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Welcome to the fascinating world of LLC formation costs! Whether you’re a budding entrepreneur or an established business owner looking to structure your company, understanding the financial implications is crucial. Most importantly, knowing how much does an LLC cost?
In this blog post, we’ll delve into the intricacies of forming an LLC, unravel the various expenses involved, and provide you with invaluable insights to help you navigate the cost landscape with confidence.
From filing fees and legal services to hidden expenditures, let’s embark on a cost-conscious journey toward establishing your dream business entity.
How Much Does It Cost to Start an LLC?
A Limited Liability Company (LLC) is one of the most powerful tools available to entrepreneurs. It protects them from business liabilities so they cannot be held personally responsible and provides tax flexibility.
And for all its power, LLC startup costs are relatively inexpensive compared to other investments you’ll make in your business.
LLC costs can be split into two categories: LLC startup costs and LLC maintenance costs. LLC startup costs are mostly a function of the state where it’s being registered. There are also ongoing costs to maintain your LLC. Here’s what you need to know.
LLC Startup Costs
There are several fees associated with the creation and filing of legal documents to form your LLC. There are also some tangential costs associated with registering your LLC with state and local authorities.
For example, you’ll want to make sure you have all the proper permits, licenses, and certificates required by local, state and federal governments. How much you spend, ultimately, is a function of your willingness (or capability) to do it yourself.
Reserving an LLC Name
Many states require that you reserve a business name for your LLC before you start filing the formation paperwork. The costs for reserving an LLC name typically range from $10 to $50. In most states, though, reserving a company name before the formation is not obligatory.
The period for which you can reserve a name for your LLC varies from one to two months or sometimes up to 120 days.
Filing Fees – LLC Cost
Typical costs: $50 (legal services) + $50 to $800 (filing fee), depending on the state
For most entrepreneurs, filing fees will account for the majority of their LLC startup costs. You don’t need a lawyer to file articles of organization to form an LLC, but it doesn’t hurt to use an LLC filing service, especially when you consider the low costs associated with these services.
There are several service providers that can register your LLC for less than $50 plus the state fee.
Using a legal services provider is well worth the cost. It can reduce the risk of improperly filing paperwork, which can lead to additional fees to fix the application or reapply, not to mention all that wasted time.
|State LLC||LLC Filing Fee||LLC Annual/Biennial Fee|
|Alabama LLC||$200||$50 minimum (every year)|
|Alaska LLC||$250||$100 (every 2 years)|
|Arizona LLC||$50||$0 (no fee and no information report)|
|Arkansas LLC||$45||$150 (every year)|
|California LLC||$70 $0 (Good news! California LLCs are free until June 2023.)||$800 (every year) + $20 (every 2 years)|
|Colorado LLC||$50||$10 (every year)|
|Connecticut LLC||$120||$80 (every year)|
|Delaware LLC||$90||$300 (every year)|
|Florida LLC||$125||$138.75 (every year)|
|Georgia LLC||$100||$50 (every year)|
|Hawaii LLC||$50||$15 (every year)|
|Idaho LLC||$100||$0 (however, an information report must be filed every year)|
|Illinois LLC||$150||$75 (every year)|
|Indiana LLC||$95||$31 (every 2 years)|
|Iowa LLC||$50||$30 (every 2 years)|
|Kansas LLC||$160||$50 (every year)|
|Kentucky LLC||$40 (sorry, I said $90 in the video)||$15 (every year)|
|Louisiana LLC||$100||$35 (every year)|
|Maine LLC||$175||$85 (every year)|
|Maryland LLC||$100||$300 (every year)|
|Massachusetts LLC||$500||$500 (every year)|
|Michigan LLC||$50||$25 (every year)|
|Minnesota LLC||$155||$0 (however, an information report must be filed every year)|
|Mississippi LLC||$50||$0 (however, an information report must be filed every year)|
|Missouri LLC||$50||$0 (no fee and no information report)|
|Montana LLC||$70 $35||$20 (every year)|
|Nebraska LLC||$100||$13 (every 2 years)|
|Nevada LLC||$425||$350 (every year)|
|New Hampshire LLC||$100||$100 (every year)|
|New Jersey LLC||$125||$75 (every year)|
|New Mexico LLC||$50||$0 (no fee and no information report)|
|New York LLC||$200||$9 (every 2 years)|
|North Carolina LLC||$125||$200 (every year)|
|North Dakota LLC||$135||$50 (every year)|
|Ohio LLC||$99||$0 (no fee and no information report)|
|Oklahoma LLC||$100||$25 (every year)|
|Oregon LLC||$100||$100 (every year)|
|Pennsylvania LLC||$125||$70 (every 10 years)|
|Rhode Island LLC||$150||$50 (every year)|
|South Carolina LLC||$110||$0 (no fee and no information report, unless LLC is taxed as an S-Corp )|
|South Dakota LLC||$150||$50 (every year)|
|Tennessee LLC||$300||$300 (every year)|
|Texas LLC||$300||$0 for most LLCs (however a No Tax Due Report and Public Information Report must be filed every year)|
|Utah LLC||$54||$18 (every year)|
|Vermont LLC||$125||$35 (every year)|
|Virginia LLC||$100||$50 (every year)|
|Washington LLC||$200||$60 (every year)|
|Washington DC LLC||$99||$300 (every 2 years)|
|West Virginia LLC||$100||$25 (every year)|
|Wisconsin LLC||$130||$25 (every year)|
|Wyoming LLC||$100||$60 minimum (every year)|
Typical costs: $0 to $200
An operating agreement is an internal document that describes how your LLC will be run, the roles and contributions of the owners (members) and the way decisions will be made.
