Cheap LLC Formation: Everything You Need to Know
Cheap LLC formation is one of the first things that will come to mind when wanting to register your business as an LLC. 3 min read
2. Choosing a State to Form an LLC
3. Foreign Qualification
Cheap LLC Formation
Cheap LLC formation is one of the first things that will come to mind when wanting to register your business as an LLC. Understandably, costs could be an issue, particularly for new businesses with little to no start-up money. In fact, at times, the cost to form can exceed a business owner’s cash on hand. Therefore, you should try to save wherever you can when registering your business as an LLC.
An LLC, or Limited Liability Company, offers many advantages in terms of taxation and management flexibility. If you want to save money when forming your LLC, then you should try establishing the business on your own.
The most important document is the Articles of Organization, which can be filled out on your own. You can find this document on the Secretary of State’s website, including detailed instructions on how to fill it out.
The document requires basic business information, such as the business name, address, registered agent name and address, type of industry and description of the business, and the member(s) names and addresses. If you choose to hire a professional formation company or attorney, then you’ll need to pay additional fees for their services.
Choosing a State to Form an LLC
Since the fees associated with establishing your LLC vary depending on the state, you could also choose a state that offers cheap filing fees. For example, the State of Colorado charges $50 to file the Articles of Organization whereas Massachusetts charges $500.
States like Delaware, Wyoming, and Nevada are also popular choices for registering your LLC. However, some states with lower fees charge additional ongoing fees for LLC, which can include:
- Annual reporting fees
- Franchise taxes
- Business income tax
- Employment tax
- Property tax
Additionally, if you own and operate an LLC in one state, but conduct business in another state, you will need to obtain foreign qualification in order to conduct business in that other state. This will cause additional fees, more paperwork, and greater tax implications, which could greatly outweigh the benefits of conducting business in that state.
There could be even more costs associated with operating out of state. Generally, you will want a physical office in the state in which you are registered, along with a registered agent who lives in that state. Therefore, if you don’t live in the foreign state, then you might need to rent space for purposes of qualifying as a foreign LLC. While you might want a physical location in that foreign state, it is not necessary.
You will also need to pay a third party to act as registered agent as opposed to you forming an LLC in your home state where you already live and acting as your own registered agent.
While you might want to try to understand what your taxes could be in the foreign state in which you want to qualify to do business in, it could prove very difficult. Therefore, you should seek the help of a tax professional who can better understand what your goals and objectives are if you want to move forward with qualifying as a foreign LLC in another state.
Be mindful that, if you operate as a registered LLC in any given state, you cannot begin conducting business in another state unless you are first qualified to do so. Therefore, you’ll want to ensure that you are not transacting business in another state. If that state finds you to lease office space or hire employees in that state, then it could require you to first qualify as a foreign LLC and pay the required fees and taxes for earning profits in that foreign state.
If you operate an online LLC, then you could have some additional options, as an online LLC is expected to reach people in potentially all states in the U.S.
Since LLCs are entities that are legal and separate distinct entities, the owners need not live in the state in which they register. In fact, LLC owners don’t have to live in the country. They can be located anywhere.
If you need help learning more about the cheapest LLC formation states, or if you want help forming an LLC, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.