The total cost of an LLC depends on the state in which you form it, as well as whether you hire a professional to help you set up your LLC.
The least expensive route is to form an LLC yourself online, but you'll still have to pay filing fees, registered agent fees, business license fees which can amount to several hundred dollars.
How much Is an LLC? Read the entire article to know the exact LLC formation costs in your state.
What Is the Total Cost of a Limited Liability Company?
Forming an LLC or limited liability company is not free. You will have to pay several fees to file the necessary paperwork with your state government.
There are also recurring costs for maintaining your LLC. If you're planning on doing business as an LLC, you should consider these expenses as part of the cost of starting it.
Articles of Organization Filing Fees
When starting an LLC, there are certain things you must do in order to stay compliant with state law. First, file Articles of Organization (sometimes called a Certificate of Organization) with your state's Secretary of State office. The articles must include basic information about your business like:
- Your LLC's name and address
- The names and addresses of your registered agents and managers (if applicable)
- Whether your LLC will be managed by members or managers
- The purpose of your business
This document typically costs around $100 to file. Some states also require you to publish notice of your new LLC in local newspapers or publish on other official public sources.
These notices cost anywhere from $100-$500, depending on where you live. Some states don't require publication at all.
Operating Agreement Cost
Although most states do not require limited liability companies to have an operating agreement, it is essential for the smooth operation of your business. An operating agreement is a legal contract between the owners of an LLC describing how the company will be established and operated.
You can buy an Operating Agreement form from the internet for less money and then modify them to fit your business needs, or you can hire a business lawyer to do it for you. Fees vary according to the business attorney or a firm.
Registered Agent Fees
A registered agent is a person or a business entity that has agreed to send and receive legal papers on behalf of your LLC. These papers are often related to annual report forms, service of process of legal action, and other official government notifications and could include state tax forms and notices.
Registered agents must reside in the state where your LLC is located. They can be you, another member of your LLC, or a registered agent service. Having a registered professional agent is required by law in most states, although the requirements differ from state to state.
Requirement of Your Registered Agent:
- They must be available during regular business hours.
- They must have a physical address
- They must be authorized to do business in your state of formation.
If you don't want to serve as your own, you'll have to hire one. That will cost you around $100-$300 per year, depending on which service you use and the state where you're doing business. You can add the cost of obtaining registered agent services cost to the total price of forming an LLC.
An Annual Fee
After the LLC has been established and all of the formation fees have been paid, the owner still needs to keep in mind that there will be ongoing costs to keeping the LLC in compliance with federal and state laws. You will be needed to be paying;
Annual Fees for this Business Entity
Most states require each LLC to file an annual report with their secretary of state's office. The purpose of the reporting fees is to ensure that an LLC keeps its records up-to-date and current with all relevant information so that its registered agent can be contacted at any time.
If you fail to file this report on time, some states will require you to pay a late fee, while other states will revoke your company's status as a legal entity within their borders. Filing fees typically start at about $50 and can go up from there depending on the jurisdiction where your company is located.
The fee is usually based on the LLC's net worth or total income for the previous year.
Annual Franchise Tax
Many states require that each LLC pay an annual franchise tax based on factors like your gross receipts or annual income. The amount can range from under $50 annually in Texas up to $800 per year in California.
If you fail to pay your federal taxes on time, many states will charge a penalty and interest until it is paid in full. In addition, if you do not pay your franchise taxes for three years, your LLC can be dissolved by the state for failure to comply with state law and mandates.
Business License Renewal Fees
In addition to paying franchise taxes and annual fees to the state, every business must renew their Business License every 1 - 3 years, depending on the state and city/town where they operate their business. License renewal fees can range from $20 - $100 depending on the
Company Formation Service Fee
Even though forming an LLC is a simple process, many people prefer to hire a company formation service to help them with their application (This is optional).
LLC formation services differ in price from $200-$600. More expensive does not necessarily mean better, however. Instead, be wary of any company that charges less than $50, as sometimes the lowest prices are done by companies that simply aren’t good at what they do or don’t provide you the support you need to successfully form your LLC.