Anyone can create an operating agreement on their own for free. But when you are doing something like dividing profits and losses amongst ownership, you want to get professionals involved to make sure everything is done correctly.
Legal service providers can handle the task for anywhere between $50 to $200, or you can hire a local lawyer. It’s a small cost to pay to ensure everyone is on the same page and avoid future disputes.
Typical costs: Varies based on state and local newspapers’ rates therein
Entrepreneurs in New York, Nebraska, or Arizona are subject to additional LLC costs in the form of publication. In short, LLCs in these states have to publish notices for a specified period of time in one or more newspapers across one or more cities or counties.
Business Licenses and Permits
Depending on your industry and geographical location, your business might need federal, state, and local permits/licenses to legally operate. This is true whether you form an LLC or any other type of business structure.
Here’s how to get a business license.
LLC Maintenance Costs
Once you’ve registered, you’ll have to take care of the LLC costs associated with maintaining it. This includes state and federal taxes, reporting fees, and the cost of any services used to maintain the LLC.
Typical costs: Varies from state to state
Like any other person or entity, LLCs are subject to taxation. The federal government doesn’t take its cut directly from the LLC. Rather, it’s collected from the profits of the owners as a pass-through income.
But LLCs can write off certain startup costs up to $5,000, including attorney fees, market research, office space, equipment, and so on.
Most states tax LLC profits in the same way as the federal government profits pass through to members’ personal tax returns. However, some states also have mandatory LLC franchise taxes. For example, the franchise fee in Delaware is $300, while California has a minimum $800 annual franchise tax.
At the state government level, LLCs may also be subject to reporting fees. Reporting fees are variable from state to state but average somewhere around $100 a year.
Typical costs: $0 to $300
A registered agent is the main point of contact between the LLC and the state. The registered agent accepts the service of lawsuits and other legal documents and can accept office mail.
Any adult can be a registered agent so long as they reside in the state in which the LLC is registered and are available during business hours.
This lack of restrictions means that businesses don’t have to endure any costs to declare a registered agent. With that said, there are service providers that will serve as your registered agent for $100 to $300 per year.
Some states levy a yearly tax on LLCs (often called a franchise tax). This is usually a fixed amount but may vary according to your LLC’s annual earnings in certain states.
Most states require LLCs to submit an annual or biennial report which includes updating the name, address, and ownership of the LLC. The report fee varies from state to state.
How to Register an LLC Yourself? – LLC Cost
Forming an LLC yourself is easy. Our state-by-state LLC formation guides simplify the process into five basic steps.
Step 1: Name Your LLC
When you name your LLC, you’ll need to choose a name that:
- Is available for use in your state
- Meets your state’s naming requirements
- Is available as a web domain
Step 2: Choose a Registered Agent
LLCs must appoint a registered agent in most states. A registered agent primarily acts as your LLC’s main point of contact with the state. But most importantly, they are responsible for accepting service of process in the event your business is sued.
A registered agent must:
- Be at least 18 years or older
- Have a physical address in the LLCs state
- Available during normal business hours to accept service of process
Step 3: File the Articles of Organization
The articles of organization, also known as the certificate of formation or certificate of organization, is a document that’s filed with your state to form an LLC. The fee to file the articles of organization varies from $0-$500, depending on your state.
Step 4: Create an Operating Agreement
What is an operating agreement? An operating agreement is a legal document outlining the ownership and operating procedures of an LLC. Why are operating agreements important? A comprehensive operating agreement ensures that all business owners are on the same page and reduces the risk of future conflict.
Step 5: Get an EIN
What is an EIN? An EIN or Employer Identification Number is a nine-digit number issued by the Internal Revenue System (IRS) to identify a business for tax reporting purposes. An EIN is essentially a Social Security number (SSN) for the company.
Why do I need an EIN? An EIN number is required for the following:
- To open a business bank account
- For Federal and State tax purposes
- To hire employees
Here’s how to look up your EIN.
Hiring an LLC Service Provider
Should you hire a professional LLC formation company? LLC service providers make the process of setting up your business easier, but they aren’t required. Here are five of the best LLC formation services to make your process easier.
ZenBusiness – Best LLC Service Overall
ZenBusiness is the best LLC service provider, offering an interactive process that guides you through creating your LLC by asking questions about your business plans using a chat feature. Read our full ZenBusiness review here.
