A Limited Liability Company (LLC) is a powerful tool for entrepreneurs, offering protection from personal liability and tax flexibility. Despite its advantages, the startup costs of forming an LLC are relatively low compared to other business investments.

In this article, we will break down the costs associated with starting and maintaining an LLC, providing you with a comprehensive overview.

9 Startup Costs for an LLC

#1: Filing Fees

For many entrepreneurs, the bulk of their LLC startup expenses can be attributed to state filing fees.

While you don’t necessarily require legal counsel to file the articles of organization for your LLC, opting for an LLC filing service can be a wise choice, especially given the affordability of these services.

This table lists the annual and startup LLC fees for each state.

State Filing Fee Recurring State Fees
Alabama $200 $10 Annual Report
$100 Annual Privilege Tax (minimum)
Alaska $250 $100 (every two years)
Arizona $50 (plus publishing costs) $0 (report due annually)
Arkansas $45 online, $50 by mail $150 Franchise Tax Report (annually)
California $70 $800 – Franchise Tax (annually)
(Exemptions are available)
$20 – Statement of Information (annually)
Colorado $50 $10 (annually)
Connecticut $120 $80 (annually)
Delaware $110 $300 Franchise Tax (annually)
Florida $125 $138.75 (annually)
Georgia $100 online, $110 by mail $60 paper/$50 online (annually)
Hawaii $50 $15 (annually)
Idaho $100 online, $120 by mail $0 (report due annually)
Illinois $150 $75 (annually)
Indiana $95 online, $100 by mail Biennial report – $32 online, $50 by mail
Iowa $50 $60 (biennial report)
Kansas $160 online, $165 by mail $55 (annually)
Kentucky $40 $15 (annually)
Louisiana $100 $30 (annually)
Maine $175 $85 (annually)
Maryland $100 $300 (annually)
Massachusetts $500 $500 (annually)
Michigan $50 $25 (annually)
Minnesota $155 online, $135 by mail $0 (report due annually)
Mississippi $50 $0 (report due annually)
Missouri $50 online, $105 by mail $0
Montana $70 $20 (annually)
Nebraska $100 online, $110 by mail $10 (biennial report)
Nevada $75, plus $150 for the initial list of officers $150 Annual List of Members & Managers
New Hampshire $100 $100 (annually)
New Jersey $125 $75 (annually)
New Mexico $50 $0
New York $200 (plus publishing costs) $9 (biennially)
North Carolina $125 $200 (annually)
North Dakota $135 $50 (annually)
Ohio $99 $0
Oklahoma $100 $25 (annually)
Oregon $100 $100 (annually)
Pennsylvania $125 (plus publishing costs) $70 (decennial report)
Rhode Island $150 $50 (annually)
South Carolina $110 $0
South Dakota $150 online, $165 by mail $50 (annually)
Tennessee $300 (minimum) $300 (minimum)
Texas $300 $0 report
Franchise Tax
Utah $70 $20
Vermont $125 $35 (annually)
Virginia $100 $50 (annually)
Washington $200 $70 (annually)
West Virginia $100 $25 (annually)
Wisconsin $130 online, $170 by mail $25 (annually)
Wyoming $102 online, $100 by mail $60 minimum (annually)

* State fees are subject to change.

Numerous service providers offer LLC registration for under $50, in addition to the state fee.

Investing in a legal services provider is a prudent decision, as it helps minimize the risk of incorrectly filed paperwork. This not only prevents the need for additional fees to rectify errors but also saves valuable time that might otherwise be wasted on corrections and resubmissions.

Summary of the Costs to Form an LLC

  1. Filing Fees:
    • Range: $35–$500
    • The cost of filing for an LLC varies by state.
  2. Operating Agreement:
    • Range: $0–$200
    • An operating agreement outlines how your LLC will operate, and while you can create one for free, it’s advisable to seek professional assistance, especially when dealing with profit and loss distribution.
  3. Publication:
    • Range: $40–$1,500
    • Some states require LLCs to publish information about their formation, incurring publication costs.
  4. EIN Application:
    • Cost: Typically free
    • Applying for an Employer Identification Number (EIN) is essential for tax purposes and is typically free when done directly through the IRS website
  5. DBA Fees (if Using):
    • Range: $10–$100
    • If you use a trade name different from your legal one (DBA – Doing Business As), there may be fees associated with registering it.
  6. Registered Agent:
    • Range: $0–$300
    • A registered agent may be required for legal correspondence.
  7. Business License Fees:
    • Range: $50–$1,000+
    • Business licenses are essential, and the fees vary widely.
  8. Annual Report Fees:
    • Range: $10–$800
    • Most states require annual reports, which come with associated fees.

