Best and Worst States to Start a Business in 2026

State fees tell you almost nothing about whether a business survives

Across 50 states the correlation between five-year state LLC charges and the five-year survival rate is -0.07, and the rank correlation is 0.18. State cost accounts for about 0.6% of the variation in survival. For scale, the BLS national five-year survival rate is 51.4%, and the unweighted average across the 50 states of five-year state LLC charges is $645.93. Knowing a state's position on one of those measures does not tell you its position on the other. Every cost figure here is a minimum, the floor a state charges an LLC that owes nothing beyond it. The methodology below sets out exactly what that includes and what it leaves out.

The clearest way to see it is the two top-ten lists. The ten cheapest states to keep an LLC registered are Montana, Arizona, Missouri, Mississippi, New Mexico, Ohio, Idaho, South Carolina, Hawaii, and Iowa. The ten states where the most businesses reach year five are Pennsylvania, South Carolina, Illinois, Michigan, Maine, Minnesota, North Dakota, Ohio, Indiana, and North Carolina. 2 states appear on both: Ohio and South Carolina.

The states where the two measures disagree most

11 states sit more than 20 places apart on the two rankings. The gap below is a state's cost rank minus its survival rank, both measured over the same 50 states. A large negative gap means the state is cheap to keep an LLC in and near the bottom on survival. A large positive gap means the opposite.

Missouri is the sharpest case in one direction: rank 3 of 50 on cost at $50 over five years, and rank 49 of 50 on survival at 42.9%. California is the sharpest in the other: rank 50 on cost at $4,120, and rank 12 on survival at 53.7%.

The Founder Conditions Index: how we combined the two

Each state gets a percentile score from 0 to 100 on each input and the two are averaged at 50/50. That weighting is an editorial judgment, not a measurement. We chose an even split because both inputs cover the same five-year horizon and we have no evidence that would justify favoring one. A different weighting produces a different ranking, so both component scores appear in the full table below and the top five under each single measure is printed here.

The 10 best states on the combined index

South Carolina leads at 91.9 of 100, pairing $110 in five-year state charges (rank 8 of 50) with 55.9% five-year survival (rank 2). Not one of these ten is Delaware, Wyoming, or Nevada, the three states most often recommended as an out-of-state formation destination.

The 10 worst states on the combined index

Tennessee scores lowest at 8.1 of 100: $2,300 in five-year state charges (rank 47 of 50) and 46.4% five-year survival (rank 45). Read this as a score on two measures, not a verdict on a state's economy. Nothing here measures demand, wages, rent, access to capital, or the tax a founder personally pays.

Where Delaware, Wyoming, and Nevada actually land

The three states most often recommended as an out-of-state formation destination all sit in the bottom half of this index: Delaware is 45 of 50 at 16.9 of 100, Wyoming is 39 of 50 at 30.6 of 100, and Nevada is 49 of 50 at 14.3 of 100. None of that means they are bad choices. It means the case for them is not the case these lists usually make.

Delaware's value is its entity law and its Court of Chancery, which is why venture investors ask for it, and that is worth paying a $400 annual tax for when you are raising money. Wyoming is chosen for privacy, and our verification supports that: neither its Articles of Organization nor its annual report asks for member or manager names. Nevada is the one to be careful with. It is marketed on privacy, and our own 50-state review found the opposite. NRS 86.263(1) requires the Annual List to state the names, titles, and addresses of all managers, or of all managing members where there are none, and that list is a public record filed at formation and every year after. None of these three is a cost argument. If you live and work in another state, forming in one of them usually means registering the same LLC as a foreign LLC at home as well, so you pay two states instead of one.

All 50 states ranked

Ranked on the combined index, best to worst. States with an identical index score share a rank. “5-year state cost” is the minimum: the filing fee plus five years of report fees and minimum entity-level taxes, excluding registered agent service. “Small businesses” is the SBA's 2025 count for the state and is context only. It is not scored.

Methodology and sources

Two inputs, 50 states, one denominator throughout. Every “of 50” on this page is counted over the same set of states, and no figure is averaged across a different one.

Five-year state LLC cost comes from our own 50-state fee dataset, verified 2026-07-29 against official Secretary of State fee schedules, state statutes, and revenue-department guidance, with commercial formation-service sources excluded. It is the formation filing fee plus five years of annualised report fees plus five years of minimum entity-level tax, plus any mandatory publication cost. Registered agent service is excluded because it is a commercial product, not a state charge. Per-state workings are on each state cost page.

Every cost figure on this page is a floor, not a bill. It is what a state charges an LLC that owes nothing beyond the minimum, and three properties of the dataset make that explicit. Wyoming and Tennessee publish a report fee that the state itself records as a minimum rather than a flat amount, so the figure holds only while the state's own scaling test is not met: Wyoming's annual report license tax is $60 or two-tenths of one mill ($.0002) per dollar of assets located and employed in Wyoming, whichever is greater, and Tennessee's annual report is $50 per member under T.C.A. section 48-249-1007(d), with a $300 floor and a $3,000 cap. Where a state levies an entity-level tax on a default LLC, the figure uses that tax's published minimum: California's $800 annual LLC tax is the floor, and an LLC with $250,000 or more of California income owes a further fee on top of it. And 5 states (Utah, New Mexico, North Carolina, New Jersey, and Vermont) levy an entity-level tax that reaches only LLCs that elect corporate treatment or that meet an ownership or income condition. That tax is excluded here because a default, pass-through LLC does not owe it.

Five-year survival is the share of private-sector establishments that opened in 2020 and were still operating five years later, from the U.S. Bureau of Labor Statistics Business Employment Dynamics series, retrieved 2026-07-16. BLS measures establishments rather than firms and does not break the series out by legal form, so it is a proxy for new business survival rather than a direct measure of LLC survival. The full state table is on our business survival rates page.

Small business counts are from the SBA Office of Advocacy 2025 Small Business Profiles. They appear as context in the full table and are not an input to the score.

Scoring. Each input is converted to a percentile score from 0 to 100 over the 50-state set, with tied values sharing the average position so that two states holding an identical figure cannot be separated by file order. The index is 50% cost score plus 50% survival score. States with an identical index score share a rank. The weighting is our editorial judgment and the page prints both component scores so it can be redone differently.

The District of Columbia appears in the BLS survival data but not in our 50-state LLC cost dataset, so it has no score on one of the two inputs and sits outside the join rather than being estimated into it. Fees and statutes change; each state name links to its own cost page, where the figures are shown with their sources. This study is informational and is not legal or tax advice.