The limited liability company (LLC) is much more popular a business entity in some states than in others. The potential explanations of this phenomenon was explored using a partly original set of cross-sectional state-level data. The dataset contains business entity filing statistics, data on formation fees, annual report fees, and franchise taxes for LLCs and business corporations, and data on particular features of state LLC statutes. It was found that formation fees, not taxes or substantive rules or anything else, explain the variation in LLC popularity best.
