No matter what type of LLC business structure you are planning to establish, there is a certain amount of LLC cost you have to bear for different types of agreements and operating policies. Be it the multi-member LLCs or the sole proprietorships, considering the overall process costs is essential for every owner. It includes the registration cost, license cost, agreement costs, filing costs, legal documents, and so on.
Once the LLC is formed, there are several other types of LLC maintenance costs that you need to keep in mind as the company owner. The overall cost of an LLC varies according to the state where you are planning to set up the business.
On this page, you’ll learn about the following:
LLC Formation Cost
While forming an LLC there are certain fees and charges one has to bear. The main cost of forming an LLC is the state filing fee. Different state has different rate of fees for LLC formation. Other than the state filing fees, there are some other costs such as name reservation fees, permit & license fees, publication fees, and so on.
The State filing fee starts from $40 and can go up to $500. It depends on the state you’re going to form your LLC in. Select a State to know the LLC filing fee in all the states.
State Filing Fee
When you are setting up the LLC business, you need to file for the Articles of Organization or the Articles of Formation. The Articles of Organization would be a legal document that will contain the business name along with the reason for LLC creation and the services you will be providing.
This certificate for Articles of Organization will give your LLC the right to operate in the concerned state. The filing has to be done with the Secretary of State, which differs from one state to the other. Check out the cost of an LLC in your state. A minimal filing fee is charged for the Articles of Organization, which usually ranges between $50 and $100 based on the state itself. However, the state filing fee is quite high in Alaska, almost around $250. Apart from this, there is a cost involved in the Operating Agreement filing, especially if it is a custom operating agreement.
Other LLC Formation Costs
Apart from the State Filing Fee, there are some other fees/charges that an LLC has to bear. Now, these charges are optional as depending on the state and their guidelines, LLCs have to pay for these services. Here is a list of other costs associated with forming an LLC.
Name Reservation Fee
This particular fee is applicable only for those LLCs which require name reservation prior to starting your LLC. Here, once you decide on your business name, you can reserve it with the Secretary of State so that no other LLC can use your name. For reservation, you need to pay a minimal amount of $10 (amount varies with states) to the government body when submitting the application with the help of the best attorneys.
You can either file the application online or mail it to the Secretary of State along with the required fee. As for the other states, name reservation is an optional step for all businesses, and hence, you wouldn’t have to bear the additional cost. Check out the LLC naming guidelines.
Three US states- Nebraska, Arizona, and New York City- require a Statement of Formation to be declared in the local newspaper to notify the business market about your LLC. This is where you have to pay the publication fee. Even though it’s a very way to publicize the business, the cost can get quite high based on the state requirements.
For example, according to Section 206 of the New York State Limited Liability Company, every new LLC business will have to publish the Statement of formation in two local newspapers. For this, you need to pay a fee of around $200 to $400 based on the newspapers you are choosing.
Since you also have to have the Certificate of Publication, you need to pay an additional amount of $50. You can hire a business attorney to understand the publication cost for having the Certificate of Organization from the publishing house.
Professional Business License Fees
Since LLC is a form of legal business, you need to get the proper license issued by the state government so that you don’t have to face any sort of legal complications or lawsuits later on. Licenses are issued in two ways- state-wise licenses like in Washington or local licenses in other US states. Based on this, the business license fee will vary between $50 and $100. This particular amount needs to be paid once, after which you will have to bear the license renewal costs. You can take the business license research service to understand more about how such special agreements vary in cost.
State-Wise LLC Formation Cost
As said, the LLC setup cost is different in different states. As the business owner, you should consider the partnership agreements to avoid excess expenditure on the formation process. For this reason, before you actually put the plan into motion, it’s better to have a look at how the costs vary from one region to the other.
- Alabama: setup cost is $200, and ongoing cost includes the annual privilege licenses
- Alaska: $250 setup cost and $200 needs to be paid biennially as the ongoing operating costs.
- California: $70 is charged as a setup cost, and $20 needs to be paid biennially as operating costs along with the Annual Franchise tax.
- Connecticut: the setup cost is $120 and an ongoing fee of $20 annually as operating fees
- New York: $200 setup cost along with the publication charges and $9 ongoing biennial foes with an Annual filing fee
- Tennessee: $300 minimum is required as the setup cost and the ongoing charges consist of Annual Franchise and Excise tax
States and LLC Filing Fees
Apart from this, the different costs will be levied for registered agent services after your company completes the first year. To check the price of registered agents, you can check our best LLC service list. Following are the 3 most popular LLC service providers.
LLC Maintenance Costs
Once you have formed the LLC, you will have to think about the various maintenance charges you need to bear. Here, we have listed the four main expenses you should consider after the LLC formation.
