Jacqi is a seasoned legal professional committed to simplifying complex legal issues. With her in-depth knowledge of tax laws, she thrives on helping individuals and businesses navigate the maze of financial obligations. Clients trust Jacqi to provid.
Jacqueline Nguyen, Esq. Small Business and Tax Expert WriterJacqi is a seasoned legal professional committed to simplifying complex legal issues. With her in-depth knowledge of tax laws, she thrives on helping individuals and businesses navigate the maze of financial obligations. Clients trust Jacqi to provid.
Written By Jacqueline Nguyen, Esq. Small Business and Tax Expert WriterJacqi is a seasoned legal professional committed to simplifying complex legal issues. With her in-depth knowledge of tax laws, she thrives on helping individuals and businesses navigate the maze of financial obligations. Clients trust Jacqi to provid.
Jacqueline Nguyen, Esq. Small Business and Tax Expert WriterJacqi is a seasoned legal professional committed to simplifying complex legal issues. With her in-depth knowledge of tax laws, she thrives on helping individuals and businesses navigate the maze of financial obligations. Clients trust Jacqi to provid.
Small Business and Tax Expert WriterCassie is a deputy editor collaborating with teams around the world while living in the beautiful hills of Kentucky. Focusing on bringing growth to small businesses, she is passionate about economic development and has held positions on the boards of.
Cassie is a deputy editor collaborating with teams around the world while living in the beautiful hills of Kentucky. Focusing on bringing growth to small businesses, she is passionate about economic development and has held positions on the boards of.
Written ByCassie is a deputy editor collaborating with teams around the world while living in the beautiful hills of Kentucky. Focusing on bringing growth to small businesses, she is passionate about economic development and has held positions on the boards of.
Cassie is a deputy editor collaborating with teams around the world while living in the beautiful hills of Kentucky. Focusing on bringing growth to small businesses, she is passionate about economic development and has held positions on the boards of.
Brette Sember, J.D. contributorBrette Sember is a retired attorney who has been writing and editing law and legal topics for more than 25 years. She is the author of more than 40 books, is a nationally recognized expert on divorce and family law and has a depth of experience that.
Brette Sember, J.D. contributorBrette Sember is a retired attorney who has been writing and editing law and legal topics for more than 25 years. She is the author of more than 40 books, is a nationally recognized expert on divorce and family law and has a depth of experience that.
Brette Sember, J.D. contributorBrette Sember is a retired attorney who has been writing and editing law and legal topics for more than 25 years. She is the author of more than 40 books, is a nationally recognized expert on divorce and family law and has a depth of experience that.
Brette Sember, J.D. contributorBrette Sember is a retired attorney who has been writing and editing law and legal topics for more than 25 years. She is the author of more than 40 books, is a nationally recognized expert on divorce and family law and has a depth of experience that.
Updated: Apr 12, 2024, 5:18pm
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A limited liability company (LLC) is one of the most powerful tools available to entrepreneurs. It protects the owners from business liabilities, so they cannot be held personally responsible, and provides tax flexibility. And for all its power, LLC startup costs are relatively inexpensive compared to other investments you’ll make in your business.
LLC costs can be split into two categories: LLC startup costs and LLC maintenance costs. An LLC’s startup costs are mostly a function of the state where it’s being registered. There are also ongoing costs to maintain your LLC. Here’s what you need to know about how much it costs to start an LLC.
Formation and maintenance costs associated with LLCs can add up. Handling the process yourself can keep costs low. Here is how much it costs to start an LLC:
Other expenses including the startup and ongoing operational costs for an LLC should also be considered. These include website development, marketing initiatives and employee-related expenses. Based on the profitability of your LLC, taxes are another consideration.
Typical costs: $0 to $200
An operating agreement is an internal document that describes how your LLC will be run, the roles and contributions of the owners (members) and the way decisions will be made.
Anyone can create an operating agreement on their own for free. But when you are doing something like dividing profits and losses amongst ownership, you want to get professionals involved to make sure everything is done correctly. Legal service providers can handle the task for anywhere between $50 to $200, or you can hire a local lawyer. It’s a small cost to pay to ensure everyone is on the same page and avoid future disputes.
Typical costs: Varies based on state and local newspapers’ rates therein
Entrepreneurs in New York, Nebraska or Arizona are subject to additional LLC costs in the form of publication. In short, LLCs in these states have to publish notices for a specified period of time in one or more newspapers across one or more cities or counties.
