LLCs are very popular across the US for the protections they offer to the business owners and the flexibility they ensure for the company. Yet, before your venture starts generating profit, you should invest in its establishment and setup.
Setting an LLC for your startup up and running is not free of charge and entails certain costs. Some of those expenses are mandatory and others are optional, so your grand total will depend on the scope of aspects and features you include in your formation list.
How much does an LLC cost? To save you the trouble of guessing and make preliminary calculations clearer and easier for you, below, we’ll make a comprehensive breakdown of LLC-related charges and rates.
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The LLC creation process is quite straightforward and comprehensible. Yet, the cost to create an LLC largely depends on the formation method you choose. Basically, you have three options:
Whatever way you form your LLC, there are certain obligatory costs you’ll have to pay anyway and optional fees appropriate for different business situations, scenarios, and plans.
While starting an LLC is easy, it’s not free of charge even if you decide to do all the job on your own. You’ll incur certain expenses and your final cost to form an LLC will largely depend on the mandatory fees that vary by state. They fall into direct formation charges and ongoing costs that will occur on a regular basis to maintain your LLC’s legitimacy and good standing with the state. Let’s look into each category of expenses in more detail.
At the stage of registering your LLC, you might be exposed to the following costs depending on the locality and industry you are going to operate your entity in.
Technically, filing an LLC is about getting the Articles of Organization reviewed and approved by the state regulator. Once your LLC statute is approved and your company data appear in the state registry and public databases, your legal entity is considered officially formed.
The main aspects to consider here are as follows:
There are a few US states that call for LLCs to share information about their registration with the public via publications in local printed media. Normally, you’ll have to make three consecutive publications in a local newspaper if you want to create LLC.
There are only three states in the US that have a publication requirement in place:
So, if you are going to form LLC in one of these states, get ready to pay from about $300 to over $1000. The final cost is dependent on the specific registration requirements and advertising rates valid in your locality.
Thus, New York is the most expensive in this concern among the three states. Since you’ll have to make publications within 120 days after formations and publish info in two newspapers, you’ll end up paying $1200 or even more.
Nearly all LLCs are exposed to some type of business license to lawfully operate on the market of a certain jurisdiction. There are LLC licenses issued at a federal, state, and local level (city, town, county). You might need more than one license or permit. Normally, it’s determined by the type of activity you are involved in and the locality your run your business in.
Though all those licenses are referred to as business licenses, they are different from a general business license. As the name suggests, the latter is a sort of generic permission required for any business to operate within a specific jurisdiction. With a general license in place, your LLC will be considered non-compliant there.
This type of license is issued either by the Secretary of State or by the Department of Revenue. It’s not associated with a certain industry and is required in the following US states:
Licensing is a very sensitive issue for all LLCs since most likely than not, you’ll need some permissive documents for your entity and there is no one-size-fits-all solution in licensing. The best option if you want to file LLC is to perform a license search or hire a professional service to do it for you to get a complete list of licenses your need for your LLC. This way, you’ll be able to calculate your licensing expenses with maximum accuracy.
In the meantime, the most common types of business licenses and permits for an LLC beyond the general business license include the following:
Licensing fees greatly vary, so it’s advisable that you get a list of licenses and permissions for your LLC first along with the list of corresponding government agencies and authorities you should contact for registration. Then, you’ll be able to find out all the related fees.
Once you have set up LLC, there will be a number of compliance requirements to observe and regular fees to pay. Typically, those are to be paid either annually or biennially.
An annual or statutory report is a document LLCs should file with the state on an annual or biennial basis if you want to make an LLC legally compliant with the state. Generic by nature, it covers basic company info you’ve submitted to the Secretary of State when registering your entity:
A franchise tax is a sort of annual LLC charge payable no matter if your business gains profit or suffers losses. Should you fail to make payment, you’ll put your LLC at the risk of involuntary dissolution initiated by the state authorities.
Similar to filing rates, franchise tax rates largely vary across the US hitting the lower marks of $100 and higher marks above $800.
Though most states don’t have law requirements on general business licenses, it doesn’t mean you won’t need licenses. Nearly any LLC will need some sort of license to operate in its jurisdiction.
Licenses are legal documents issued by the state authorities to verify that you run your business in full compliance with all current regulations and don’t breach any laws related to the type of activity you are engaged in.
Yet, licenses are not issued once and for all. You’ll have to renew them annually or every two years. Renewal fees are usually lower than registration fees and still greatly vary by state. Thus, one state will renew your license for $20 while another will charge nearly $300 for the same job.
Optional costs are those you can avoid or add to your list of LLC expenses if you deem necessary. Some of them are minor while others really bring value.
As we’ve already mentioned, checking your desired business name before filing your formation docs is of utmost importance. And should the moniker you’ve set your eyes on appear to be available, you can put it on hold.
In most states, you can reserve a future company name for a period of up to 120 days to have enough time to finish all preparations before filing your LLC statute. It’s a really great option to have and the reservation price of $10 to $50 is well worth it.
A registered agent is a law requirement for LLC formation. However, the agent rules are very simple:
By hiring a third party, you’ll have to pay for their services. Yet, this option has a lot of good about it, especially if you employ a dedicated company for that purpose. Not only will it save you the trouble of handling this function on your own but also it will ensure the agent’s job is done professionally and your business mail is under complete control.
Professional services are available under an annual subscription that costs from $100 to $300 on average.
An Operating Agreement is a company bylaw and is optional for LLCs in most states. However, given the document’s importance since it helps regulate business operations and outline internal business rules, you’d better have an Operating Agreement in place.
Operating Agreement content is not limited to some specific points, though, there are common provisions normally covered by this instrument. How simple or complex the document will mostly depend on your business scenario and structure.
Basically, you have a few options for getting an Operating Agreement:
In the US, you have an option to run your business under a name different from your registered company name that appears in your LLC statute and should be used for all legal purposes.
For market purposes, though, you can choose a different moniker. Since you can have multiple DBAs under a single LLC structure, this will help you set up different brands or launch different product or service lines without getting into the hassles of running multiple LLCs.
To be lawful, a DBA or fictitious name requires filing either at a state or at a county level. Filing fees also vary by locality and range from $20 to $200.
LLCs need Employer Identification Numbers or Federal Tax IDs for many purposes. An EIN is required to:
Many formation services offer payable EIN registration. Yet, if you choose to apply on your own, you’ll find out that it’s issued by the IRS free of charge and will cost you nothing. So, don’t let anyone fool you and it will save you $50 to $80.
At this point, it’s obvious that, though there is a more or less unified formula for LLC cost calculations, the final cost will be different for a different state. Hence, let’s take a look at how much it will cost to open an LLC in each state.
|State||Filing Fee||Annual Report|
|Minnesota||$135||$0 (though report is required)|
|Mississippi||$50||$0 (though report is required)|
|New York||$200||$9 (biennially)|
|Pennsylvania||$125||$70 (once per 10 years)|
|Tennessee||$300||$300 – $3000|
|West Virginia||$100||$300 (biennially)|
While an LLC brings a lot of benefits both to the business and to its owner, hence its popularity, you’ll have to invest money in setting up the legal entity to start your entrepreneurial activity on the right foot.
LLCs do come at a cost, yet, those costs greatly vary by state and locality where you are going to initiate your business. Thus, some states appear to be more expensive than others. Besides, if you decide to hire an assistant to help you out with LLC formation or add some payable extras to your formation list, all of this will further bump up the final cost of your LLC.