Freelancers — designers, developers, writers, consultants, photographers, coaches — are the most likely to fall for the "form in Wyoming to save money" myth. It's understandable: Wyoming has no income tax, low fees, and privacy-friendly LLC laws. But unless you actually live and operate in Wyoming, you can't take advantage of any of that. Your home state taxes your income based on where you live, not where your LLC was formed.
Why your home state is almost always the right answer
When you form a Wyoming LLC but live in California, you don't escape California. Here's why: California determines whether your LLC must register there based on where you conduct business — and working from your California home counts. California will require you to register your Wyoming LLC as a foreign LLC in California, pay the $800/year minimum franchise tax, and file a California tax return. You also still pay Wyoming's $60/year annual report and RA fees. Total: you pay both states, not just Wyoming.
State-by-state comparison for freelancers
| State | Filing fee | Annual report | Notable tax | |
|---|---|---|---|---|
| Wyoming WY | $100 | $60 annual report or $0.0002 per dollar of WY assets, whichever is greater | No income tax of any kind. | Guide → |
| New Mexico NM | $50 | $0 | No annual report at all is the standout feature. | Guide → |
| Ohio OH | $99 | $0 | No annual report, no franchise tax, and the CAT now only kicks in above $3M of OH gross receipts — a major small-business win in 2024. | Guide → |
| Missouri MO | $50 | $0 | No annual report and no franchise tax — once your LLC is formed, ongoing state-level cost is essentially zero (you still owe income tax on profits). | Guide → |
| Montana MT | $35 | $20 annual report | No state sales tax (one of only 5 states) and a $35 filing fee — among the cheapest in the country to start. | Guide → |
| Colorado CO | $50 | $25 periodic report | No franchise tax, a flat 4. | Guide → |
| Florida FL | $125 | $138.75 annual report | No state income tax is the headline. | Guide → |
| Texas TX | $300 | Public Information Report + Franchise Tax Report annually | No personal income tax. | Guide → |
When Wyoming actually makes sense for a freelancer
Wyoming is the right choice when: you're a digital nomad with no fixed home state; you want the strongest possible charging-order asset protection and are willing to accept Wyoming as your legal domicile; or you're building a holding company structure where the Wyoming LLC owns intellectual property or other assets, and you have an accountant who's set up your tax structure to make this legitimate.
- Digital nomad (no fixed home state) → Wyoming is the clearest choice: lowest ongoing cost, best asset protection, most privacy
- Freelancer in a no-income-tax state (TX, FL, NV, WA, WY, SD) → form in your home state, enjoy no state income tax there
- Freelancer in a high-tax state (CA, NY, NJ, IL) → you still owe state income tax where you live; forming in WY doesn't change that
- Privacy-focused freelancer → Wyoming or New Mexico if keeping your name off public records is worth the extra state fees
New Mexico: the cheapest anonymous option
New Mexico is frequently overlooked. It has the lowest filing fee of the privacy-friendly states ($50) and no annual report requirement — just a registered agent fee (~$50–$150/year). Like Wyoming, member names aren't on the public Articles. Unlike Wyoming, it lacks Wyoming's strong single-member LLC charging-order case law.
For a freelancer who wants anonymity and minimal ongoing cost — and who doesn't have significant assets to protect — New Mexico is often cheaper than Wyoming ($50 filing + $50–$150/year RA vs. Wyoming's $100 filing + $60/year annual report + $50–$150/year RA). Same caveat applies: if you live in another state, you're still registering there as a foreign LLC.
The cheapest home-state options
If you live in one of these states, you're already in a low-cost LLC environment:
- Missouri: $50 filing fee, $0 annual report (just a registered agent). Total year-1 cost: ~$100–$200 with RA.
- Ohio: $99 filing fee, $0 annual report. Total year-1 cost: ~$150–$250 with RA.
- Montana: $35 filing fee, $20/year annual report. Cheapest state filing fee in the U.S.
- Colorado: $50 filing fee, $10/year periodic report. Fast portal, easy process.
- Mississippi: $50 filing fee, $0 annual report.
Taxes for freelancer LLCs: the part that actually matters
Your LLC's state of formation has almost no effect on your income taxes as a freelancer. Why? A single-member LLC is a disregarded entity by default — its income flows to your personal tax return. You pay income tax where you live, not where your LLC was formed. The only way state of formation affects your taxes is if your LLC has employees or operations in multiple states — which most freelancers don't.
The tax move that actually matters for freelancers: the S-corp election. Once your LLC nets roughly $50,000+ in profit, electing S-corp taxation can save $2,000–$8,000/year in self-employment tax. This has nothing to do with which state your LLC was formed in — it's a federal election available to any single-member LLC.
Freelancer LLC checklist
- Form in your home state unless you have a specific reason not to
- Get an EIN from the IRS (free, irs.gov/ein, 10 minutes)
- Open a separate business bank account immediately — commingling personal and business funds is the most common way freelancers lose their liability protection
- Draft a simple operating agreement (single-member template is fine)
- File your FinCEN BOI report within 30 days of formation
- Keep a simple income/expense log — even a spreadsheet works for most freelancers
- Set aside 25–30% of gross income for taxes if no employer is withholding for you
- Consider the S-corp election once you're consistently netting $50K+
Don’t want to file yourself? Northwest Registered Agent files your LLC for $39 + state fee and acts as your registered agent the first year free.
Frequently asked questions
Should a freelancer form an LLC?
Generally yes, once you're generating real income. The main benefits: liability protection (a client suing your LLC can't reach your personal assets), a separate business bank account for cleaner finances, and access to the S-corp election once profits exceed ~$50K. The main cost: state filing fees ($50–$500) and annual compliance. For most freelancers, the LLC cost is well worth it within a year of operation.
What state should a freelancer in New York form their LLC in?
New York, almost certainly. New York has a $200 filing fee and a quirky publication requirement ($400–$2,000 to publish in two local newspapers). It's expensive, but forming in Wyoming doesn't help — you'd still owe New York foreign registration fees and taxes because you work there. The one exception: if you're planning to leave New York soon, you might form in Wyoming now and register in NY temporarily. But that's a planning exercise, not a cost-saving one.
Do freelancers need to collect sales tax?
Usually no — most freelance services (design, writing, consulting, development, photography) aren't subject to sales tax in most states. Notable exceptions: some states tax digital products, some tax SaaS, and a handful tax certain professional services. Check your specific state's sales tax rules for the service category you're in. Selling physical products is a different matter — those are typically taxable.
Can a freelancer deduct LLC formation costs?
Yes. State filing fees, registered agent fees, operating agreement template costs, and attorney fees for LLC setup are deductible business expenses. They can be deducted in full in year 1 (up to $5,000 in organizational costs) or amortized over 15 years. Keep the receipts and track them in your books.
Is a single-member LLC good enough for a freelancer, or do I need a multi-member LLC?
A single-member LLC (SMLLC) is ideal for solo freelancers. It's simpler, has less paperwork, and is treated the same as a sole proprietorship for tax purposes by default. You only need a multi-member LLC if you have a business partner with ownership stake — at which point you'd form an LLC with them as co-members.
Do I need to live in the state where I form my LLC?
No — you can form an LLC in any state. But if you live and work in a different state, you'll usually need to register as a foreign LLC in your home state anyway. Most freelancers who form in Wyoming but live in California end up paying both states, which wipes out any Wyoming savings. The digital nomad exception: if you truly have no fixed home state, Wyoming or South Dakota are popular choices for establishing state domicile.