How Much Does It Cost to Form an LLC?
When establishing a new limited liability company , the business owner will be required to pay various fees. The LLC cost will depend on these required fees and the amounts will vary depending on which state the LLC will be established in.
Some common fees you can expect to pay when starting an LLC include:
- Articles of Organization Filing Fees- This is the fee you will pay when you register your articles of organization and LLC with the state.
- Registered Agent Fees- Limited liability companies are required to appoint a registered agent who is in charge of receiving legal documents on behalf of the company. Although most companies appoint the owner as the registered agent, some companies prefer to hire registered agent services to do this job.
- Business License Fees- Depending on the type of business you are starting and which state you are in, you may be required to obtain licenses or certificates. These will usually have fees associated with them.
These fees are generally what a business owner will have to pay when establishing the business. Keeping the LLC legally operating and in compliance with state and federal laws will require ongoing costs and fees.
For a more detailed look at limited liability company formation documents like articles of organization, read this article.
LLC Filing Cost
The owner of a new limited liability company will be required to pay a filing fee when filing the company’s articles of organization with the state. Filing costs will vary depending on the state laws but generally range from around $40 to up to $500 .
Along with filing the articles of organization, most states require that businesses obtain a business license. Business license costs range from around $50 to $100 in most states.
In some cases, a business owner may want to reserve the name of their business before filing the articles of organization. Each legally operating business needs to have a unique name that doesn’t infringe on the trademark of any other registered business. The cost to reserve a name with the state is usually between $10 and $50 . You can also create a fictitious business name, or ‘ doing business as’ , if your name is already taken.
LLC Ongoing Cost
After the LLC has been established and all of the formation fees have been paid, the owner still needs to keep in mind that there will be ongoing costs to keeping the LLC in compliance with federal and state laws.
These fees include:
- Annual Fees- Limited liability companies are required by most state laws to file an annual report . This report is usually accompanied by a filing fee however some states do not charge a fee. This annual report is essential in keeping the LLC in compliance with state laws. If a state does charge a filing fee, it can sometimes be as much as $500 .
- Annual Franchise Tax- Some states charge LLCs a yearly tax just for doing business in the state. This will need to be paid for the LLC to remain operational. California currently has the highest annual franchise tax at $800 but most states charge between $100 and $400.
- Business License Renewal Fees- After initially obtaining a business license or permit, most states require annual fees to keep these licenses. Business license renewal fees generally range from $20 to $100.
LLC Formation Costs By State
The limited liability cost in each state varies because each state charges different fees. Below is a chart detailing the filing fees and ongoing fees for an LLC in each state. These fees only include mandatory filing fees, not optional fees like hiring a professional registered agent.
|State||LLC Filing Fees||Ongoing LLC Fees|
|Alabama||$180||$100 to $200|
|Arizona||$50||$0 to $100|
|Arkansas||$45 or $50||$150|
|District of Columbia||$220||$300|
|Minnesota||$135||$25 to $45|
|Missouri||$50 or $105||$0|
|New Jersey||$125||$125 per LLC member + $50|
|New York||$275||$25 to $4,500|
|Tennessee||$300 to $3,000||$300 to $3,000|
For more information about LLC cost by state, check out this article.
Operating Agreement Cost
An operating agreement is a written document that lays out how a company will be operated and governed. The operating agreement includes important information like management structure, investments, taxes, and profit-sharing.
Most states do not require limited liability companies to have an operating agreement, however, it is a good idea to have one anyway, especially if the LLC is a multi-member LLC. The operating agreement outlines the roles and responsibilities of all the members and managers in a company and will help avoid and solve any business disputes that may arise.
There is no government fee associated with having an operating agreement, however, some businesses will hire a corporate lawyer to assist in drafting the operating agreement.
Having a clear, well-written operating agreement is an important part of running a successful company. It is a good idea to consult with an attorney who is familiar with your state’s business laws to ensure that the operating agreement is compliant with the law and includes all necessary information.
Attorney’s fees associated with drafting an operating agreement will vary based on the state and law firm.
Need more information about operating agreement cost ?
Are LLCs Expensive?
Establishing and maintaining a limited liability company will be more costly than a sole proprietorship , however, it will be less expensive than establishing a corporation.
Filing fees, business license fees, annual fees, and taxes can add up quickly so it may seem like owning and operating an LLC is expensive. The fees and cost of business associated with your LLC will depend on which state you are operating and what licenses you may require for the business you are operating.
Many business owners feel that incurring the costs of forming and maintaining a limited liability are worth it because of the asset protection, tax benefits, and flexibility that LLCs offer owners.
If you would like to read more about LLCs, click here.
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