The Franchise tax is one of the main expenses most LLCs need to bear. It is charged by several states like Delaware annually once the company starts functioning fully. Even though the name suggests a franchise business, it isn’t compulsory that you need to open up a franchise of your LLC. The due date and the tax percentage will depend on the state where your LLC company is. If you make delay paying the taxes, you will be charged a penalty along with monthly interest. You can pay this tax via your Northwest registered agent, who will remind you of the tax due date so that you can avoid the penalty.
Annual Report Cost
The annual or biennial report needs to be filed every one to two years. This report consists of detailed information about your LLC’s modus operandi and any kind of change that has been introduced. Here, you need to mention the finances, the member transfers, increase in the business credit, employees hired, and other such details. This report needs to be submitted to the Secretary of State along with a submission fee of around $20 to $100 based on the state where your LLC company is situated.
Registered Agent Fee
Since you need to have a registered agent from a third-party LLC agent corporation, you will have to pay the fees. Even though many people try to avoid this fee and nominate themselves as the agent, the decision is not profitable since, without a professional agent, one might mess up with the legal notices, the reminders, the taxes, and others. If such incidents happen, you will have to pay the penalties, which will be costlier than paying the agent his fees. Based on the corporation from where you have hired the agent, the fee will vary.
Is an LLC a One Time Fee?
For filing your LLC you need to pay only a one time fee. However, annual, biennial or decennial fee is required in states for maintaining your LLC.
When people think of founding an LLC, they might envision a straightforward process that requires a single payment of a filing fee, suggesting a user-friendly and low-cost approach to establishing a business entity. While it is true that the initial formation of an LLC does involve a fee paid to the relevant government entity, regrettably this is not the full picture. Founding an LLC encompasses a number of important legal and financial considerations that extend beyond the initial fee.
One of the essential aspects to consider is the maintenance of an LLC. After establishing the LLC by filing the certificate of organization and paying the formation fees, there are ongoing obligations that require regular attention. These typically include updating and filing annual reports, maintaining good standing by paying the necessary state fees, and adhering to any additional requirements imposed by relevant regulations. The costs associated with these obligations can vary depending on the jurisdiction and the specific nature of the LLC’s activities.
Furthermore, legal formalities must be observed in operating an LLC. Although the flexibility of an LLC structure often lends itself to a more relaxed approach compared to other business entities, it is crucial to maintain the corporate veil that provides personal liability protection. LLC owners must remain vigilant about proper record-keeping, following internal governance procedures, and distinguishing the LLC’s finances from their personal finances. Failure to adhere to these formalities could lead to the piercing of the corporate veil, jeopardizing the personal liability protection that the LLC affords.
Additionally, it is worth noting that an LLC’s financial responsibilities stretch far beyond its establishment. Depending on the jurisdiction and the nature of the business, an LLC may be subject to additional taxes, licensing fees, or regulatory compliance, which can result in ongoing financial obligations. These obligations may not only include state and federal taxes but also potentially indirect taxes related to sales, property, or relevant industry-specific taxes.
An emerging misconception is that an LLC is solely a tool for tax advantage, primarily concerning federal taxes. While it is true that pass-through taxation can offer substantial benefits by generating both business and personal tax savings depending on individual circumstances, the association of LLCs exclusively with tax advantages is a narrow perspective. Proper consideration must be given to individual state tax laws, regulatory reporting requirements, and any indirect taxes that may apply within a given jurisdiction.
In light of these considerations, it is evident that the concept of an LLC being a one-time fee is far from accurate. Founding an LLC involves not only an initial fee but also ongoing compliance, formalities, record-keeping, and potential tax obligations. Understanding and preparing for these obligations is essential from the outset to ensure the successful and sustainable operation of an LLC. Overall, the decision to form an LLC requires a holistic perspective, shifting the focus from an initial fee to a more comprehensive understanding of the long-term responsibilities that come with operating this type of business entity.
It takes $40 to $500 to set up a Limited Liability Company. This fee range is the State Filing Fee. Depending on the state you are forming your LLC in, the fee changes. Apart from that, some more costs like permits & licenses, name reservation fees, publication fees, and so on should be added to the LLC cost.
The state filing fee is a mandatory charge every LLC has to bear. Apart from that cost, one can avoid hiring a professional to get things done. For example, you can be your own registered agent, write your LLC’s operating agreement, and finally file your documents on your own.
Yes, you can. There are professionals that offer LLC formation services for free. Apart from the mandatory state filing fee, no other price is required to pay. You can explore the best LLC service to know which companies are offering free LLC setup.
LLCs are cost-effective and do not require a handsome cost to be paid. Startups and small businesses can easily set up LLCs as it takes a much lower amount to pay than other types of business structures. One thing you must know is that the LLC filing fee varies from state to state. Other than the filing fees and registered agent cost, there is no major cost involved in forming LLC.