Expensive States to Form an LLC

What You Need to Know Before Choosing Where to Register

When starting a business, one of the first questions entrepreneurs ask is: “Where should I form my LLC?”
While some states are known for being affordable and business-friendly, others have significantly higher LLC filing and maintenance costs.

However, choosing a state solely based on lower fees—or avoiding higher fees—can be a costly mistake if not done correctly.

In this guide, we’ll explain:

Which states are considered expensive to form an LLC
Why higher fees don’t always mean you should form elsewhere
The hidden costs of forming an LLC out of state
How to make the right decision based on your business activity

Understanding LLC Formation Costs

Before diving into expensive states, it’s important to understand what makes an LLC “expensive.”

LLC costs typically include:

Initial state filing fee
Annual or biennial report fees
Franchise or business privilege taxes
Registered agent costs
Compliance and renewal expenses

Some states charge more upfront, while others have lower filing fees but higher annual costs. The total cost over time is what truly matters.

States With Higher-Than-Average LLC Filing Fees

While LLC filing fees vary across the U.S., most states fall between $50 and $200.
However, a few states stand out for having significantly higher costs.

Examples of Expensive States to Form an LLC

Alaska – $250 Filing Fee

Alaska has one of the higher initial LLC filing fees at $250, along with biennial reporting requirements. While the state has no personal income tax, compliance costs can still add up for small businesses.

Massachusetts – $500 Filing Fee

Massachusetts is one of the most expensive states to form an LLC, with a $500 filing fee and a $500 annual report fee. This makes it particularly costly for startups and small businesses operating on tight budgets.

Tennessee – $300 Filing Fee

Tennessee’s LLC filing fee starts at $300 and can increase based on the number of LLC members. The state also has franchise and excise taxes that can significantly impact ongoing costs.

Texas – $300 Filing Fee

Texas charges $300 to form an LLC. While there is no personal income tax, Texas imposes a franchise tax on many businesses, which adds to the long-term cost of maintaining an LLC.

Does a High Filing Fee Mean You Should Form Elsewhere?

No—not necessarily.

One of the most common misconceptions among entrepreneurs is that they should avoid forming an LLC in their home state if the fees are high. In reality, forming outside your home state often costs more, not less.

The Costly Mistake: Forming an LLC Out of State

If you form an LLC in a state where you do not actually conduct business, you may be required to register that LLC as a Foreign LLC in your home state.

What Is a Foreign LLC?

A Foreign LLC is an LLC that was formed in one state but conducts business in another. States require this registration to ensure compliance with local laws and taxes.

Why This Doubles Your Costs

When you form an LLC out of state and register it as a Foreign LLC in your home state, you pay:

Initial LLC filing fee in the formation state
Foreign LLC registration fee in your home state
Two sets of annual fees
Two compliance schedules
Two registered agents (often required)

Instead of saving money, you end up paying twice.

Example Scenario

Let’s say you live and operate your business in Massachusetts:

Massachusetts LLC filing fee: $500
Annual report: $500

If you form your LLC in another state to avoid the $500 fee:

You still must register as a Foreign LLC in Massachusetts
You pay the foreign registration fee
You still pay the $500 annual report
You now also pay fees in the other state

👉 Total cost: higher than forming locally

When Does It Make Sense to Form an LLC Outside Your Home State?

There are limited scenarios where forming an LLC outside your home state can make sense:

1. Online-Only Businesses

If your business is fully remote with:

No physical office
No employees
No inventory
No significant business presence in your home state

You may have flexibility in choosing a state with lower ongoing costs.

2. Asset-Holding LLCs

Some LLCs are formed purely to hold assets such as:

Real estate
Vehicles
Aircraft
Intellectual property

In these cases, the location of the asset often determines the best state for LLC formation.

3. Multi-State or International Businesses

Businesses operating across multiple states or countries may require strategic structuring, which should be done with professional guidance.

Why Your Home State Is Usually the Best Choice

For most small businesses and startups, the best state to form an LLC is the state where you operate.

Benefits of forming locally:

No foreign registration requirements
Lower compliance complexity
Easier tax filings
Reduced legal risk
Clear regulatory oversight

Even if your home state has higher fees, the simplicity and compliance savings often outweigh the cost difference.

Looking Beyond Filing Fees: Total Cost of Ownership

Instead of focusing only on the initial filing fee, consider:

Annual renewal fees
Franchise taxes
Compliance costs
Accounting and legal support
Administrative time and effort

A state with a low filing fee but high annual taxes may be more expensive in the long run.

How Epics Deal Helps You Choose the Right State

Choosing where to form an LLC is not a one-size-fits-all decision.

At Epics Deal, we help you:

Compare LLC formation and maintenance costs
Understand state compliance requirements
Avoid costly foreign LLC mistakes
Structure your business efficiently
Handle LLC formation end-to-end

Our goal is to ensure your LLC is formed legally, cost-effectively, and strategically.

Final Thoughts: Don’t Let Fees Drive the Wrong Decision

While states like Alaska, Massachusetts, Tennessee, and Texas have higher-than-average LLC fees, that doesn’t mean they are the wrong choice—especially if that’s where you do business.

Trying to avoid higher fees by forming an LLC elsewhere often leads to double fees, extra compliance, and unnecessary complexity.

👉 The smartest approach is to choose the state that aligns with where and how your business operates, not just where fees appear lowest.