Key Takeaways

  • LLC cost varies widely by state. State filing fees for Articles of Organization range from about $40 to over $500, with Massachusetts and Tennessee at the higher end.
  • Ongoing fees are required. Most states require annual or biennial reports, with fees ranging from $0 to $800.
  • Additional costs apply. Registered agent services, operating agreements, name reservations, business licenses, and publication requirements can all increase the total LLC cost.
  • DIY vs. professional services. Filing on your own can save money, but many business owners hire legal or formation services for compliance and convenience.
  • Hidden or overlooked costs. Certified document copies, franchise taxes, and expedited processing fees can significantly affect total expenses.

What Is an LLC

How much does an LLC cost depends on multiple factors. An LLC, or limited liability company, is a structure for a business that separates the owner's personal property from the holdings of the business. LLCs have more flexibility in the operations, as well as benefits related to being a pass-through entity for taxes. This type of entity structure is similar to a partnership or sole proprietorship. As a pass-through entity, the LLC isn't taxed; instead, profits are passed to its members and those profits are taxed.

In most states, an LLC is inexpensive and easy to form, offering an advantage over other types of business structures. Some states also allow for the formation of an LLC by filling out standard forms or completing those forms online. You can even form a single-member LLC by filling out the forms, and the fee to complete the process is minimal. For those with more complex LLCs, legal assistance may increase the cost but is worthwhile.

Using an incorporation website to form the LLC comes at a cost as low as $99 or up to $900. After paying the filing fee, you must also pay additional fees to get an employer identification number (EIN) and the operating agreement. The IRS requires that all LLCs be formed under state statutes, not federal statutes. As a result of this regulation, the costs to establish and maintain an LLC will vary between states. Certain states have stricter and more expensive requirements, making it harder to set up an LLC.

Factors That Influence LLC Cost

The cost of forming and maintaining an LLC depends on several factors:

  • State of formation: Some states like Kentucky charge only $40 to file, while others such as Massachusetts exceed $500.
  • Business size and complexity: Multi-member LLCs or those requiring detailed operating agreements may incur higher legal costs.
  • Professional services: Hiring an attorney or a formation service can range from $99 to $900, depending on the level of support.
  • Additional compliance requirements: Certain states impose publication requirements, franchise taxes, or high annual renewal fees that increase overall LLC cost.

Forming an LLC, How Much Does It Cost?

When you are considering starting a business, take a closer look at the option to form that business as an LLC. As you consider how you will structure the LLC, consider the two main costs associated with forming the business. These two main costs include startup and ongoing. The startup costs include paying for the expertise and additional services from a professional provider, such as an attorney or accountant.

Other Startup Expenses to Consider

Beyond the state filing fee, several additional expenses may arise during LLC formation:

  • Name Reservation Fees: Some states require a reservation to hold your desired LLC name, usually $10–$50.
  • Registered Agent Fees: States require an LLC to designate a registered agent. You can act as your own, but many use professional services that cost $100–$300 per year.
  • Operating Agreement Preparation: While not always required, drafting an agreement (especially with attorney assistance) may cost $200–$1,000.
  • Business Licenses & Permits: Depending on the industry, you may need local, state, or federal licenses. Costs vary widely, often $50–$500.
  • Publication Requirement: In states like New York, LLCs must publish notice of formation in newspapers, costing anywhere from $600 to $1,200.
  • Expedited Filing: Some states charge extra for faster processing, ranging from $25 to over $100.

Requirements and Filing Fees

Every state requires a filing fee to register an LLC. However, the amount of that filing fee varies between states. For example, Kentucky's LLC filing fee is $40, while the filing fee in Massachusetts is $520. The updated requirements and fees to form an LLC are available through the Secretary of State's office. 

Another requirement of forming an LLC is creating articles of incorporation and registering them with the proper agency within the state in which you plan to file. You might need a certified copy of the articles of incorporation for tax purposes, although this will require an additional fee. When you submit your articles of incorporation, the filing fee is typically between $50 and $500.

One recommendation of an LLC is an operating agreement. This document includes a declaration of all members' rights, along with an outline of how the operations of the business will be regulated and handled. Laws do not require LLC members to use an operating agreement, but it is certainly recommended. 

The agreement should clearly spell out important aspects for members, including:

  • Responsibilities and liabilities of the members
  • Calculations for taxes
  • Ownership interests
  • Conditions if a member enters or exits the business
  • Rules for termination of the business

The IRS also requires every LLC to have an EIN, which is also referred to as a tax ID number. Before you can open a bank account for the business, you will need the EIN. You will also use the EIN to obtain credit, access the finances of the business, and file taxes. There is no cost associated with obtaining an EIN, and it comes from the IRS.

Be sure to wait to apply for an EIN until the LLC has been approved in your state. If you form the LLC after receiving an EIN, that number will be linked to you personally, making it a sole proprietorship instead of an LLC. You shouldn't need certified copies of the documents, but if the need arises, you can request these from the Secretary of State's office. The fee to get certified copies is typically low and you can order the copies at any time.

Annual and Ongoing LLC Fees

Once formed, an LLC must remain in good standing by meeting annual or biennial obligations. Common ongoing costs include:

  • Annual or Biennial Report Fees: Most states require a report with updated member/manager information. Fees range from $0 (Ohio) to $800 (California franchise tax).
  • Franchise Taxes: Certain states (e.g., Delaware, Texas, California) impose franchise or business privilege taxes that are separate from filing fees.
  • Registered Agent Renewal: If you hire a professional agent, expect annual charges of $100–$300.
  • Business License Renewals: Some industries and localities require annual license renewal fees.
  • Late Filing Penalties: Missing deadlines for reports or taxes can result in penalties of $25–$500, plus interest.

Hidden and Miscellaneous LLC Costs

LLC owners should also budget for smaller but important compliance costs:

  • Certified Copies and Certificates of Good Standing: Often needed for banking or expanding to another state, costing $10–$50 each.
  • Foreign Qualification Fees: Expanding your LLC into another state requires separate registration and fees, usually $100–$300.
  • EIN Replacement or Amendments: While the initial EIN is free, legal assistance in correcting or amending IRS filings may carry costs.
  • Dissolution Fees: If you close the business, some states charge $50–$200 for processing dissolution documents.

Frequently Asked Questions

  1. What is the average cost to form an LLC?
    The average state filing fee is around $100–$150, but total startup costs can range from $200 to $1,000 depending on services and state requirements.
  2. Which state has the cheapest LLC cost?
    Kentucky has one of the lowest LLC filing fees at $40, while other low-cost states include Arkansas and Mississippi.
  3. Why is California’s LLC cost so high?
    California requires both a $70 filing fee and an $800 annual franchise tax, making it one of the most expensive states to operate an LLC.
  4. Do I need to pay ongoing fees for an LLC?
    Yes. Most states require annual or biennial reports, renewal fees, and in some cases, franchise taxes to keep your LLC active.
  5. Can I reduce the cost of forming an LLC?
    You can save by filing documents yourself, acting as your own registered agent, and skipping optional expedited services—but professional help ensures compliance.

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