LLC Fee: Everything You Need to Know
The average LLC fee in most states is $100. The LLC filing fee is a one-time fee paid to the state to form your LLC. Refer to your local secretary of state office to know the exact registration cost in your state.3 min read
2. Articles of Organization
3. What Is an LLC?
4. Operating Agreements
5. Operating Structure
The average LLC fee in most states is $100. The LLC filing fee is a one-time fee paid to the state to form your LLC. Refer to your local secretary of state office to know the exact registration cost in your state.
There are also annual dues that vary by state. You must also file annual reports with the annual fee.
Annual reports can go by the following names depending on the state you live in:
- Annual List of Members
- Annual Certificate
- Business Privilege Tax Return
- Periodic Report
You need to pay annual fees in most states, but some states make an exception. Annual dues can be paid every 1 or 2 years, depending on the state where you live. For example, Alaska levies a one-time filing fee of $250 and an additional biennial fee of $100. Arizona works differently, requiring you to pay a single $50 registration cost, but no annual dues are required.
The following consequences could result if you fail to pay the annual fee:
- Dissolution of the LLC
- Additional Fees
Articles of Organization
To use California as an example, you would file your articles of organization with the California secretary of state before and pay your registration fee before you conduct business in the state. Regardless of state, creating an LLC is a faster and easier process than registering a corporate entity. All LLC members should enter into a verbal or written agreement before or after you file the articles of organization.
What Is an LLC?
An LLC is defined as a business entity that combines partnership and corporate structures. LLCs are more advantageous than partnerships because any obligations or debts incurred from the LLC is restricted to the entity itself and not individual members.
Like a partnership, however, each member has the right to participate in LLC operations and absorb any losses or profits to the members. With that, certain businesses cannot form LLCs, such as legal or medical practices.
An operating agreement is a formal agreement between you and other members of the LLC regarding management structure, among other things. A good operating agreement should include the following:
- Compensation or Payment Disbursement Share to Each Member
- Roles, Duties and Responsibilities of All Participants
- Dispute Contingency Plans
States generally do not require operating agreements, but you should have one in place so all members are aware of their duties in the organization. Further, operating agreements prevent internal disputes from spiraling out of control, which could result in lawsuits or extensive legal wrangling.
The operating structure of the LLC depends on your preference or agreement between members. For instance, members can agree to have a sole manager operate business affairs, or members can be become involved and take on special duties within the company.
Businesses with more than one member are generally treated as partnerships (Subchapter K), unless it is designated as a corporate entity. For example, a husband and wife that own the LLC can opt for a partnership or a disregarded entity.
LLCs are usually taxed as partnerships, but members that opt for corporate classification are taxed in the same way as corporate structures. LLCs also abide by pass-through taxation, meaning that profits and losses are passed from the LLC to a member’s personal tax return.
With California, for instance, credits, incomes, and deductions will flow from the LLC to each member on their Schedule K-1. The flow-through method allows members to include certain items on their taxes such as:
- Property Shares
- Payroll Taxes
- Member Income Share
In essence, all LLC members are protected from any judgments or debt obligations of the company. It should also be noted that LLCs do not issue stocks and are not required to conduct annual meetings like corporate entities. Instead, LLC members hold a share of the business and can be compensated based on his or her share in the business.
An employer identification number (EIN) is generally mandatory if you retain employees, or if you have multiple members within the LLC. EINs helps the IRS uses to label your business and tax it accordingly. If you need an EIN for your business, you can obtain one of free via the IRS website.
To find out more about an LLC fee in your state, submit your legal inquiryto our UpCounsel marketplace. UpCounsel connects you with the most prestigious and reputable attorneys in the nation. We will guide you through fee structures or the general process of creating an LLC. We will also help you with any questions regarding taxes and the best structure that suits your business accordingly.