Total Startup Costs:

  • Range: $150–$4,000+

Other Considerations:

In addition to these startup costs, you should factor in other expenses related to your LLC, such as website development, marketing, and employee-related costs. Profitability will determine your tax obligations, so this should also be part of your budget.

Maintenance Costs of an LLC

Once your LLC is established, you’ll need to account for ongoing expenses:

  1. EIN Application:
    • Cost: Typically free
    • Applying for an Employer Identification Number (EIN) is essential for tax purposes and is typically free when done directly through the IRS website.
  2. DBA Fees (if Using):
    • Range: $10–$100
    • Maintaining a DBA might require renewal fees and additional licenses.

State and Federal Taxes:

  • The LLC is responsible for state and federal tax compliance, which may include income tax, sales tax, and employment taxes.

Reporting Fees:

  • Fees for filing annual reports, renewals, and other compliance-related documentation.

Service Costs:

  • Any services used to maintain the LLC, such as registered agent services or legal counsel.

 

#2 Crafting an Operating Agreement

An operating agreement serves as an internal blueprint outlining the operations, roles, and contributions within your LLC. It delineates how decisions are to be made, providing clarity and structure.

While anyone can draft their operating agreement at no cost, it becomes advisable to engage professionals when dealing with profit and loss allocation and ownership division. Legal service providers offer this assistance for a reasonable fee, typically ranging from $50 to $200. Alternatively, you can opt to hire a local lawyer to ensure accurate documentation. This modest investment ensures alignment among members and minimizes the potential for future disputes.

#3 Navigating Publication Requirements

In specific states like New York, Nebraska, or Arizona, entrepreneurs encounter an additional LLC expense – publication. LLCs operating in these states must publish notices in newspapers for a prescribed period, spanning one or more cities or counties.

The costs for publication can vary widely, contingent upon the rates set by state and local newspapers. Adhering to these publication requirements is essential for LLC compliance in these states and should be factored into your overall budget when establishing your business.

#4 Obtaining Your EIN: A Vital Step

Acquiring an Employer Identification Number (EIN) is a critical task for businesses and entities, essential for tax purposes. Here’s what you need to know about the EIN application:

  • What is an EIN? An EIN is a unique nine-digit identifier assigned by the Internal Revenue Service (IRS) to businesses and entities for tax-related purposes.
  • Application Methods: You have various options to apply for an EIN, including online submission, fax, or mail using Form SS-4. The online application is the most recommended and efficient route.
  • Application Details: Applying for an EIN entails providing specific business information, such as your legal business name, address, entity type, names of members (if applicable), Social Security numbers, and a description of your business activities.
  • Instant Online Approval: When applying online, the approval process is typically instant, expediting the EIN assignment.
  • Costs: Acquiring an EIN is typically free when applying directly through the IRS website. Alternatively, you can choose to use an authorized third-party service provider for a small fee.

It’s crucial to ensure the accuracy and completeness of your EIN application to avoid potential compliance issues in the future. Obtaining this essential identifier is a straightforward process that can streamline your business’s tax-related operations.

#5 DBA Fees: Your Business Alias Costs

When it comes to DBA (Doing Business As) fees, here’s what you need to know:

  • Typical Costs: Generally range from $10 to $100.

A DBA, also known as a trade name, allows a business to operate under a name different from its legal one. However, the fees associated with obtaining a DBA can vary significantly by state and may encompass several components:

  • Filing Fee: The initial fee for registering the DBA.
  • Publication Costs: Some states require businesses to publish information about their DBA, incurring publication expenses.
  • Renewal Fees: Fees for renewing the DBA registration.
  • Notary Fees: Costs associated with notarizing documents.

In addition to these initial registration fees, securing a DBA may necessitate additional business licenses, contributing to the overall cost of setting up an LLC. If you wish to establish exclusive rights to your DBA name beyond its local area, you may want to explore trademark registration. However, trademark registration involves separate fees at both the federal and state levels.

For precise information about DBA costs in your state, refer to your secretary of state’s website or the local business registration office. Understanding these expenses is crucial for budgeting and ensuring compliance with state requirements.

#6 Registered Agents: The Essential Intermediary

A registered agent serves as a crucial intermediary between the LLC and the state. This individual accepts legal documents, including lawsuits, and handles office mail. Remarkably, any adult residing in the state where the LLC is registered can be a registered agent without incurring costs. Nonetheless, there are service providers offering registered agent services for an annual fee ranging from $100 to $300.