Typical costs: $0
An EIN application is used to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is a unique nine-digit number assigned to businesses and other entities for tax purposes.
You can apply for your EIN through various channels, including online or by fax or mail with the Form SS-4. The online application is the most preferred and efficient way to get an EIN.
Applying for an EIN requires specific details about your business, such as its legal name and address, entity type, names of member(s), Social Security numbers and business activity. Once the IRS approves, an EIN will be assigned. If done online, the approval is instant.
Acquiring an EIN is free, with applications being accepted directly by the IRS website. You can pay a small fee to use an authorized third-party service provider to apply for you if you wish. Be mindful when applying for your EIN that accurate and up-to-date information is provided when filling out applications to avoid potential compliance issues in the future.
Typical costs: $10 to $100
DBA, which stands for Doing Business As, is a trade name a business uses that differs from its legal one. Every state has a different application and filing fee for a DBA. These fees can consist of:
In addition to the initial registration fees, getting a DBA may require additional business licenses, which can add to the total of how much it costs to set up an LLC. If you want exclusive rights over the name of your DBA beyond its local area, trademark registration might be worth exploring, which requires separate fees at both federal and state levels.
Specific information regarding the cost of a DBA can be found on your secretary of state’s website or business registration office website.
Once you’ve registered, you’ll have to take care of LLC costs associated with maintaining it. This includes state and federal taxes, reporting fees and the cost of any services used to maintain the LLC.
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Typical costs: Varies from state to state
Like any other person or entity, LLCs are subject to taxation. The federal government doesn’t take its cut directly from the LLC. Rather, it’s collected from the profits of the owners as a pass-through income. But LLCs can write off certain startup costs—up to $5,000—including attorney fees, market research, office space, equipment and so on.
Most states tax LLC profits in the same way as the federal government—profits pass through to members’ personal tax returns. However, some states also have mandatory LLC franchise taxes. For example, the franchise fee in Delaware is $300, while California has a minimum $800 annual franchise tax.
At the state government level, LLCs may also be subject to reporting fees. Reporting fees are variable from state to state, but average somewhere around $100 a year.
Typical costs: $0 to $300
A registered agent is the main point of contact between the LLC and the state. The registered agent accepts service of lawsuits and other legal documents and can accept office mail. Any adult can be a registered agent, so long as they reside in the state in which the LLC is registered and are available during business hours. This lack of restrictions means that businesses don’t have to endure any costs to declare a registered agent. With that said, there are service providers that will serve as your registered agent for $100 to $300 per year.
Typical costs: Varies depending on the type of license
Costs associated with a business license for an LLC can depend on many factors. Below are some factors that affect the costs associated with LLC business license fees:
Some permits and licenses can be more costly due to complex regulatory requirements or the nature of a business activity. Here are some of the more expensive business licenses:
To accurately assess your LLC’s license fees, contact your local city/county government and state business regulatory agency. They can provide details regarding required licenses, associated costs and any special requirements unique to your type of business.
Typical costs: $10 to $800
State filing fees are the primary cost associated with annual reports, and they vary significantly by state, from as little as zero to several hundred dollars or even more depending on an LLC’s revenue or number of members. Be mindful of your annual report due date in your state. Missing this deadline can incur late fees, penalties, administrative dissolution or the rescission of your limited liability protection.
If you need to update your LLC’s information, you may be required to amend it with its annual report or file an amendment. Changes such as hiring a new registered agent, shifting member structure or updating the business address could all incur separate fees.
Foreign LLCs registered outside their home state may need to file annual reports in both jurisdictions where they qualify as foreign LLCs. Each state has different filing fees associated with this process.
If your LLC falls out of good standing due to failure to file annual reports and you decide later to reinstate it, additional reinstatement fees may need to be considered.
Many entrepreneurs set up LLCs because they are often more affordable than corporations with some liability protection. For instance, LLC finances are treated as separate from individual assets. They’re also typically treated as pass-through tax entities, allowing you to claim them on your taxes. The exceptions are LLCs whose members choose to be taxed as corporations.
LLCs can be taxed as sole proprietorships, partnerships, C corporations or S corporations. This choice allows members of an LLC to minimize their tax burden.
While the cost to register an LLC varies by state, there is a fee to register in every state. So, while there are some companies that advertise “free” LLC formation, what this really means is that the company will fill out the LLC paperwork for you for free. But again, you will still be responsible for the state’s filing fee.
Fees to register an LLC vary depending on the state. It can be as low as $35 in Montana or as expensive as $500 in Massachusetts.
