both common. If you have a warehouse, employees or an office here, you'll still need to register in that state.
• Every company needs a registered agent in its state of formation to receive legal papers and state notices. If the agent lapses, the company can lose its good standing.

All figures are state government fees and don't include registered agent or professional fees. States change their fees, so we confirm the current year's amounts on the official sites when we file.

Start with where you'll operate, then whether you'll raise money and whether you live in the U.S.

• Situation A: You're opening a shop or office in North Carolina (or any one state). Form in that state. A North Carolina LLC is $125 in state fees (2026). Skipping the out-of-state detour saves a second registration and a second annual report.
• Situation B: You plan to raise money or issue stock. A Delaware C corporation is the usual choice. Plan the authorized shares and par value up front so the franchise tax doesn't balloon, and register as a foreign corporation wherever you start operating.
• Situation C: You live in China or another country, and the company has no physical U.S. operations. Wyoming and Delaware are both common. The EIN goes by phone, fax or mail, a single-member LLC files Form 1120 with Form 5472 every year, and you use a commercial registered agent.
• Situation D: You formed out of state but really operate here. Get a foreign qualification in your home state soon, and put both states' annual filings on the calendar.