Company formation service fee covers everything, including:
- Filing Articles of Organization with the Secretary of State on your behalf
- Handling all correspondence with the state
- Preparing a customized Operating Agreement for your LLC
- Providing you with an EIN or Federal Employer Identification Number and filing with the IRS
- Registering your business with your state taxation department; and
- Completing any additional paperwork required in your state.
There are plenty of good reasons to have a company formation service handle your application for you:
You don't have to worry about getting anything wrong. If you make a mistake on your articles of organization, for example, it could delay the approval process.
You get a professional business filing address instead of using your own home address, which will be made part of the public record. This is especially important if you're worried about privacy.
Hiring a company formation service saves time; it will take care of everything for you in as little as a day.
It will handle your Annual Filing
They also charge an annual report fee if your company requires one. An annual report is a form that you file with the state each year to stay in compliance with the law. If your LLC files an annual report, they will send the form to you a few weeks before it's due and charge a fee to process it for you.
What Are the Benefits of an LLC?
Many business owners choose this type of business structure because it limits the personal liability of the owner. If a lawsuit or debt puts the company in jeopardy, creditors can't seize the owner's personal assets such as a home, car, or bank accounts.
An LLC provides its owners with great flexibility in structuring management and financial arrangements. Unlike a corporation, there are no formal requirements for how often meetings should be held or what decisions must be approved by all owners.
LLC owners, called members, do not need to be U.S. citizens or residents, and there is no limit on the number of members an LLC can have.
An LLC also gives members some flexibility when it comes to choosing how they want their taxes to be handled. According to IRS, it allows members to choose whether they would like their LLC to be taxed as a partnership or as a corporation or sole proprietorship (if they have only one member). In most cases, an LLC elects to be taxed as a partnership by filing Form 8832 with the IRS.
Is an LLC worth it for a Small Business?
LLCs are one of the most popular business structures for small business owners because they're relatively easy and inexpensive to set up. They are simpler than setting up a corporation, with filing paperwork and fees being completed online. Your secretary of state's website has all the legal documents required to form an LLC.
It has become a preferred business structure because it is not bound by the same rigid rules of corporations and requires no formalities such as corporate minutes to hold unless you filed an IRS form electing to be treated as a corporation.
Is an LLC Expensive?
When you're starting a business, one of the most important decisions that you'll make is what type of business to form. The most common options for small businesses are sole proprietorships, partnerships, and limited liability companies. LLCs are popular because they offer the liability protection of a corporation but with fewer formalities and at a lower cost than a corporation.
Are Less Expensive than Corporations
Corporations have higher start-up costs than LLCs. In addition to filing fees charged by the state, there are attorney fees for drafting the necessary documents and accounting fees for preparing your books. Corporations must follow strict guidelines regarding meetings and minutes of meetings; LLCs do not have these requirements.
Trusted Business Formation Services
Despite only doing business since 2015, their 100% positive reviews are speaking for themselves. Swyft Filings offers one of the best refund policies in the industry. On a bonus side the company also has no processing or cancellation fee for your refund. It is a great company to consider when looking to designate a registered agent service for your business.
BizFilings takes you through the whole process from quality check to post-incorporation and also offers on-going support. You can choose various payment plans based on the features you want and your budget. The features in the higher-end packages are also available in the lower-end packages but at an additional fee. With an A+ rating with the BBB, BizFilings is a trusted online formation service.
When compared to other formation services, SunDoc Filings provides volume discounts for multiple states and entities and equally amazing customer support. However, if you want a service that will save you money, you may find other services in the market that cost less. Also, you may not choose SunDoc Filings if you are looking for a service with payment packages with tons of features and free registered agent service.
This is one of the most reputable companies you can pick as your registered agent service. Inc Authority has enough experience in the field, having been founded in the 1980s. Its free payment package stands out in what they offer. Loads of positive customer reviews speek for themselves how satisfied and happy with their services and their LLC formation speed their clients are.
MyCorporation is known for offering a fast LLC formation process. If you wish to speed up the process turnaround time, you can use their expedited service, reducing the process from weeks to a few days, thoug for a fee. Nonetheless, MyCorporation is an excellent pick as your registered agent. It offers numerous payment packages with various features depending on your budget.