Cost of LLC By State: Everything You Need to Know
The cost of LLC by state is a topic that many business owners are curious about when they begin thinking about starting an LLC. 3 min read
2. LLC Startup Procedure
3. Forming an LLC: Which State is Right for You
The cost of LLC by state is a topic that many business owners are curious about when they begin thinking about starting an LLC. This is particularly true among entrepreneurs who are open to starting their LLC in a different state to save money on filing fees and annual fees.
LLC Annual Fees by State
In the United States, the average annual fee is $101. In most states, the law requires that LLCs file annual reports. There are due dates and filing fees associated with these annual reports. Other names for the annual report include the following:
- Annual certificate
- Annual registration fee
- Annual list of members
- Biennial statement
- Biennial report
- Decennial report
- Periodic report
The annual fee for an LLC is an ongoing fee paid to state authorities to keep an LLC in good standing and in compliance with the laws of the state. On the other hand, the filing fee for an LLC is a one-time fee paid to state authorities. The annual fee is not always paid on an annual basis. In most states, this fee is paid every few years.
No matter the income or activity of the LLC, the annual fee is required. If an LLC doesn't pay this fee, the state will shut down the LLC. Over 90 percent of states will dissolve an LLC in the event the annual fee isn't paid.
If you decide to form an LLC in one state and do business or have your business physically located in another state, you will need to register your LLC in both states. Accordingly, you will need to pay filing fees, annual fees, and taxes for both states.
Most of the time, it is a good idea to form an LLC in the state where the owner plans to do business. However, it is also worth looking at the filing and annual fees in all of the states. In some cases, there are huge differences in fees. For example, the filing fee in Arizona is $50 and there is no annual fee. On the other hand, the filing fee in Alaska is $250 while the annual fee is $100.
LLC Startup Procedure
For many businesses, changing the format of their business to an LLC allows them to enjoy a number of advantages. Some of the benefits of forming an LLC are credibility, asset protection, tax savings, deductible employee benefits, and ease of raising capital.
To form an LLC, you need to fill out paperwork referred to as the "articles of organization." The rules for LLC formation differ from state to state. The filing fee is as low as $40 in some states and as high as $500 in other states.
The business name you choose for your LLC needs to be unique. The name must indicate that the business is an LLC and it shouldn't use words restricted or prohibited by the state.
The purpose of the articles of organization is to legitimize your company. This document consists of general information about the LLC, such as the names and contact information of the members.
If you want to run your business legally, you need to acquire certain permits and licenses. The regulations that you will need to abide by depend on the state, industry, and locality.
Multi-member LLCs should create an operating agreement to determine the details for the business arrangement. The operating agreement should include the rights, responsibilities, and percentage of ownership of each of the members.
Some states require owners to announce the formation of an LLC. If your state has this requirement, you can reach out to the business filing office for more information.
LLCs that hire employees need to comply with state and federal regulations through the process of recruitment.
Forming an LLC: Which State is Right for You
Chances are, you've heard that forming an LLC in certain states can offer you certain advantages in comparison to other states. Some of these states are Wyoming, Delaware, and Nevada.
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