A domestic single-member LLC is generally disregarded for federal income-tax purposes, and a domestic multi-member LLC is generally treated as a partnership unless it elects corporate treatment. State classification and taxes do not always follow the headline individual-income-tax rule. The owner's residence, source of income, entity elections, and where the business operates all matter.
The 9 no-income-tax states: full comparison
Wyoming has no individual or corporate income tax. Domestic LLC formation costs $100, and the annual report license tax is $60 minimum or $0.0002 per dollar of Wyoming assets, whichever is greater. Wyoming law also makes a charging order the exclusive remedy against a member's transferable interest, including for a single-member LLC. Other taxes, licenses, and foreign-registration obligations can still apply.
Texas has no individual income tax, but taxable entities can owe the Texas franchise tax. For 2026 and 2027 reports, the Comptroller lists a $2.65 million no-tax-due threshold, a 0.375% retail or wholesale rate, and a 0.75% rate for other businesses. Entities at or below the threshold do not file a No Tax Due Report, but they still file a Public Information Report or Ownership Information Report. Texas LLC formation costs $300.
Florida has no personal income tax and no franchise tax on LLCs (Florida's corporate income tax applies to C-corps, not pass-through LLCs). Formation costs $125 and the annual report is $138.75. Florida's economy is large and the state has a skilled workforce, major metro areas, and no additional business activity tax on LLCs beyond the standard formation and annual report fees. It is consistently the most popular no-income-tax state for LLC formation by volume.
Nevada has no personal income tax and no corporate income tax, but it charges a Commerce Tax (0.051% to 0.331% of gross revenue above $4 million, depending on industry) and a Business License Fee of $200 per year. LLC formation in Nevada costs $425 (Articles of Organization + initial list of managers) and the annual list of managers/members costs $150/year. Nevada has historically marketed itself on privacy and asset protection, though Wyoming has largely matched those protections at lower cost.
Washington State has no personal income tax — but it has the Business and Occupation (B&O) Tax, a gross receipts tax that applies to nearly all business activity in the state regardless of profit. Rates range from 0.138% (manufacturing) to 1.5% (services). There is no deduction for expenses — revenue is taxed at the gross level. For a service business grossing $500,000, the B&O tax alone is $7,500 per year. Formation costs $230 and the annual report is $60. Washington is a common trap: founders assume "no income tax state" and miss the B&O entirely.
South Dakota does not impose an individual income tax. LLC formation currently costs $150 online, and the required annual report costs $55 online or $70 by paper. The report is due on the first day of the anniversary month. Other-state, sales, employment, and industry taxes can still apply.
New Hampshire does not tax W-2 wages, and its interest and dividends tax was repealed for taxable periods beginning after December 31, 2024. Businesses can still owe the 7.5% Business Profits Tax and the 0.55% Business Enterprise Tax. For taxable periods beginning on or after January 1, 2025, the BPT filing threshold is gross business income over $109,000. Formation costs $102 and the annual report is $100.
Alaska has no individual income tax and no statewide sales tax. Domestic LLC formation costs $250, and a $100 biennial report is filed every two years. Alaska is rarely a practical choice for an out-of-state LLC without genuine Alaska operations; local sales taxes, industry taxes, licenses, and foreign-registration obligations may still apply.
Tennessee repealed its Hall Income Tax on interest and dividends effective January 1, 2021, and does not impose an individual income tax. Most LLCs doing business in Tennessee are still subject to franchise and excise taxes unless an exemption applies. The Department of Revenue lists a 0.25% franchise tax, a 6.5% excise tax, and a $100 minimum franchise tax. Secretary of State LLC filing and annual-report fees start at $300 and can increase with the number of members.
Wyoming: best overall for small LLCs
Wyoming combines the full no-income-tax benefit with the lowest LLC operating costs of any no-income-tax state. There is no corporate income tax, no franchise tax, no gross receipts tax, and no LLC-specific business activity tax. Formation is $100 online. The annual report is $60 (minimum) and it is straightforward to file.
On asset protection, Wyoming stands out. Most states weaken charging-order protection for single-member LLCs — if you are the sole owner, a creditor can sometimes pursue your LLC assets directly, rather than being limited to a charging order against distributions. Wyoming explicitly extends the stronger charging-order protection to SMLLCs, making it the most protective state for the solo founder or investor.
- Formation fee: $100 online
- Annual report: $60 minimum
- No state income tax, corporate income tax, or franchise tax
- Strong SMLLC charging-order protection — rare nationally
- No public disclosure of member names required on Articles
- Registered agent required: $50–$300/year (commercial)
Texas: best for high-revenue businesses
Texas is the second-largest state economy in the U.S. and a genuine destination for scaling businesses. It has no individual income tax, but its franchise tax applies to taxable entities including LLCs. For 2026 and 2027 reports, the no-tax-due threshold is $2.65 million. The listed rates are 0.75% for most businesses and 0.375% for retail or wholesale.