#7 Business License Fees: A Multifaceted Determinant

The cost of obtaining a business license for an LLC is influenced by numerous factors:

  • Location: The geographical area where your LLC operates.
  • Type of Business: The nature of your business activities.
  • License Duration: The period for which the license is valid.
  • Revenue: The income generated by your LLC.
  • Licensing at Multiple Levels: If your business requires permits or licenses at various government levels.

Certain business licenses can be notably expensive due to either complex regulatory requirements or the specific nature of the business:

  • Liquor License: In areas with high demand for alcohol-related businesses, liquor licenses can range from several hundred to several hundred thousand dollars.
  • Casino License: Operating a casino can result in licensing and regulatory costs amounting to millions of dollars, depending on your jurisdiction. For instance, Nevada has an Operator of Interactive Gaming License priced at $500,000 for the first two years.
  • Environmental Permits: Businesses engaged in heavy manufacturing, mining, or other environmentally impactful industries may face costly environmental permits, with expenses accumulating over time.
  • Healthcare Facilities: Establishing and operating healthcare facilities, such as hospitals or nursing homes, often comes with extensive licensing fees and strict regulatory compliance requirements.
  • Transportation and Trucking: Commercial transport companies operating large truck fleets require multiple permits and licenses, incurring fees and compliance costs that quickly add up.

For precise assessments of your LLC’s license fees, reach out to your local city/county government and state business regulatory agency. They can provide information on required licenses, associated costs, and any unique requirements tailored to your business type.

#8 Annual Report Fees: Ongoing Compliance

LLCs must address annual report fees as part of their ongoing compliance. These fees are primarily tied to state filing requirements and can vary widely, ranging from zero to several hundred dollars or more, contingent on factors like LLC revenue and membership numbers.

Maintaining awareness of your state’s annual report due date is essential, as missing it can lead to late fees, penalties, administrative dissolution, or the revocation of limited liability protection.

Should you need to update your LLC’s information, such as changing the registered agent or business address, separate fees may apply.

For foreign LLCs registered outside their home state, filing annual reports in both the home state and the foreign jurisdiction may be necessary, each associated with distinct filing fees.

In the event your LLC loses its good standing due to failure to file annual reports, consider additional reinstatement fees if you decide to reinstate it at a later date.

#9 Other Considerations

Tax Considerations: Navigating the Fiscal Landscape

When it comes to taxes, LLCs operate within a complex landscape with varying costs and regulations. Here’s a closer look:

  • Federal Taxes: LLCs, like individuals or other entities, have tax obligations. However, the federal government doesn’t directly tax the LLC itself; instead, it collects taxes from the owners based on pass-through income. LLCs can deduct certain startup costs, up to $5,000, which may include attorney fees, market research, office space, and equipment.
  • State Taxes: Most states follow the federal model, with profits passing through to members’ personal tax returns. Yet, some states introduce mandatory LLC franchise taxes. For instance, Delaware imposes a $300 franchise fee, while California enforces a minimum $800 annual franchise tax.
  • Reporting Fees: At the state level, LLCs may encounter reporting fees that vary from state to state but generally average around $100 annually.

Frequently Asked Questions (FAQs) – Understanding LLC Startup and Maintenance Costs

1. What are the typical startup costs for forming an LLC?

  • Typical startup costs for an LLC can include filing fees, operating agreement expenses, publication costs (where required), DBA fees (if using a trade name), registered agent fees, business license fees, and annual report fees. The total cost can vary widely depending on your state and business needs.

2. Do I need a lawyer to form an LLC, or can I do it myself?

  • You don’t necessarily need a lawyer to form an LLC. Many entrepreneurs choose to handle the process themselves, especially when using online resources and filing services. However, consulting with an attorney can provide added assurance, especially when dealing with complex ownership structures and legal matters.

3. What is the role of a registered agent in an LLC, and do I need one?

  • A registered agent is a point of contact between the LLC and the state for legal and official documents. While anyone residing in the state of registration can serve as a registered agent, using a professional service provider is common. It helps ensure compliance with legal requirements and allows you to focus on your business.

4. How are LLCs taxed, and what tax considerations should I be aware of?

  • LLCs are typically taxed as pass-through entities, meaning profits and losses pass through to the members’ personal tax returns. However, specific tax rules vary by state. Additionally, some states impose mandatory LLC franchise taxes, while others have reporting fees. Consult with a tax professional to understand your LLC’s tax obligations.

