An LLC (Limited Liability Company) is a hybrid business entity that combines the best characteristics of a corporation and sole proprietorship.
Business owners who choose to form an LLC are protected from the company’s debts and liabilities, while also enjoying taxation flexibility and more.
LLCs are one of the most popular business structures due to the flexibility and simplicity. However, it does not come without fees.
How much does it cost to file LLC? Is there an annual fee for an LLC? Let’s take a look at the LLC fees you should consider before forming this type of business structure.
How much does it cost to start an LLC?
There is no exact amount when it comes to the cost of starting an LLC. That’s because filing fees for each state range between $40 and $500, with the current average being $132. This fee is typically associated with filing your LLC’s Articles of Organization.
Additionally, there are other costs you need to consider when forming an LLC. For example, business licenses and permit fees, and other fees that vary by state, such as LLC name reservation fees, and publication fees.
What are LLC Expenses and Fees?
LLCs are one of the simplest and more affordable business entities to form. However, if you’re a start-up business, every dollar counts when trying to grow your business. Here are some expenses and fees you’ll pay when forming an LLC.
Starting Costs to Form an LLC
As previously mentioned, LLC fees will vary based on the state in which the business is formed. The filing fee for an LLC is a one-time fee required to be paid during formation. This is paid to the state and accompanies specific documents, such as the Articles of Organization.
Annual Fees Associated with an LLC
The annual fee associated with LLCs is required to keep compliance with the state. Annual fees are required once a year or once every other year, depending on the state.
Assigning a registered agent is a requirement for all LLCs regardless of the state. You can assign yourself, another member, lawyer, or another entity to be the registered agent. You can also outsource this duty to an experienced agency, which costs an annual fee of $100 to $300.
Filing Articles of Organization
The main filing fee you pay from the beginning of formation typically includes your Articles of Organization. This legally establishes your business with the Secretary of State.
All states require that you choose a unique name for your business – one that is not associated or similar to any other business in the state. Additionally, you must have “LLC” or “Limited Liability Company” attached to the end of the name. Some states require a name reservation, however, to ensure you get the name you want, it’s best to secure it by paying a $10 to $50 reservation fee.
Fictitious Business Name Applications
A fictitious business name, or DBA (doing business as), is used when you don’t want to operate your business as the same name listed on your Articles of Organization. If you wish to do this, a filing fee between $10 and $200 is required.
Obtaining Business Licenses and Permits
There are a lot of variants when it comes to business licenses and permits for your LLC. For example, your state may require that you have a business license, or the industry you work in may require it. Business licenses cost between $50 and $100 and permits vary based on the industry and product.
An Employer Identification Number (EIN) is not always required by states, but it’s often needed. This unique number is given to you by the IRS and is used to tie everything together – taxes, reports, employees, and more. EIN registration costs between $60 and $70.
Annual Franchise Tax
A franchise tax is a tax that is put on all businesses by the government. Every business is required to pay a certain amount in taxes each year, even though it varies based on state laws, your business size, and if you have employees. Some states require that you pay franchise tax quarterly if you don’t have employees.
There are several internal documents your LLC needs to run smoothly. While some of the documents can be handled by the owner or members, many are managed by the state. Many of these tasks, such as creating invoices, taking inventory, and creating a record of business transactions are best handled by professional companies.
Fees Vary By State
As we’ve discussed in detail, LLC fees vary depending on the state in which the LLC is formed. Making the decision to form an LLC is a big step in the direction of business growth, and fortunately, it’s a fairly simple process. However, it’s important to know the upfront fees and ongoing maintenance and compliance costs.
Although it’s an additional cost, it's best to work with a business attorney when forming an LLC. This will ensure that you are paying the right fees for your state to avoid penalties or dissolution.