Taxable margin depends on the Comptroller's permitted deductions and the entity's facts, so gross revenue alone does not determine the bill. Entities at or below the no-tax-due threshold no longer file a No Tax Due Report, but they still file the applicable Public Information Report or Ownership Information Report. Formation is $300.
Florida: most popular, good reasons why
Florida is the most popular state for LLC formation outside California and Texas. Its combination of no personal income tax, no franchise tax on LLCs, a large consumer market, warm climate, and business-friendly regulatory environment makes it a natural destination. For online businesses, service businesses, and entrepreneurs who want to physically relocate to a no-income-tax state, Florida is the most common choice.
- Formation fee: $125
- Annual report: $138.75 (due by May 1 each year)
- No personal income tax, no LLC franchise tax
- Florida corporate income tax does NOT apply to pass-through LLCs
- Large economy, skilled talent pool, major metros (Miami, Tampa, Orlando, Jacksonville)
- Homestead exemption if you establish Florida residency
The main cost to watch is the annual report — $138.75 is higher than Wyoming's $60. If you miss the May 1 deadline, a $400 late fee is automatically assessed. Many out-of-state LLCs get hit with this late fee when they forget Florida's early annual report deadline.
Nevada: strong protection, highest cost
Nevada was the original "favorable LLC state" before Wyoming took that mantle. It still has real strengths: strong charging-order protection, no personal income tax, no corporate income tax, and a business-friendly regulatory environment. But the cost structure is the highest of any no-income-tax state. The initial formation package (Articles + Initial List) costs $425. The Annual List of Managers or Members costs $150/year. The mandatory Business License costs $200/year. That is $350/year in recurring Nevada fees before any registered agent.
The Commerce Tax applies to businesses with Nevada gross revenue over $4 million — so most small LLCs avoid it. But the base overhead of $350–$650/year (fees + RA) is roughly 4–5x Wyoming's cost for a comparable structure. Unless you have Nevada operations or specific Nevada legal needs, Wyoming provides equivalent or better protection at a fraction of the cost.
Washington: no income tax but B&O gross receipts tax
Washington State is the most common trap in the no-income-tax conversation. It is technically a no-income-tax state — there is no personal income tax on wages or business profits. But Washington's Business and Occupation (B&O) Tax is a gross receipts tax levied on total revenue, not profit. The rate depends on your business classification: 1.5% for most service businesses, 0.471% for retail, 0.138% for manufacturing. There are no deductions for cost of goods sold, salaries, or rent — gross revenue is taxed at the top.
A consulting business with $300,000 in revenue and $200,000 in real expenses — $100,000 in actual profit — would owe $4,500 in B&O tax on that $300,000 gross (at 1.5%), plus any applicable city B&O taxes on top. The effective rate on actual profit can be dramatically higher than the headline rate suggests. Washington also has a 6.5% state sales tax that applies to many digital products and services.
New Hampshire: low-key great option
New Hampshire gets less attention than the Sunbelt states. It does not tax an individual's W-2 wages, and the interest and dividends tax was repealed effective January 1, 2025. That does not make New Hampshire business income tax-free: businesses carrying on activity in the state can be subject to the Business Profits Tax and Business Enterprise Tax.
The Business Profits Tax rate is 7.5%, and the Business Enterprise Tax rate is 0.55%. For taxable periods beginning on or after January 1, 2025, a business with more than $109,000 of gross business income must file a BPT return. That is a filing threshold, not a tax-free-profit allowance, and BET has a separate base and thresholds. New Hampshire also has no general sales tax.
The key trap: where you live vs. where you form
Forming an LLC in Wyoming, Nevada, or another no-individual-income-tax state does not by itself eliminate obligations where the owners live, the business operates, employees work, customers create nexus, or property is located. A California resident can owe California tax on pass-through income, and an out-of-state LLC doing business in California can face registration, filing, and the $800 annual tax.
The only way to actually benefit from a no-income-tax state is to genuinely live there. That means establishing domicile — physically moving, changing your driver's license, registering to vote, and spending the majority of the year there. States like California aggressively audit high-income individuals who claim to have moved but maintain significant California ties (home, family, business relationships). If you are relocating for real, the tax savings are real. If you are trying to avoid your home state's taxes by paper-forming in another state, it generally does not work.
