Starting a new business can be exciting as well as overwhelming. One of the most important decisions you have to make is selecting a suitable business structure. A Limited Liability Company (LLC) is a popular choice among entrepreneurs. This is because it provides tax flexibility and protects them from several business liabilities. But have you ever wondered how much does it cost to get an LLC? 

Various costs are associated with setting up and maintaining an LLC, from filing fees to operating agreement expenditures and hiring registered agent services. This article will explore the expenses of getting an LLC and help you plan your budget accordingly. So, are you ready to discover the full cost of forming an LLC and what you can expect in terms of expenses? Read on!

How Much Does It Cost to Form an LLC 

Establishing an LLC involves various charges, including fees for preparing and submitting necessary legal documents. Additionally, registering your LLC with relevant authorities, such as state and local governments, requires obtaining necessary permits, licenses, and certificates, which may add to the overall expenses. The cost of setting up an LLC can vary based on your approach to the process – whether you choose to do it on your own or seek professional help.

 

1. Initial LLC Filing Fee 

Typical amount: $50 to $800

When it comes to filing fees, the cost typically ranges from $50 for legal services to $50 to $800 for filing with the state, based on the state you are operating in. Below are details for some states:

State	LLC Filing Fee	LLC Annual Fee
California LLC	$0 (free until June 2023)	$800 + $20
Florida LLC	$125	$138.75
Georgia LLC	$100	$50
Kansas LLC	$160	$50
Louisiana LLC	$100	$35
Mississippi LLC	$50	$0
New Jersey LLC	$125	$75
New York LLC	$200	$9
North Carolina LLC	$125	$200
Texas LLC	$300	$0
Washington DC LLC	$99	$300

For many business owners, these fees make up the majority of the expenses incurred during the LLC startup process. Although it is possible to file the articles of the organization without the assistance of a lawyer, utilizing the services of an LLC filing provider can reduce the chances of incorrect paperwork, which could result in additional fees or even cause a delay in the process. These services often come at a low cost and can help ensure that the formation of your LLC goes smoothly. We will discuss these later in the article. 

2. Operating Agreement Cost

Typical amount: $50 to $200

An operating agreement outlines the inner workings of an LLC, including the responsibilities of its owners (members), decision-making processes, and overall management of the company.

While it is possible to create an operating agreement on your own for free, involving professional help is highly recommended when it comes to the division of profits and losses. Legal service providers can handle this task for a fee ranging from $50 to $200. 

Alternatively, a local lawyer can also assist with this. Spending a small amount to ensure everyone is on the same page and prevent potential disputes in the future is well worth it.

3. Other Taxes

Typical Amount: Varies from state to state

LLCs, like any other business entity, are subject to taxation. The federal government collects its share of taxes from the profits of the LLC owners, which are treated as pass-through income. LLCs are allowed to write off some of their startup costs, such as attorney fees, market research costs, office space expenditure, inventory costs, and more, up to a limit of $5,000.

Regarding state taxes, most state tax LLC profits in a similar manner as the federal government by passing through profits to the members’ personal tax returns. However, some states have mandatory franchise taxes for LLCs. For example, the franchise fee is $300 in Delaware and $800 in New York. Similarly, California has a minimum annual franchise tax of $800.

In addition to these franchise taxes, LLCs may also be subject to reporting fees at the state level. These reporting fees vary from state to state but are usually around $100 per year.

 

Ongoing Costs of Running An LLC 

1. Minimum Annual LLC Taxes

Typical Amount: Varies from state to state

Most states require LLCs to pay an annual tax, also known as a minimum franchise tax or minimum annual fee, as a requirement for doing business in the state. This fee is in addition to any federal and state income taxes the LLC may owe. We explained it briefly under the Federal & State taxes heading above. 

2. Annual Report Fees

Typical amount: Ranges from $50 to $200

Most states require LLCs to file an annual report, also known as an annual statement, with the state to maintain their good standing and to update their business information. The cost of filing an annual report varies by state. However, it is usually a small fee ranging from $50 to $200.

3. Registered Agent Fees

Typical amount: Ranges from $50 to $300 

Every LLC must appoint a registered agent, also known as a resident agent, who is responsible for receiving important legal documents, such as service of process, on behalf of the LLC. A registered agent can be an individual or a registered agent service. The cost of hiring a registered agent service can range from $50 to $300 per year.

4. Business License Renewal Fees

Typical amount: Varies from state to state

Business licenses and permits must be renewed periodically. It is usually done on a yearly basis, but it can vary. For instance, Chicago requires all daycare centers to renew their services every two years. Likewise, the cost of renewing a license or permit varies by state and local government. It can range from a few to hundreds of dollars, depending on the type of business, location, and other factors.

 

Other LLC Costs and Fees 

1. Publication Fees 

Typical amount: Varies from state to state

In certain states, such as New York, Nebraska, and Arizona, LLCs are subject to additional costs in the form of publication. This means that these LLCs must publish notices in one or more newspapers in one or more cities or counties for a set period. The cost of publication varies based on the rates offered by state and local newspapers.

2. Business Licenses and Permits

Typical amount: Varies from business to business

These legal requirements imposed by state and local governments allow LLCs to operate a business. Depending on the type of business, location, and other factors, the cost of obtaining a license or permit can vary. For example, suppose an LLC operates in the food and beverage industry. In that case, it may need to get a food service license and pay a fee to the local health department. If the LLC sells products, it may need a sales tax license and pay a fee to the state revenue department.

3. Name Reservation Fee

Typical amount: $50 to $200

Some states allow LLCs to reserve a business name for a limited period, usually several months, to prevent others from using the same name. The cost of securing a business name varies from state to state. For example, in some states, the fee is around $50, while in others, it may be as high as $200.

4. Fictitious Name Fee

Typical amount: $50 to $200

A “fictitious name” or “doing business as” (DBA) name is a name that an LLC uses for business purposes that are different from its legal name. In some states, LLCs must register their DBA name with the state, and the cost of registering varies depending on the state. For example, in some states, the fee may be around $50, while in others, it may be as high as $200. Registering a fictitious name is necessary for LLCs to conduct business legally under a different name than their legal name and protect their business name from being used by others.

 

Conclusion

As you must have noticed, the cost of starting an LLC varies based on a number of factors. These include the state where you form the LLC, the services you use, and whether you hire a lawyer or do it yourself. Some costs to consider are initial filing fees, operating agreement costs, publication costs, and ongoing costs such as minimum annual LLC taxes, annual report fees, registered agent fees, and business license renewal fees. It is vital to research and understand all the costs associated with starting an LLC to budget accordingly. Good luck!

LLC Cost FAQs

Are there any recurring costs for an LLC?

Yes, there are recurring costs for an LLC. These include the minimum annual LLC tax, annual report fee, registered agent fee, and business license renewal fee. The amount of these fees can vary, depending on your state and local government.

Can I start an LLC on my own, or do I need a lawyer?

Yes, you can start an LLC on your own without the assistance of a lawyer. However, hiring a legal services provider or a local lawyer can reduce the risk of improperly filing paperwork. Providing wrong information can lead to additional fees to fix the application or reapply.

Can I write off my LLC formation costs on my taxes?

Yes, you can write off your LLC formation costs up to $5,000. These include attorney fees, market research, office space, equipment, and other startup expenses. But, the condition is, these costs should be considered ordinary and necessary for starting your business.

What is a registered agent, and do I need one for my LLC?

A registered agent, also known as a resident agent, is a person or entity responsible for receiving important legal documents on behalf of your LLC. Every LLC must appoint a registered agent, and the cost of hiring a registered agent service can range from $50 to $300 per year.