Overall Guide to LLC costs
Starting an LLC is a sound decision if you’re a small business owner or individual entrepreneur who wants to scale your business. In comparison to sole proprietorships and similar business structures, limited liability companies provide better personal assets and limited liability protection. It also makes sense for tax purposes in many states as LLCs are exempt from corporate profit taxes, and you are only liable for personal income tax.
However, like any business structure, starting an LLC comes with its own set of filing costs. The following guide will explain how much it costs to start an LLC.
How much does it cost to form an LLC?
Various fees are applicable and payable by business owners when starting a limited liability company. The costs will depend on what fees are required, and ultimately, the amounts are specific to each state.
However, the following fees are standard and apply to all states:
Articles of Formation filing fees (between $50 – $500)
When you register your Articles of Organization and LLC with the relevant state, you will need to pay the necessary LLC filing fees, also known as the Articles of Organization or Certificate of Formation filing fees.
Registered Agent fees (between $100 – $300)
All LLC owners must appoint a registered agent, also known as a service of process or statutory agent. This individual is responsible for accepting official paperwork and legal correspondence on your company’s behalf. While you may decide to nominate yourself as your company’s own registered agent, many LLC owners opt to hire a registered agent service to do the job. In this case, it will cost you an additional amount.
Business license fees (between $50 – $550)
Based on the type of business you are starting, you may need to obtain specific licenses, permits, and certificates. These fees are applicable when forming the LLC. However, in order to keep your business compliant and running legally, you’ll need to budget for operating and recurring costs as well.
If you’re forming an LLC in New York, Nebraska, or Arizona, you’ll have to pay a compulsory publication fee. This also means that you need to publish a statement of limited liability company formation. This will need to be done within a certain timeframe in a local newspaper. The fees included are:
- Newspaper publication fees (between $50 – $450) – If you’re forming an LLC in any of the three states mentioned above, then you will need to pay the local newspaper to publish an ad pertaining to your company formation for at least three weeks in a row if you are in Nebraska and Arizona and six weeks if you are in New York. The costs here all depend on the local newspaper or publisher, as well as the state and county handling the publication.
- Affidavit of publication fee (between $10 – $50 or more) – This fee is payable to the government unless you’re in Arizona, where this fee is not applicable. However, New York LLC owners will need to pay $50, whereas Nebraska LLC owners will pay $10 plus an additional $5 per page.
Ongoing LLC costs
Once you’ve paid the necessary fees to start your LLC, you must also budget for ongoing costs to keep your LLC in good standing and compliant with both state and federal laws.
These ongoing costs include:
Annual franchise tax (between $100 – $800)
You may need to pay a yearly tax for doing business in some states. In order for the LLC to operate legally, this tax must be paid. The state with the highest annual franchise tax currently is California. While most states have annual franchise fees ranging from $100 – $400, California’s annual franchise tax is $800.
Annual report fees (between $10 – $820)
Annual reports must be filed by LLCs in most states. An annual report is are also referred to as a statement of information. The annual report comes with a state filing fee in most cases, while some states do not charge an annual report filing fee. Some states charge up to $500 for filing an annual report. However, regardless of whether there is a fee, the annual report must be filed to keep your business in good standing.
Business license renewal fees (between $20 – $100)
Once you’ve paid for and obtained the necessary licenses, you will need to pay annual fees to keep those licenses up to date. Expect to pay between $20 to $100 to renew business licenses.
Optional costs for LLCs
Operating agreement cost (between $99 – $1000+)
The document that outlines how your LLC will be governed and operated is called an operating agreement. It consists of crucial information like investments, management structure, state taxes as well as profit-sharing.
While this document does not need to be filed with the state and is not mandatory in many states, it is a legal document, and you should still have one anyway, and more so if your LLC consists of multiple members.
This is because the document will lay out the roles and responsibilities of all managers and members of the company. Ultimately, this helps to avoid and resolve disputes that may arise in the future.
While there are no fees payable to the government, drawing up an operating agreement will cost you.
A clear and well-drawn-up operating agreement is imperative to the success of your LLC. Some LLC owners opt for hiring a corporate lawyer to help with this step. We recommend hiring professional LLC formation companies like Northwest Registered Agent, Incfile, and Zenbusiness to help you get the operating agreement drawn up. They can also assist with various parts of the LLC formation process.
LLC Name reservation fee ($10 – $28)
Reserving a name for your business entity is optional in many states but always comes with a fee. In Alabama, it will cost you anywhere between $10 – $28 to reserve a name.
DBA name fee ($10 – $100)
While a fictitious business name or “Doing business as” name is mandatory, you may want to register a fictitious name to create separate brands under your primary LLC.
Why hire a professional LLC formation service?
Many entrepreneurs spend time and effort forming their own businesses. However, there are other options out there, and although they do come with certain fees, they prove to be a huge advantage in saving you time, effort, and money. The alternative to forming an LLC on your own is using a professional LLC formation service.
The benefits of using a competent and reliable LLC formation service are as follows:
- Reduces the risk of business formation errors
- Free/included registered agent services
- Easy access to important business documents
- Access to the formation company’s customer support
- Possible access to additional business tools
- Peace of mind
- Saves you time and effort
The following professional business formation services will assist you in every aspect of your LLC formation, from deciding on and reserving a business name to drawing up the operating agreement and obtaining the relevant certificates from the state.
Below we’ve listed the costs of each of these recommended companies, excluding the state filing fees:
- Starter package – $39
- Pro package – $149
- Premium package – $249
Northwest Registered Agent
- Standard package – $39
Unlike other competitors, Northwest Registered Agent offers just one package, which includes a registered agent service free of charge for the first year. You’ll need to pay $125 annually for a registered professional agent thereafter.
- Silver package – $50
- Gold package – $199
- Platinum package – $349
What is the cheapest way to form an LLC?
The most affordable way to form an LLC is to do it yourself. In this case, you will be liable for state filing fees and publishing fees only. There won’t be any additional costs. However, also bare in mind that using a professional formation service could save you lots of time and effort.
What is an EIN?
An EIN, which is short for Employer Identification Number. It’s a nine-digit code that is issued by the IRS and is used to identify a business for tax reporting purposes. You will need one when it comes to opening up a bank account and hiring employees.
Is an LLC the best business structure?
All business types come with advantages and disadvantages, be it C corporations, S corporations, or nonprofits. With LLCs, the advantage is that it provides limited liability protection in the event of unpaid debt or lawsuit.
What is an assumed name?
An assumed name is also known as a trade, DBA, or fictitious name. When you register an assumed name with the Secretary of State, you may operate or transact legally under this name. However, it is not your company’s legal entity name.
What is short-form cancellation?
If you start an LLC and decide to cancel it within one year of formation, you may file a short form cancellation within due time so that you are not liable for the annual franchise tax.
Is an LLC better than an S corporation?
An S corporation is more of an IRS tax status than a business entity. An LLC is taxed in the default way or as an S corp. In terms of taxes, being taxed as an S corp is a huge advantage for many businesses.
What are the advantages of an LLC?
LLCs have a simple formation process and are easier to maintain than other business structures. LLC owners also experience personal liability protection, management and ownership flexibility, and tax benefits.