5 States to Consider for Business Incorporation or an LLC

Whether you are looking to form an LLC or thinking about business incorporation, there are 5 states with tax breaks that may be the perfect location for your small business. For your corporation or LLC have you considered?

South Dakota
Texas
Montana
Tennessee
Utah

In 2009, South Dakota ranked #1 in the Tax Foundation’s annual state-by-state ranking of business tax climates. Why would South Dakota be such a great state to incorporate a business or form an LLC? South Dakota has no personal or corporate income tax. It is also one of the few states left that doesn’t levy “gross receipts” business tax on revenue. What you bank in sales or profits, you keep. You can also count the sales tax as a plus. South Dakota has a relatively modest 4% sales tax rate. Side note, some municipalities add on their own toll taking the rate as high as 6% in some areas.

“Don’t mess with Texas?” Well maybe you should if you are thinking of incorporating a business or starting an LLC. The Lone Star state also has no personal or corporate income tax. They actually go as far as to forbid income tax in their constitution. A spokesperson for the Texas Controller’s Office said “The spirit of entrepreneurship is inherent in the Texas business community. The state has made a concerted effort not to be stringent.” Although Texas has a gross receipts or “franchise” tax of .05% of revenues for retail business and 1% of revenue for non-retail business, small businesses are exempt from the franchise tax. Additionally, state legislature gave small business a shot in the arm by raising the revenue exemption level from $300,000 to $1 million. The change took effect January 2010.

The Big Sky State is one of only 5 states without sales tax. In fact, Montana is one of only two states that are currently operating in the “black” without a budget deficit (North Dakota is the other state). The unemployment rate in Billings is 5%, half the national average. Corporate income and property tariffs are also competitively low.

Next on the list of states with tax benefits right for business incorporation or forming an LLC is Tennessee. Tennessee gives their residents a tax break by not imposing personal income tax on wages and salaries. There is a down side to the state tax codes for LLCs and corporations. Tennessee levies taxes on corporate income at a rate of 6.5%. Also, if you’re in the retail business, sales tax is on the high side at 7%.

Utah offers more than just picturesque mountains and some of the best snow on earth. It is a pretty good place to incorporate your business or form an LLC. Although it imposes all the usual taxes, including corporate and personal income taxes it has a simple tax code and relatively low rates. In 2008, Utah adopted a flat 5% personal income tax rate across all income brackets and a flat 5% corporate income tax rate. Utah tends to be an employer “friendly” state, another reason to consider it a good location for business incorporation or to form an LLC.

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