How much does it cost to start an LLC?

Updated: June 7, 2023

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How much does it cost to start an LLC? : Registration Costs

While forming an LLC seems like a fun and easy way to kick-start your entrepreneurial dreams, it also requires careful planning and cost consideration. It may sound intimidating, but we promise to simplify it for you by the end of this read. So, without wasting any more time, let’s talk numbers!

When starting an LLC, the state filing fee is the primary cost to take care of. Depending on your state of interest, the fee could be anything from $40 to $500.

There are usually three setup choices available:

DIY(Do it Yourself): Doing it yourself is your best bet when you’re on a budget and wish to open an LLC. While the complicated paperwork and filing procedures could be a hassle, you could save a lot more money than possible.

Consult an Attorney: If you’re not on a budget and can afford to get help from a professional lawyer, contact a reputed one. The fee ranges from $1000- $1500.

Hire an LLC formation service: Hire your area’s best LLC formation service, and you’re all set! We’re not even exaggerating. They cost around $300- $400 and provide professional and specialized LLC formation assistance that can secure your company’s future.

There are also some other costs to notice when opening your company. It can include:

Reserving a name for your LLC:

Usually, you’re not required to reserve your LLC name before filing your article of incorporation. But if there’s a name you can’t get out of your head, you can apply to reserve it with the state of your interest. Even if you need more time to formally register your business, you can reserve your LLC name for up to 120 days.

Remember that all LLCs must have a distinctive name that is not already used in the state and contains the initials LLC or LLC. When forming an LLC, the name’s availability must be checked with the secretary of state. The fees for reserving your perfect business name can be as little as $10 to $50, depending on the state, so it’s also well worth the investment.

In some states, like Florida, there are no name reservation services.

Filing the Articles of Organization:

The Articles of Organization, also known as the “Certificate of Formation” or “Certificate of Organization,” must be filed with your state of interest to form an LLC. It is a legal document that establishes your LLC and its existence and sets forth its basic structure and purpose.

You can file Articles of Organization online using the Secretary of State’s website or by mailing the document to their office. The filing fee could be around $100, a single-time fee. It can take about two to three weeks for the state office to process, verify and pass the document.

EIN Application:

The Employer Identification Number (EIN) is quite similar to the Social Security Number (SSN) assigned to US people for tax purposes. EIN, sometimes known as a tax ID, does exactly that; it provides official identification for taxation.

You will need it to create a business bank account, apply for merchant accounts like PayPal, and file LLC tax returns. On the IRS website, anyone from the country can apply for an EIN, but if you’re based abroad, you can email or fax the necessary Form SS-4.

The fees could go from $0 to $99, depending on the state you’re interested in.

Publication Fees:

All LLCs based in New York, Arizona, and Nebraska are subject to this additional cost of publications. As the name suggests, publication fees apply when a select state requires a new LLC to announce its formation publicly in a local newspaper. It needs to be published for at least three consecutive runs, one publication can be printed once a week, and this can continue for three weeks.

The cost can go from $600 to $1200. It all depends on your LLC’s business location and address, your state’s needs and requirements, and the rates charged by the newspapers.

Operating Agreement:

An operating agreement is an internal document that contains information on the LLC’s running terms and descriptions of its members’ roles, rights, and obligations. Even though it might not be necessary in all US states, you should consider establishing one in case the co-owners disagree and need assistance coming to a settlement.

Certain states, like California, don’t need an operating agreement for a single-member LLC, but an operating agreement will be needed for a multi-member LLC. It also depends on your state of interest, but setting one up is advised to prevent future problems.

Now, let’s go over the four different pricing options available:

Create your own Operating Agreement: Writing and submitting an operating agreement is free.
Buy a template: You can spend $50 to $200 online to purchase an operating agreement template.
Hire a lawyer: You should do this if your LLC has a complicated structure or multiple members. A single-member LLC typically costs $300; for a multi-member LLC, the average cost is $3,000 or more.
Use an incorporation service: You can pay an internet company to write and submit your operating agreement for as little as $99.

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LLC Business Licenses and Permits:

There is a tonne of paperwork involved in starting a business. You must obtain the necessary licenses and permits based on your location and the type of LLC you are in. Company licenses show your compliance with industry norms, whereas permits permit you to sell specific goods or services in your state.

The cost of attaining these licenses and permits could be anything from $20 to $500. The cost depends on the type of permit or license to be acquired and which state is concerned. Licenses like Sales tax ID are often free in certain states, whereas Business licenses could go as up to $500.

How much does it cost to start an LLC: Ongoing Maintenance Charges

Once your LLC is up and running, it’s already time to tax it again! Below are some maintenance charges that usually arise, depending on your state of interest:

Franchise Taxes:

Like any other person or entity, LLCs are subject to taxation. Out of which is the Annual Franchise Tax. An annual franchise tax (sometimes known as an annual fee) is a recurring fee paid to your state each year you are in business.