They also provide free resources and courses to help you explore new ideas for expanding your business. With their top-notch services, you can rest assured that your LLC will be formed with ease and efficiency.
ZenBusiness offers three LLC service plans: Starter, Pro, and Premium. The Starter Plan has no annual fee, only state filing fees, and provides essential services. The Pro Plan, priced at $199 per year, offers comprehensive support, including an Operating Agreement and EIN registration.
The Premium Plan, costing $299 annually, provides additional benefits like faster filing, compliance monitoring, and a worry-free guarantee. Choose the plan that suits your needs and form your LLC with confidence.
Swyft Filings – Best LLC Service for Quick Turnaround Time
For business owners who value speed in setting up their ventures, time is of the essence. That’s where Swyft Filings shines as the best LLC service option. With turnaround times as quick as seven to ten business days, it lives up to its name and beats most other business formation services in terms of speed. Read our Swyft Filings review here.
Swyft Filing offers three LLC service plans: Basic, Standard, and Premium. The Basic plan, priced at $49, covers state fees and provides preparation and submission services for articles of incorporation/organization, along with a name availability check and one-year registered agent service.
The Standard plan includes the same services for $49, ensuring a strong LLC foundation. The Premium plan, costing $299, adds a professional website, domain, business email, phone number, and a comprehensive business license report. Choose the plan that suits your needs and enjoy top-quality LLC services.
Tailor Brands – Best LLC Service for Branding Solutions
Their services cover LLC formation, compliance, and branding/online presence. While they offer three different plans, their Elite Plan is highly recommended as it provides all the essential tools that serious entrepreneurs require to effectively reach their target audience.
Tailor Brands offers three pricing options for our services: Basic, Standard, and Premium. With the Basic plan, paying the annual fee upfront gets you a discounted rate of $3.99 per month, or it’s $9.99 per month at the regular monthly rate.
For the Standard plan, an upfront yearly payment reduces the monthly cost to $5.99, while the regular monthly cost is $19.99. The Premium plan offers a choice between $49.99 per month or a discounted rate of $12.99 per month with an upfront yearly payment. Select the plan that suits your needs and budget.
Northwest Registered Agent – Best LLC Service for Registered Agent Service
If you’re planning to form an LLC and require a registered agent service, we highly recommend utilizing Northwest Registered Agent. Their basic package includes LLC formation services and registered agent service at the initial cost. Additionally, their Corporate Guide® service can help you fulfill all your requirements efficiently.
Northwest Registered Agent offers high-quality LLC formation services for $225 per year. Their comprehensive package includes preparing and submitting Articles of Organization, name availability verification, and one-year registered agent services.
With online document access, free forwarding of legal and tax documents, and compliance reminders, they provide convenient and customizable solutions for businesses. Northwest Registered Agent is the go-to choice for hassle-free LLC establishment. Read our Northwest Registered Agent review here.
Incfile – Best LLC Service for Affordability
After conducting thorough research on LLC formation services, we have found that Incfile is the most cost-effective option for those starting a business with limited funds. Read the full Incfile Review.
With Incfile, you only need to cover the state filing fees, and you’ll receive a free year of registered agent service. While there may be additional charges after the first year, we still highly recommend Incfile as our top choice for helping you establish your business on a tight budget.
Incfile offers three LLC formation packages: Silver, Gold, and Platinum. The Silver package requires only payment of state fees, with no additional charges. The Gold package is priced at $199 plus state fees, while the Platinum package is priced at $299 plus state fees. Choose the package that best suits your needs and budget to begin your LLC formation process.
How much does it cost to form an LLC? – Frequently Asked Questions
Do You Have to Pay for an LLC Every Year?
In some states, there’s an annual franchise tax and/or annual report fee. Visit an LLC annual report guide and choose your state to learn exactly what ongoing fees might be required in your state.
Is an LLC Really Necessary?
An LLC provides limited liability protection. This means an LLC protects your personal assets in the event of a business loss such as a lawsuit or unpaid debt. We recommend any small business that carries even the smallest amount of risk or liability, to form an LLC.
Can I Pay Myself a Salary From My LLC?
You can pay yourself a salary from your LLC but it would be called a draw or distribution if your LLC is taxed in the default way by the IRS.
Bottom Line on How Much Does It Cost to Form an LLC?
In conclusion, an LLC Operating Agreement serves as the backbone of a limited liability company, offering structure, protection, and clarity to its members.
By defining ownership, management, and decision-making processes, it sets the stage for successful collaborations and minimizes conflicts. This crucial document provides a solid foundation for the smooth operation of the business, safeguarding individual interests and outlining the path to growth.
Whether you’re starting a new venture or seeking to strengthen an existing LLC, taking the time to craft a comprehensive Operating Agreement is an investment well worth making. Remember, it’s not just a legal requirement but a powerful tool that empowers entrepreneurs to build thriving businesses while ensuring transparency, accountability, and long-term success.