How Much Does It Cost To Form an LLC: Everything You Need to Know
How much does it cost to form an LLC? One of the best benefits of an LLC is that in most states they are easy and inexpensive to form. They involve simply filling out standard or online forms.3 min read
How much does it cost to form an LLC? One of the best benefits of an LLC is that in most states they are easy and inexpensive to form. They involve simply filling out standard or online forms. This process can also be inexpensive for single-member LLCs and only becomes more costly when legal expenses are added for LLCs where the organization is more complicated or there a lot more members.
What is an LLC
An LLC or limited liability company is a business structure that helps provide flexibility and savings on taxes for small business owners. In an LLC, the business entity status separates it from the owners in the event of personal liability. This will prevent the owners from being responsible for business debts.
An LLC, similar, to a partnership and sole proprietorship, can function as a pass-through liability for tax purposes. This essentially means that the taxes are not paid by the LLC and must pass-through to the members themselves to pay on their personal tax returns.
Creating an LLC will require a few simple steps on the part of the business owner including:
- The creation of Articles of Organization by you or your business attorney.
- Filing the Articles of Organization with the Secretary of State in the states where you will be conducting business.
- Creating an Operating Agreement that will set up the rights of the members and rules for running the company.
- Getting an Employer Identification, or EIN, for tax purposes.
While creating an Operating Agreement is not required by law, is considered highly advisable so that members will be aware of their rights as well as what will happen upon member departure, dissolution of the company, and the tax calculations that will occur.
Cost to form an LLC
When forming an LLC, there will be two primary costs that you will need to consider. The first costs will include what are known as start-up costs and include:
- State fees.
- Service fees.
- Company naming.
- Filing articles of organization.
- Publication of operating agreement.
- Filing for EIN.
The other set of costs will be what is termed ongoing costs for the company and will include:
- Annual franchise taxes - this is only applicable in some states.
- Reporting fees.
It is always a good idea to form your LLC in the state where you plan to conduct most of your business, or you may end up with additional fees and a considerable amount of additional paperwork.
Cost to Form an LLC: Do It Yourself
When forming the LLC yourself, you will be required to pay state filing fees. You will also need to retain the services of a business lawyer to file for the Certificate of Formation, otherwise known as the Articles of Organization, with your area Secretary of State. You can expect a business lawyer to run you between $1,000 and $1,500 to form the Articles of Organization.
You can also choose to use an online website for incorporation which will charge you between $99 and $900 depending on the state and the complication of filing. If you pay the minimum amount, you will likely need to pay extra costs for a Federal Tax ID number and the formation of the operating agreement.
Whether you go through a business lawyer or choose an online service to file forms for your LLC, you will be responsible for covering the state required filing fees, and this cost will range depending on the state where you are filing. The average filing fee in the United States is $127 with ranges between $50 and $800.
In addition to state filing fees, there is an additional cost that can arise when setting up your LLC. You may be required to pay service fees for the services of a business lawyer for their expertise in helping you to fill out the forms and set up filing agreements. It is important to note that state filing fees are subject to change at any time and can be higher when the state is looking to raise more money.
Cost to Form an LLC: Name Reservation
You can reserve your name for your LLC for a period of time and pay a small fee by filing the proper papers with the Secretary of State. At this time, most states will conduct a name search to see if there is a company with a similar name before approving and reserving it.
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