Figuring out how much forming an LLC will cost depends on two main factors: the amount it will cost to create the LLC and the costs associated with maintaining it. The exact costs will vary depending on your geographic location—any examples given should be viewed as strictly hypothetical.
How Much Does It Cost to Start an LLC?
The initial costs associated with forming an LLC will be composed of state and service fees.
• LLC filing fees vary by state. They can be as low as $50 or as high as $500, with the average cost of filing being somewhere in the neighborhood of $125. These fees are also very likely to change often, and with little warning (sometimes due to the state requiring more money for their budget).
• If you are using a service provider to form your LLC (highly recommended, due to the complexity of the process), you will also have to account for their charges. Most service providers will be able to give you an accurate quote that includes both their fees as well as the state and service fees when you select a service package. A reputable service provider will be able to provide you with an itemized list of fees and costs.
The Costs of Setting Up an LLC May Include:
- The Name of the Company
Every state has its own unique set of requirements when it comes to names. To be formed, your LLC will be required to have a unique name that is not currently in use and must contain the initials “LLC.” To verify that the name you’ve chosen is both unique and in compliance with state policies regarding naming, you or your service provider must have the name confirmed by the secretary of state.
- Filing the Articles of Organization
You, or your service provider, will be required to file your company’s Articles of Organization with the secretary of state. In some states, this can be accomplished electronically, while others may require a paper document.
In some states, including New York, it’s necessary to publish a statement of formation in one (or several) local newspapers. The length of time that this statement must run will be dependent on the state and county in which it is published. Once it has been published, you or your service provider will be required to file an affidavit or certificate of publication with the state.
- Operating Agreement
You’ll also need to have an operating agreement on hand for your company. While it is not typically required for you to file this agreement with the state, you will be required to maintain this operating agreement at your company’s primary location or headquarters.
- Employer Identification Number
Your LLC will require an Employer Identification Number for tax purposes. Many service providers can provide you with an EIN as part of your service package.
- LLC Ongoing Costs
In addition to the fees associated with forming your LLC, there will also be ongoing costs. At this stage, there is less paperwork, but it is essential to ensure that it is filled out accurately and submitted on time with the appropriate fees. Like the initial filing fees, these costs are subject to change at any time.
- Annual Franchise Tax
LLC profits are not directly taxed. However, some states require every LLC to pay an annual flat tax known as a franchise tax. This tax can vary a great deal from state to state; in one state it may be $250 per year, while in another it may be $800 per year.
- Reporting Fees
Another annual fee that is enforced in some states but not others is often referred to as a reporting fee. The amount of this fee depends on numerous factors, including the state you are in, the number of partners you have, and so forth. In some states, this fee might be as low as $20 annually; in another, it might reach a maximum of $10,000.
While “compliance” isn’t a direct fee per se, it is essential to recognize the fact that maintaining your LLC will cost time, attention, and other resources. Additionally, if you fail to maintain compliance, you may find that your assets are lacking legal protection when you most require it. That’s one of the reasons we advise clients to enlist the services of an experienced company. While you’ll have to pay for their services, it is well worth the peace of mind you gain from knowing that your company is protected.