5. What is a DBA (Doing Business As), and why might I need one?

  • A DBA is a trade name used by a business that differs from its legal name. It allows your business to operate under an alias. You may need a DBA if you want to use a different name for branding or marketing purposes. Costs associated with obtaining a DBA can include filing fees, publication costs, renewal fees, and notary fees.

6. What are some considerations for reducing LLC formation costs?

  • To reduce LLC formation costs, consider handling the process yourself, using online filing services, and conducting thorough research to understand your state’s specific requirements. Additionally, explore cost-effective registered agent services and review your business license needs carefully.

7. Are there ongoing costs associated with maintaining an LLC?

  • Yes, there are ongoing costs, including state and federal taxes, annual report fees, reporting fees, and costs associated with services like registered agents. Staying compliant with these obligations is essential to keep your LLC in good standing.

8. What should I do if I miss the deadline for filing my LLC’s annual report?

  • Missing the annual report deadline can result in late fees, penalties, administrative dissolution, or the loss of limited liability protection. If you miss the deadline, take prompt action to file the report and address any associated fees. Consider seeking legal or professional advice if needed.

9. How can I determine the specific costs and requirements for forming an LLC in my state?

  • To find the precise costs and requirements for forming an LLC in your state, visit your secretary of state’s website or contact your local business registration office. They can provide detailed information on filing fees, regulations, and compliance requirements specific to your state.

10. What are the consequences of not complying with state regulations for my LLC?

  • Non-compliance with state regulations can lead to penalties, fines, the loss of limited liability protection, and even administrative dissolution of your LLC. It’s crucial to stay informed and adhere to all state requirements to protect your business.

14 Comments

  1. Avatar Benjamin Foster says:

    Are there any hidden costs to be aware of when forming an LLC?

    1. Hi Benjamin,
      While the primary costs of forming an LLC include state filing fees and Registered Agent fees, potential hidden costs can arise, such as expedited filing fees if you’re in a hurry, fees for obtaining necessary permits or licenses, and the cost of drafting an Operating Agreement, if you opt for professional help. Additionally, some states have publication requirements that can add to the initial cost of forming an LLC. It’s important to research thoroughly to budget effectively for the total cost of LLC formation and maintenance in your state.

  2. Avatar Alexander says:

    How does the cost of an LLC’s annual maintenance vary by state?

    1. Hi Alexander,
      Annual maintenance costs for an LLC also differ by state and may include annual report fees, franchise taxes, and renewal fees for your Registered Agent service. Some states have minimal annual fees, while others may require more substantial payments to maintain your LLC’s good standing. This cost is in addition to any federal or state taxes your LLC may owe based on its earnings.

  3. Are there any other costs involved?

    1. Hi Aiden,
      When forming an LLC, the costs can vary significantly from state to state, but typically include the filing fee for the Articles of Organization, the fee for hiring a Registered Agent (if you choose to use one), and any additional state-specific fees, such as an initial report fee or franchise tax. Some states may also require an annual report fee right from the first year. It’s crucial to check the specific requirements and fees of the state where you’re forming your LLC to get an accurate estimate of the total cost.

  4. Avatar BusinessGrowthExpert says:

    Hi Brian, I liked the post. The flexibility of an LLC structure is one of its key advantages. You can start as a single-member LLC and later bring in partners without changing your entity type. That adaptability is worth every penny.

  5. LLC formation costs are an investment in your business’s future. While it’s tempting to go for the cheapest option, it’s essential to consider the quality of service and ongoing compliance. I appreciate the breakdown of costs and the mention of registered agent services, which can be a lifesaver when it comes to legal notifications.

  6. Avatar Startup Enthusiast says:

    I’m currently in the process of starting my own LLC, and this article came at the perfect time. It’s reassuring to know that I’m making the right decision, not just for my business but also for my financial future. Understanding the state-specific requirements and the importance of an operating agreement is crucial for any entrepreneur.

  7. This was a good article. I often advise my clients on LLC formation, and one thing I stress is the long-term benefits. Sure, there might be some upfront costs, but the tax advantages can far outweigh them. Plus, the peace of mind knowing that your personal assets are protected is priceless. This article covers all the key aspects brilliantly

  8. Avatar BizOwner101 says:

    Great article. LLC formation costs can vary depending on the state you’re in. It’s essential to consider not just the initial filing fees but also the ongoing annual fees and any additional expenses like a registered agent service.
    As a small business owner, I found this article informative, especially the part about tax benefits and liability protection that come with an LLC

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