Regardless of whether your company was profitable or not, this tax must be paid. If you do not pay, your LLC will be dissolved by the state. Fees can vary depending on the state you’re in. It costs about $150 in Arkansas to $800 in California.

Annual Reports:

An annual report, also known as a periodic report or statement of information, is a record of the operations of your LLC for the previous year.

Its goal is to set forth the current controlling members and owners, the business address of your registered agent, and any changes that may have occurred since the last filing period. By submitting an annual report, you can keep your LLC compliant with all state laws, protecting your limited liability and maintaining your flow-through tax status.

Most states require you to submit your reports every year. Some ask for one every two years, while others need the report every ten years. In some rare cases, an annual report is not needed at all!

Some states do have this policy of sending a reminder so you don’t miss the deadline. If not, you might outsource to a provider that files annual reports.

Depending on how many partners you have, the fees in states like New York can go from a minimum of $325 to a maximum of $10,000. Some states only impose a flat cost of $20 annually, in other states. Any franchise tax is in addition to this cost.

Registered Agents:

Your LLC needs a registered agent to receive all the legal documentation and notices for you and your business.

This individual can be anyone 18 or older and available during regular business hours with an address in the LLC’s state of formation. In some states like California, appointing a person or representative authorized to receive your government notices, tax forms, and lawsuit letters is mandatory.

If your LLC has no physical location in your state, you must appoint a registered agent. You can do it yourself for free, or hire someone as your registered agent. It will cost between $100 and $300 per year to name someone as your registered agent.

Cost of Starting an LLC

For your comfort, here’s a list of LLC formation fees for every state:

STATE	Filing Fee	Annual Fee
Alabama	$200	$100
Alaska	$250	$100
Arizona	$150	none
Arkansas	$50	$150
California	$100	$800
Colorado	$50	$10
Connecticut	$120	$80
Delaware	$90	$300
District of Columbia	$99	$300
Florida	$125	$138.57
Georgia	$100	$50
Hawaii	$50	$15
Idaho	$100	none
Illinois	$150	$75
Indiana	$90	$30
Iowa	$50	$60
Kansas	$165	$50
Kentucky	$40	$15
Louisiana	$75	$30
Maine	$175	$30
Maryland	$100	$300
Massachusetts	$500	$500
Michigan	$50	$25
Minnesota	$135	$35
Mississippi	$50	$25
Missouri	$105	none
Montana	$70	$20-35
Nebraska	$100	$10-30
Nevada	$75	$150-400
New Hampshire	$100	$100
New Jersey	$125	$50
New Mexico	$50	none
New York	$200	$25-4,500
North Carolina	$125	$200
North Dakota	$135	$50
Ohio	$99	none
Oklahoma	$100	$25
Oregon	$100	$100
Pennsylvania	$125	none
Rhode Island	$150	$50
South Carolina	$110	none
South Dakota	$150	$50
Tennessee	$300-3,000 + $50 a member	$300-3,000 + $50 a member
Texas	$300	None
Utah	$70	$20
Vermont	$125	$35
Virginia	$100	$50
Washington	$200	$60
West Virginia	$100	$25
Wisconsin	$130	$25
Wyoming	$100	$60

Bottom Line

As we’ve seen, forming an LLC could be a little expensive. Although it may seem intimidating and pricey, keep in mind that costs vary depending on the state where you operate and any permits your business might need.

However, many small business owners believe that an LLC’s advantages outweigh these costs. So that’s a plus! In conclusion, our advice would be to sit down in peace for a few minutes and then ponder upon an LLC’s whys, ifs, and buts. Once that image map of your LLC is clear in your head, all these expenses will be worth it!

Frequently Asked Questions

Is it feasible to form a limited liability company (LLC) for free?

There is a fee for registration in every state, even though the price to form an LLC varies by state. As a result, even though some businesses claim “free” LLC formation, they imply they will fill out the paperwork for your LLC at no cost. Yet once more, you are still liable for the filing fee charged by the state.

What kind of tax flexibility is offered by an LLC?

LLCs can be taxed as partnerships, C corporations, S corporations, sole proprietorships, or other entities. Members of an LLC might use this option to reduce their tax liability.

Can I use my LLC to pay myself a salary?

You can use the funds from your LLC to pay yourself a salary. There are many ways depending on the kind of LLC you choose (single-member LLC or multi-member LLC). U sing guaranteed payments, paying as a partnership, using an owner’s draw, or choosing to be taxed as an S corporation and paying as an employee.

Does the cost of an LLC need to be paid annually?

Most states require the submission of an annual (or biennial) report every year, which is necessary to keep one’s standing with the state. The yearly report requires filing a fee. Other franchise taxes may be used as additional yearly contributions, but not all states levy them.

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