LLC Costs: Everything You Need to Know
LLC costs depend on your state’s guidelines, but you must generally pay a filing fee of around $100 to successfully register your business.3 min read
LLC costs depend on your state’s guidelines, but you must generally pay a filing fee of around $100 to successfully register your business. An LLC is a business entity regulated under state law that combines aspects of a partnership and corporation. As is the case with a corporation, LLC owners are not liable for any obligations and debts that the business incurs. Similar to a partnership or sole proprietorship, LLCs operate under various flexibilities.
For instance, LLCs operate under pass-through taxation, where profits and losses flow from the LLC to individual members to file on their individual tax returns. To register an LLC, you must submit an articles of organization to the secretary of state office in your respective state. After, LLC members should draft an operating agreement that establishes member rights and operating procedures within the company. Operating agreements are generally not mandatory under state law, but you should create one to effectively manage your business. Your business may also need to get a tax ID number via the IRS.
LLCs enjoy the following liberties:
- Few Formalities: LLCs do not need to hold official meetings unless the operating agreement requires so. Also, LLCs come with less paperwork, and there is less of a chance in members violating guidelines in some fashion and placing the business and liability protections in jeopardy.
- Easy Process: Creating an LLC is simple, and you would not need an attorney to help you. You may prepare all paperwork and register without extensive legal requirements. However, you may seek legal advice if you need additional help registering your LLC, or you can use a formation service.
- One-Member Registration: Only one person needs to register an LLC. Further, IRS code changes have prompted state law reforms that allow sole-member LLCs. With that, you should create your LLC in the state where you intend to conduct business. Registering in other states calls for more paperwork and red tape.
The LLC structure is similar to a corporate structure in the sense that members represent shareholders of the business. Members appoint managers to run daily business affairs, which is similar to directors within a corporation. Also, managers can be members as well.
Cost is a prime factor when registering an LLC. Since each state has varying LLC regulations, the cost amount depends on the state. All states require you to pay a fee with your articles of organization document, but additional costs may apply in the following areas:
- Franchise taxes
Startup costs comprise state and service fees. There are also various filing fees, and they can change periodically, especially as states look to raise additional capital. Further, submitting your articles of organization may not be enough, depending on the state. Rather, your may have to go through additional steps to complete the process. Failure to take such steps could result in the business being canceled or suspended.
In Nevada, for instance, you should submit what’s called an Initial List containing member information, and you must obtain a business license within 30 days of registering the LLC. Since December 2010, the fee regarding the Initial List amounts to $125 and $200 to get the license application.
Moreover, you may also need to pay fees to get special services. For example, you would have to pay a fee if you choose to use a formation service to register the LLC, which is a step that could save you time if you do not wish to submit the documents.
Service providers usually charge for the following services:
- LLC creation
- Registered agent services
- Drafting an operating agreement
- Getting an employer identification number
- Researching LLC licenses that are necessary for your business
If you use a service company, or other professionals such as an accountant or lawyer, you will need to pay additional fees along with the state filing fees. The states do not mandate professional services, but you should hire a professional when the situation calls for doing so. For instance, for states that mandate an operating agreement, such as Missouri and New York, attorney services would be a good way to ensure that you draft an agreement that suits your business.
If you have more questions about LLC costs, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s lawyers will provide guidance on creating an operating agreement that all parties within your LLC can agree to. Moreover, they will help you regarding any maintenance steps you need to be aware of so you can keep your business in good-stating with state officials.