Our ranking: best no-income-tax states for LLCs
- 1. Wyoming — best overall: lowest fees, strongest SMLLC protection, clean tax structure. Ideal for solo founders, freelancers, investors, and anyone who wants minimal overhead.
- 2. South Dakota — $150 online formation and a required $55 online annual report under the current fee schedule.
- 3. Florida — best for relocation: largest real-world economy of the group, no income tax, no LLC franchise tax. Best if you're actually moving there.
- 4. Texas — large market with no individual income tax; the 2026–2027 franchise-tax no-tax-due threshold is $2.65 million, with information reporting still required.
- 5. New Hampshire — no tax on W-2 wages and no general sales tax, but BPT and BET can apply to LLC activity.
- 6. Tennessee — no individual income tax, but most LLCs are subject to franchise and excise taxes unless an exemption applies.
- 7. Alaska — no individual income tax or statewide sales tax; $100 biennial report and limited relevance without Alaska operations.
- 8. Nevada — strong protection, high cost: $350+/year in fees before RA. Wyoming matches or beats it at a fraction of the cost.
- 9. Washington — avoid for most LLCs: B&O gross receipts tax often makes it more expensive than income-tax states for service businesses.
Primary sources checked
- Texas Comptroller — franchise tax rates and thresholds ↗
2026–2027 no-tax-due threshold, rates, and annual information-report requirements.
- Tennessee Department of Revenue — franchise and excise tax ↗
Entity coverage and the $100 minimum franchise tax.
- New Hampshire DRA — Business Profits Tax ↗
Current rate and filing threshold.
- New Hampshire DRA — Interest and Dividends Tax repeal ↗
Repealed for taxable periods beginning after December 31, 2024.
- Alaska Division of Corporations — forms and fees ↗
$100 LLC biennial report fee.
- South Dakota Secretary of State — filing fees ↗
Online and paper LLC formation and annual-report fees.
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
If I form my LLC in Wyoming, do I pay zero state income tax?
Wyoming does not impose an individual income tax, but forming there does not make every owner or business tax-free. Your residence, where the business operates, employees, property, sales, and the source of income can create tax and registration obligations in other states.
What is the cheapest no-income-tax state to maintain an LLC in?
Among the states compared here, Wyoming currently lists a $100 formation fee and a $60 minimum annual license tax. South Dakota lists $150 for online formation and a required $55 online annual report. Registered agents, foreign registrations, taxes, and licenses can change the total.
Does Texas really have no income tax for LLCs?
Texas has no individual income tax, but taxable LLCs are within the franchise-tax system. For 2026 and 2027 reports, the no-tax-due threshold is $2.65 million. The listed rates are 0.75% for most businesses and 0.375% for retail or wholesale. Entities at or below the threshold do not file a No Tax Due Report, but they still file the applicable Public Information Report or Ownership Information Report.
Is Washington State actually a no-income-tax state for LLC owners?
Technically yes — Washington has no personal income tax. But Washington's Business and Occupation (B&O) Tax is a gross receipts tax on total revenue, not profit. Service businesses pay 1.5% of gross revenue. There are no deductions for expenses. For a profitable service business, the effective tax burden can be comparable to or worse than a state with a lower income-tax rate. Always calculate B&O before choosing Washington.
Can I avoid California income tax by forming my LLC in Wyoming?
A Wyoming filing alone does not remove California obligations. California residents can owe tax on pass-through income, and an out-of-state LLC that does business in California can face California registration, returns, and the $800 annual tax. The result depends on residency, source, management, property, employees, and other contacts, so get state-specific tax advice before restructuring.
Is New Hampshire a no-income-tax state for LLC owners?
New Hampshire does not tax W-2 wages, and it repealed its interest and dividends tax effective January 1, 2025. Businesses can still owe the 7.5% Business Profits Tax and 0.55% Business Enterprise Tax. The BPT filing threshold is based on gross business income, not taxable profit, and is $109,000 for taxable periods beginning on or after January 1, 2025.
Which no-income-tax state has the best asset protection for an LLC?
Wyoming. It is the only no-income-tax state (and one of the very few states nationwide) that explicitly extends strong charging-order protection to single-member LLCs. Most states allow creditors to pursue a sole member's LLC interest more aggressively. Wyoming's statutory protection means a creditor is generally limited to a charging order against distributions — they cannot seize control of or dissolve the LLC.
Is Tennessee still a no-income-tax state after the Hall Tax repeal?
Tennessee does not impose an individual income tax, and the Hall Income Tax was repealed effective January 1, 2021. Most LLCs doing business in Tennessee are nevertheless subject to state franchise and excise taxes unless an exemption applies. The Department of Revenue lists a 0.25% franchise rate, a 6.5% excise rate, and a $100 minimum franchise tax.