The cost to form an LLC in the United States varies by state, usually $50-$500 for state filing fees and $50-$300 annually for registered agent fees. Other costs may include fees for preparing the articles of organization, operating agreement, and obtaining a tax ID number.
The total amount can range from a hundred to a thousand dollars, according to the state and additional services used. It is important to check with the state's Secretary of State office for a complete list of fees and requirements.
What is an LLC?
A Limited Liability Company is a popular business structure in the United States. It provides personal liability protection for its owners, known as members, and is taxed as a partnership or a sole proprietorship. This article will outline the costs associated with forming an LLC in the United States.
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Filing Fees
The primary cost associated with forming an LLC is the state filing fee. The fee varies from state to state but ranges from $50 to $500. California and New York have higher filing fees, while others, like Wyoming and Arizona, have lower fees.
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Registered Agent Fees
An LLC must have a registered agent responsible for receiving legal documents on behalf of the company. The rate of a registered agent varies, but it typically ranges from $50 to $300 per year.
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Articles of Organization
The articles of organization are the legal documents that formally create an LLC. They typically include information such as the company's name, location, and the names of its members. The cost of preparing these documents ranges from $50 to $1,000, depending on the complexity of the business and the expertise of the person preparing the documents.
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Operating Agreement
The ownership structure and operating procedures of the company. It is not required in all states but is recommended for all LLCs. The cost of preparing an operating agreement ranges from $50 to $1,000, depending on the complexity of the business and the expertise of the person preparing the documents.
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Tax ID Number
An LLC must obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is also known as a tax ID number. The EIN is used to identify the company for tax purposes and to open a business bank account. The cost of obtaining an EIN is $0.
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Annual Fees
In addition to the initial costs of forming an LLC, annual fees are also associated with maintaining the company. These may include annual report fees, franchise tax, and registered agent fees. These fees vary from state to state, but they typically range from $50 to $800 per year.
Cost to Form an LLC
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State Filing Fees
This fee varies depending on the state where you choose to form the LLC but ranges from $50 to $500, with the average fee being around $200. Some states also require an annual report fee ranging from $10 to $800 per year.
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Registered Agent Fees
Forming an LLC in a state where you do not reside, you may be required to appoint a registered agent. This person or company must have a physical address in the state and be available during business hours to receive important legal and tax documents. The cost for a registered agent service can range from $50 to $300 per year.
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Professional Fees
Suppose you hire a professional to assist with the formation process, such as a lawyer or an LLC formation service. In that case, their fees can range from a hundred to a thousand dollars, depending on the services provided. This may include assistance with creating the articles of organization, obtaining an EIN from the IRS, and obtaining any necessary licenses and permits.
It's important to note that while the upfront costs to form an LLC may seem high, they can be outweighed by the many benefits of having an LLC structure, such as liability protection, tax benefits, and the ability to raise capital.
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Factors in the Cost to Form an LLC
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State Fees
As mentioned earlier, the cost of filing the articles of organization with the state is a major factor in the overall cost of forming an LLC. The fees vary from state to state, with some states having higher fees than others.
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Type of LLC
The cost of forming an LLC can also depend on the type of LLC you choose, such as a single-member LLC, multi-member LLC, or series LLC. Some states charge higher fees for certain types of LLCs.
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Professional Fees
Suppose you hire a professional to assist with the formation process. In that case, the cost of their services widely depends on the complexity of your needs and the level of services provided.
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Add-On Services
Suppose you opt for additional services, such as obtaining an EIN from the IRS, obtaining business licenses, or drafting an operating agreement. In that case, this can increase the overall cost of forming an LLC.
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Location
The cost of forming an LLC can also differ depending on the location of the LLC. For example, forming an LLC in a state with a high cost of living, such as California or New York, may be more expensive than forming an LLC in a state with a lower cost of living, such as Wyoming or Georgia.
Generally, the cost of forming an LLC in the US ranges from a few hundred to a few thousand dollars, depending on the abovementioned factors.
Conclusion
It is essential to understand the amount associated with forming an LLC and budget accordingly, as they can add up quickly. By taking the time to understand the costs and budgeting appropriately, you can ensure that your LLC is set up for success. ContractsCounsel can guide you to plan the budget and help you set up LLC successfully.
