New research conducted by small business advice company Venture Smarter has revealed the best and worst states to start up a Limited Liability Company (LLC). This is a business structure in the U.S. that protects its owners from personal responsibility for its debts or liabilities. Such companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.
To assess the optimal areas in the U.S., the experts indexed all 50 U.S states (plus DC), ranking each against six factors necessary for starting up an LLC, to receive a score out of 100.
Rankings are based on factors including LLC annual fees, LLC filling fees, average LLC agreement bid costs (from professional in States required to have one), advertising and publishing costs, tax climate index scores, and number of small businesses per 100,000 residents. Each factor was weighted to receive a score out of 100 and indexed into a ranking.
The best of rankings shows that Wyoming tops the rankings, receiving a score of 96.12 out of 100, the total LLC startup costs for the first year are $160 – making it the least expensive state to start up an LLC.
Wyoming’s tax climate index score is 78.33 out of 100, with an annual LLC fee of $60 and an LLC filling fee of $100. There are currently around 12,398 small businesses in Wyoming.
Entrepreneurs looking to setup an LLC in Wyoming do not need to pay LLC Agreement bid costs or advertising costs for publishing and certificate of publication.
Second in the study is Florida, scoring 80.95 out of 100. Whilst Florida’s tax climate index score is 65.59 out of 100, the state currently has around 13,370 small businesses.
Florida’s total LLC startup costs are a total of $264, with $125 of the LLC filling fee and $139 for the annual LLC fee. Entrepreneurs looking to set up an LLC in Florida also do not need to pay LLC Agreement bid costs or advertising costs for publishing and certificate of publication.
Placing third is South Dakota, achieving a score of 84.78 out of 100. South Dakota has a good tax climate index score of 75.35 with total startup costs at $200. LLC filling fees in South Dakota are $150, whilst LLC annual fees are a mere $50.
Rounding out the top 10 is; Montana, Alaska, Colorado, Utah, Vermont, Georgia and New Hampshire.
At the other end of the scale, the report finds that California is the worst state to set up an LLC. Scoring 18.46 out of 100, the total cost for the first year for an LLC in California is $1,950. California has 10,870 small businesses per 100K residents and a tax climate index score of 36.85.
The second worst state is New York, scoring 17.49 out of 100. Total LLC startup costs in New York are $1,985. Whilst the LLC Filling fee is only $200 and the LLC annual fee is $5, those wanting to startup in New York are required to pay an average $1,030 for an LLC Operating Agreement and $750 on advertising costs for publishing and certificate of publication.
Ranking third worst is Delaware, scoring 40.91 out of 100, total startup costs are around $1,210. Delaware also requires an LLC Operating Agreement certificate, costing around $820.
