For a single-member LLC or multi-member LLC taxed as a partnership, all profits pass through to the owner's personal income tax return. There is no entity-level federal income tax. In a state with no personal income tax, that means the state also takes nothing from those pass-through earnings. In a high-income-tax state like California (13.3% top rate) or New York (10.9%), that pass-through tax hit is substantial. The 9 no-income-tax states eliminate that entirely — at the state level.
The 9 no-income-tax states: full comparison
Wyoming has no personal income tax, no corporate income tax, and no franchise tax. LLC formation costs $100 online and the annual report is $60 minimum (or $0.0002 per dollar of Wyoming-based assets, if higher). It is the leanest, most LLC-friendly state in the country. Asset protection is strong — Wyoming extends charging-order protection even to single-member LLCs, a protection most states deny.
Texas has no personal income tax and no corporate income tax, but it does impose a Franchise Tax — officially called the Texas Margin Tax. For most LLCs the rate is 0.75% of taxable margin (revenue minus one of several deductions). However, LLCs with total revenue under $2.47 million (the 2026 threshold, adjusted annually) owe $0 in franchise tax. Above that threshold, the tax is real. LLC formation costs $300 in Texas and there is no annual report fee — but the annual franchise tax return must still be filed even if the tax owed is zero.
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 has no personal income tax and no corporate income tax. There is no gross receipts tax and no state franchise tax on LLCs. Formation costs $150 and there is no annual report for LLCs — only a $50 annual license tax. South Dakota has strong asset protection laws and is commonly used for trusts and holding structures. It is a genuinely low-cost, low-obligation state that gets less attention than Wyoming but is worth considering.
New Hampshire levies no tax on earned income (wages, business profits) but does tax interest and dividend income at 3% in 2026 (dropping to 0% in 2027 under current law). It also imposes the Business Profits Tax (BPT) at 7.5% on business profits over $92,000, and the Business Enterprise Tax (BET) at 0.55% on the enterprise value tax base. For a small LLC with modest profits under the BPT threshold and no significant investment income, New Hampshire is effectively a no-income-tax state. There is no sales tax. Formation costs $102 and the annual report is $100.
Alaska has no personal income tax and no state sales tax. Business formation costs $250 and there is an annual report fee of $100. Alaska is genuinely remote, has a small local economy, and is rarely the right choice for an out-of-state LLC formation unless you have genuine Alaska operations. That said, its tax structure is clean — no income tax, no gross receipts tax, no franchise tax.
Tennessee eliminated its Hall Income Tax on investment income effective January 1, 2021, making it a true zero-income-tax state. There is no personal income tax on wages, business profits, dividends, or interest. Tennessee also has no franchise tax on LLCs. Formation costs $300 and the annual report is $300. Tennessee's business filing fees are among the highest of the no-income-tax states, partly offsetting the tax savings for small LLCs. The state has a strong economy centered around Nashville and Memphis.
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. No personal income tax means LLC profits pass through tax-free at the state level. But the Franchise Tax (Texas Margin Tax) is real and often misunderstood. The tax applies to LLCs with total Texas revenue above $2.47 million (2026 threshold). Below that threshold, the tax is $0. Above it, the effective rate is 0.75% of taxable margin for most businesses (0.375% for retail and wholesale).
For a business doing $5 million in revenue with $2 million in costs, the taxable margin might be roughly $3 million, and the franchise tax would be about $22,500 — less than 0.5% of gross revenue. That is far less than a 5–9% state income tax on $1 million of profit. Texas wins heavily on income-tax savings for large, profitable businesses. Formation is $300 and there is no annual report fee, though the Franchise Tax return must be filed annually.
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 no-income-tax states, but it is quietly an excellent option for small LLCs — especially those below the Business Profits Tax threshold. New Hampshire has no tax on earned income (wages, salary, business profits from active operations). The only income-adjacent tax is a 3% rate on interest and dividend income in 2026, which is scheduled to drop to 0% in 2027 under current legislation.
