Best State to Form an LLC for a Side Hustle (2026)
What is the best state to form an LLC for a side hustle?
By Edmond Hui · Last updated: July 2026
Edmond Hui · Founder, MyStateLLC
Edmond Hui is a software engineer and serial entrepreneur based in New York who has founded multiple online businesses across e-commerce, media, and information publishing. Before transitioning into tech, he spent years as a commercial real estate professional closing deals totaling over 100,000 square feet, giving him firsthand experience with business formation and entity structuring. He built MyStateLLC to provide the free, state-specific LLC guidance he wished existed when forming his own companies.
For a side hustle, the best state question has the shortest honest answer of any business type: your home state, almost without exception. A part-time business runs where you live (evenings at your kitchen table, weekends in your garage), which makes your home state the place you are legally doing business. At side-hustle scale, the case for forming anywhere else is weaker than for any other persona, because every dollar of duplicate fees comes out of a modest income. The ranking below is still worth reading: it shows what states actually charge, which matters if you are choosing where to live or wondering whether your state's fees are typical.
Wyoming ranks #1 nationally for new business applications per capita, up 13.3% year-over-year (U.S. Census Bureau, Business Formation Statistics (BFS), 2026 YTD (Jan to Jul) vs 2025 YTD (same months)). Source.
Why your home state is almost certainly the answer
A side hustle is the least portable business there is, legally speaking: you run it from where you live, in the hours around a day job, which plants it firmly in your home state. Forming there is not settling for second best. It is usually the cheapest option once every recurring fee is counted, because in your own state you can typically serve as your own registered agent for free and there is no second state demanding a foreign registration.
The arithmetic is harsher at small scale. An extra state's filing fee, annual report, and registered agent might be a rounding error for a funded startup; for a business earning part-time money it can consume a meaningful slice of the year's profit. The exotic structures that occupy the rest of this cluster (privacy parents, holding companies, no-tax formation states), solve problems a side hustle does not have yet.
When the ranking actually matters
The table below is still useful, in three narrower ways. If you are about to relocate, it shows which candidate states will treat a small LLC gently. If you are genuinely location-independent, you inherit the digital-nomad logic and the ranking becomes actionable. And for everyone else it is a benchmark: seeing the spread between the cheapest and most expensive states tells you whether your home state's fees are ordinary or an outlier, context worth having before you pay them.
One more honest note: the no-income-tax column only helps if you live in that state. State income tax follows your residency, not your LLC's formation state, so a side hustler in a high-tax state gains nothing by forming across the border. If the numbers in your state sting, the fix that works is the same one that works for full-time businesses, moving yourself, not just your paperwork.
Top 10 states for a side hustle or part-time business
| Rank | State | 1st-year cost | State income tax | Sales tax | Owner privacy | Processing | 5-yr DIY cost |
|---|---|---|---|---|---|---|---|
| 1 | Wyoming | $160 | None | Yes | Private | 0 days | $400 |
| 2 | South Dakota | $205 | None | Yes | Public | days | $425 |
| 3 | Florida | $263.75 | None | Yes | Public | days | $818.75 |
| 4 | Alaska | $300 | None | None | Public | 0 days | $500 |
| 5 | Texas | $300 | None | Yes | Public | days | $300 |
| 6 | Nevada | $425 | None | Yes | Public | days | $1,825 |
| 7 | Montana | $35 | Yes | None | Public | days | $35 |
| 8 | Arizona | $50 | Yes | Yes | Public | days | $50 |
| 9 | Mississippi | $50 | Yes | Yes | Public | 0 days | $50 |
| 10 | Missouri | $50 | Yes | Yes | Private | 0 days | $50 |
How we ranked these states
Each state is scored 0 to 1 on the factors that matter for a side hustle or part-time business, then weighted: cost 50%, processing 25%, income tax 25%. Cost and processing use the live figures from our 50-state dataset; income tax, sales tax, privacy, and asset-protection are factual state attributes.
The 5-year DIY cost column adds the state filing fee to five years of annual-report fees (biennial fees annualized), using the same figures as our 5-Year True Cost tool. It assumes you act as your own registered agent, which most home-state side hustlers can.
Common mistakes to avoid
The overspending traps for part-time businesses:
- Buying an out-of-state formation package for a hobby-scale business. Wyoming and Delaware packages are marketed hard, but a settled side hustler ends up registering at home anyway. Paying twice for a structure that delivers nothing at this scale.
- Skipping the separate bank account. Mixing side-hustle money with personal money is the fastest way to lose the liability protection the LLC was formed for. One free business checking account solves it.
- Forgetting the annual report. In most states a lapsed annual report eventually leads to administrative dissolution. If your state requires one, put the due date on your calendar the day you file.
What to do next
The whole setup, kept proportionate:
- Form the LLC in your home state. File the Articles of Organization yourself and act as your own registered agent, for most side hustles that is the entire structure.
- Get a free EIN and open a business account. The EIN comes directly from the IRS at no cost; the separate account keeps the liability shield intact.
- Calendar the annual report and revisit at tax time. Stay in good standing, and reassess the structure, including a possible S-corp election, only once profits make it worth the overhead.