How Much Is an LLC?: Everything You Need to Know
How much is an LLC? How much an LLC costs depends on the filing fees and other costs within the state of the company's establishment.4 min read
How much is an LLC? How much an LLC (limited liability company) costs depends on the filing fees and other costs within the state of the company's establishment. An LLC is a business entity that provides personal liability protection. This means your personal property cannot be seized to settle the financial debts and obligations of the business.
An LLC has the operating flexibility of a partnership or sole proprietorship and is treated as a pass-through tax entity. The company is not taxed at the corporate level; instead, profits and losses pass through to each shareholder's tax return and are taxed at the individual level.
The owners of an LLC are referred to as members. An LLC can have any number of members. The LLC members can decide to manage the business themselves or to hire a manager to carry out the daily operations. This decision should be specified in the LLC's operating agreement. LLCs are not required to have a board of directors or hold formal meetings but instead can conduct meetings as needed.
Legal Documents Needed to Form an LLC
Each state has its own state of guidelines to establish an LLC, but the basic steps are the same. This includes creating and submitting two legal documents: the Articles of Organization and the Operating Agreement.
The Articles of Organization are filed with the Secretary of State where you plan to do business. This form includes basic information about your company, including:
- The company name.
- The names of members.
- The business address.
- The name and contact information of your attorney or registered agent.
The Operating Agreement establishes the guidelines for running the company and the rights and responsibilities of its members. Although this document is usually not required by state law, it's still an important step that prevents potential conflicts in the management of the company. If your LLC has more than one member, an Operating Agreement will be an essential part of your major business decisions, including:
- How profits and losses will be shared.
- The ownership transfer process.
- The dissolution process.
- Other operational details.
Once the operating agreement is signed by all members, it is a legally binding document. You'll also need to acquire an employer ID number (EIN) from the IRS. This is used to:
- Pay taxes.
- Apply for loans.
- Establish business bank accounts.
- Other financial purposes.
After the state approves your LLC, you can request a free EIN from the IRS.
LLC Startup Costs
Common LLC startup costs include the following:
- Filing fees, which vary from state to state. Some states charge as little as $50 while others charge up to $800 or more. Check with the secretary of state's office to find out the fees for your state.
- The cost to register your LLC name with the secretary of state. This name must include LLC or L.L.C. and cannot be in use already by another business in the state. You should search your name before filing your articles of incorporation. While most states will search the name for you as part of the application process, if it's already in use, your application will be rejected and subject to an additional refiling fee.
- The cost of trademarking your LLC name with the U.S. Patent and Trademark Office, with the Department of State, or with a service mark if applicable. Each registration carries a separate fee.
- In some states, you will need to publish a notice of LLC formation in specific local papers as designated by the secretary of state. Depending on your location, the cost of running this notice can range from $40 to $2,000, with higher costs in urban areas such as New York City.
- The cost of hiring a registered agent, a person or business who agrees to accept legal paperwork and official documents on behalf of your LLC. You can serve as your own registered agent or have a friend or family member do so, as long as he or she has a street address in the state of formation. If you do not have an address in the state, you can hire a registered agent service at a cost of between $100 and $300 per year.
- Filing assistance to help set up your LLC, with fees starting at $50 with extra costs for rush processing and other add-on services. If you have a multi-member LLC or another complex situation, you may want to consult a business attorney.
- The cost to create and file an operating agreement ranges from $50 to $200.
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