The Cost of Starting an LLC
The cost of starting an LLC largely depends on the state in which you conduct business and if you complete the process yourself or hire professional help. Here are some potential expenses you might encounter:
LLC Filing Fee: You will need to file your LLC’s Articles of Organization (sometimes called a Certificate of Formation or a Certificate of Organization) with the appropriate department in your state. This fee varies by state, ranging from $40 to more than $500, with an average cost of about $100 to $150.
Operating Agreement: It’s strongly recommended that every LLC have an operating agreement. There’s no filing fee for operating agreements, and it’s possible to write one yourself or use a free template. However, you may prefer to have an attorney help you or to use a paid template or other professional services. Depending on your choice, the cost of creating an LLC operating agreement can range from nothing to more than $1,000.
Business Name Reservation: Only Alabama requires LLCs to reserve their business name before registering it and filing their Articles of Organization. However, a number of states offer this option if you have a name in mind and want to reserve it before you officially register your business. This cost varies state to state but generally is less than $50.
LLC Notice of Formation: Three states — Arizona, Nebraska, and New York — require LLCs to publish a notice of their organization in a local newspaper. This can cost between $40 and $2,000, depending on your location.
Registered Agent Fee: Your LLC will need to appoint a registered agent (also referred to as a statutory agent, resident agent, or agent for service of process in some states). You have the option of appointing a member of your LLC as its registered agent, which would be free in most states. If you prefer to appoint a professional service to handle this responsibility, that will typically cost between $50 and $300 per year. Some LLC formation services will include this service for free the first year.
LLC Formation Service: While it’s possible to complete all the paperwork to form an LLC yourself, you may want to hire professional help. Formation services tend to cost anywhere from $40 to $350, depending on the company and the additional features included in the package.
The Cost of Maintaining an LLC
After you form your LLC, you may be responsible for paying several recurring costs on a regular basis. These include:
- Annual/Biennial Report Preparation: Most states require LLCs to file a regular report to stay compliant. The frequency of this report varies by state, but it’s usually every one or two years. The fee typically ranges anywhere from $10 to $500.
- Franchise Taxes: Some states require LLCs to pay an annual franchise tax. This could be based on a flat rate, on your company’s revenue, or on some other financial metric.
- Registered Agent Fee: If you decide to sign up for a professional registered agent service, the annual cost typically totals between $50 and $300.
Other Potential LLC Costs
You might encounter a handful of other potential expenses when forming an LLC, such as:
- Expediting Fees: Some states offer expedited processing of your LLC’s Articles of Organization for an additional fee. While this may prove useful if you’re in a rush for some reason, expedited processing generally isn’t necessary.
- Attorney Fees: Some business owners prefer to hire an attorney to help them with certain aspects of creating their LLC, including writing the operating agreement.
- Website Development/Hosting and Domain Name Registration: You’ll want to have a business website for your LLC. The cost of developing and maintaining this site can vary, depending on the service provider and the specific services you choose.
- Certified Copy Fees: If you want a certified copy of your Articles of Organization or other documents you file with your state, most states offer these at a nominal cost.
LLC Formation Cost: FAQ
How much does starting an LLC cost?
The cost to start an LLC varies from state to state and can cost in total anywhere from $50 to $500. Using a formation service will add an additional fee between $40 and $350.
What are the state fees for an LLC?
Each state charges LLCs a fee to file their Articles of Organization. This fee ranges between $40 and more than $500, depending on the state. Some states also charge a regular reporting fee and an annual franchise tax.
Do I need a lawyer to start an LLC?
A lawyer is not required to start an LLC, but some owners hire one to help them create their LLC’s operating agreement.
Should I use an LLC formation service?
Using a professional formation service to start your LLC can help save you time and allow you to focus on other aspects of your business. Check out our guide to the best LLC formation services to learn about our favorites.
What is the best state to set up an LLC?
While the costs and regulations can differ from state to state, it’s generally best to form an LLC in the state in which it will conduct business.
Does an LLC need a registered agent?
Yes, you need a registered agent to form and maintain an LLC. You can either appoint someone from inside the company or pay for a registered agent service.
Is an EIN free?
Yes, an Employer Identification Number (EIN) is free.