The Business Profits Tax (7.5% on profits over $92,000) and Business Enterprise Tax (0.55% on enterprise value) do apply to businesses that exceed the thresholds. But a small LLC with under $92,000 in New Hampshire-source profits owes neither — effectively zero state tax. Add the absence of a state sales tax (New Hampshire has no sales tax), and the state is genuinely among the least-taxed in the country for small business owners who actually relocate there.
The key trap: where you live vs. where you form
Forming an LLC in Wyoming, Nevada, or any other no-income-tax state does NOT eliminate your obligation to pay income tax in the state where you actually live and work. If you live in California and form a Wyoming LLC, California will tax your LLC profits as California-source income because you — the owner — are a California resident. California requires you to register the Wyoming LLC as a foreign LLC in California and comply with California tax law, including the $800 minimum franchise tax and income tax on profits.
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 — runner-up for low cost: no annual report, $50 annual license, no gross receipts tax. Great for holding structures.
- 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 — best for high-revenue businesses: no income tax, franchise tax only above $2.47M threshold, massive economy and talent pool.
- 5. New Hampshire — best in the Northeast: effectively zero income tax for small LLCs under the BPT threshold, no sales tax. Strong choice for East Coast founders.
- 6. Tennessee — solid but expensive to file: zero income tax since 2021, but $300 formation + $300 annual report is the highest combo on this list.
- 7. Alaska — clean but remote: no income or sales tax, but small economy with limited relevance for most out-of-state formations.
- 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.
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?
Only if you live in Wyoming. Wyoming has no state income tax, so Wyoming residents owe nothing to Wyoming on their LLC profits. But if you live in another state — including a state with income tax — you owe income tax in your home state on those profits, regardless of where the LLC is formed. Formation state and residence state are separate questions.
What is the cheapest no-income-tax state to maintain an LLC in?
Wyoming and South Dakota are the cheapest. Wyoming costs $100 to form and $60/year to maintain (plus ~$50–$150/year for a registered agent). South Dakota costs $150 to form and $50/year in annual license tax (with no separate annual report filing). Both are dramatically cheaper than Nevada ($350+/year in state fees alone) or Tennessee ($300/year annual report).
Does Texas really have no income tax for LLCs?
Texas has no personal income tax, so LLC profits that pass through to your personal return are not taxed by Texas at the individual level. However, the Texas Franchise Tax (Margin Tax) applies at the entity level for LLCs with total revenue over approximately $2.47 million (2026 threshold). Below that threshold, the tax owed is $0. Above it, the rate is 0.75% of taxable margin (0.375% for retail/wholesale). You still must file the franchise tax return annually even if you owe nothing.
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?
No. California taxes its residents on worldwide income, including pass-through profits from out-of-state LLCs. If you live in California and form a Wyoming LLC, California will require you to register it as a foreign LLC in California and pay California income tax on the profits, plus the $800 minimum franchise tax. The only way to avoid California income tax is to genuinely establish domicile in another state — which California scrutinizes carefully for high-income individuals.
Is New Hampshire a no-income-tax state for LLC owners?
Effectively yes for most small LLC owners. New Hampshire has no tax on wages, salary, or active business income. It taxes interest and dividend income at 3% in 2026 (0% from 2027). The Business Profits Tax (7.5%) applies only to profits over $92,000 from New Hampshire business activity. Small LLCs under that threshold owe no state income tax. New Hampshire also has no sales tax.
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?
Yes. Tennessee's Hall Income Tax on investment income (interest and dividends) was fully repealed effective January 1, 2021. Tennessee now has zero personal income tax on wages, business profits, interest, or dividends. However, Tennessee does not tax pass-through business income at the entity level anyway for LLCs, so the repeal primarily benefits investors with dividend and interest income. The main cost concern with Tennessee is its high formation and annual fees ($300 each).