If you want to form an LLC, it’s important to know the costs involved in doing so. One thing to note is that the fees for forming and maintaining your LLC vary from state to state.
When forming your LLC, you’ll be required to pay a fee to file your articles of organization. These are a set of legal documents used to establish your LLC with the state. You may also incur additional expenses if you require any professional help to file your documents.
If you’re looking to get a full breakdown of the various costs of forming an LLC in your state, the guide below is for you. We’ve included a comprehensive breakdown of the fees you can expect whether you choose to go the DIY filing route or intend to hire a service provider.
Articles of Organization Filing Fees
The first step in the process of legally establishing your LLC is to file your articles of organization with your state’s business filing office. These legally binding documents may also be referred to as “certificate of organization” or certificate of formation” depending on your state.
In most states, your documents will be filed with the Secretary of State and you can expect to pay filing fees between $40 to $500. Alaska is one exception, where instead you’ll pay a fee of $250. There are additional publication fees for New York, Nebraska, and Arizona.
Fees To Reserve Your LLC Name
When choosing a name for your LLC, you’ll want to ensure that it’s not too similar to any existing LLCs on file with your Secretary of State. Once you’ve chosen the name of your LLC, you can reserve that name for up to two months, depending on the state. Filing a name reservation application will cost you anywhere between $10 to $50 depending on your state. This process is optional as you are not required to reserve your LLC name with the state. It’s simply a precaution you can take to secure your name while completing and filing your legal documents.
The Cost of Filing a Fictitious Business Name Application
You are not required to operate your business under the legal name listed in your articles of organization. For a fee, you can choose to operate under a different name, typically referred to as your assumed name, fictitious business name, or DBA (doing business as). This is purely optional and not necessary if you choose to operate under your existing LLC name.
To operate under a fictitious business name, you’ll need to apply with the Secretary of State. In some states, you may be required to file the application at the county level and in every county where you have business offices. While the average filing fees are between $50 to $100, they can be as low as $10 and as high as $200. It’s best to confirm the rules in your state to know the exact fees and if you’ll be required to publish your new fictitious name in the newspaper to make it official.
Obtaining a Business License
Obtaining a business license can cost anywhere from $50 to $100. You’ll need to get one for your LLC, depending on the location and state your LLC is registered in. A few states have statewide licenses, while the majority have local requirements. You’ll need to confirm the requirements with your city or county government.
Ongoing Costs of Running an LLC
Once you’ve established your LLC, you’ll be required to pay a set of ongoing fees and taxes to remain in good standing with your state and local government. Any failure to pay these fees and your LLC could lose the legal right to operate in the state.
Annual Report Fees
Most states will require an LLC to file an annual or biennial report with the Secretary of State to ensure that all official contact information is up to date. Some states refer to this as a periodic report or statement of information, and the fee is typically $20 to $100.
Minimum Annual LLC Taxes
Each state requires that an LLC pay a predetermined minimum annual tax also referred to as franchise taxes or fees. This tax must be paid regardless of what the earnings of the LLC are. In California, LLCs can expect to pay $800 per year in minimum annual taxes. In most other states, the price varies from $100 to $400.
Registered Agent Fees
Every LLC is required to have an agent for service of process. This individual or separate business entity holds the responsibility of receiving any lawsuits on behalf of your LLC. An LLC cannot serve as its own agent, so it is required to designate a third party.
You have many options when it comes to choosing your agent for service of process. As long as the individual lives in the state you do business in, any adult over the age of 18 can serve as your LLC’s registered agent. Your lawyer, spouse, friend, relative, employee, or any other trusted individual can assume this role. It is also possible for owners of the LLC to serve as the registered agent, but many choose to hire a professional from a registered agent company. The annual fee for these services are typically $100 to $300. Working with a professional service guarantees peace of mind that any important legal documents for your LLC will be received and sent to you.
Business License Renewal Fees
LLCs are required to renew their state or local business license periodically. While some states and counties may require an annual renewal, it’s best to check the requirements based on your LLCs location. The fees for license renewals can be between $20 to $100.
Which State Should I Form My LLC In?
For some brick-and-mortar businesses it may be best to avoid any additional paperwork or unwanted costs by forming your LLC in the state you intend to operate your business. However, many businesses choose to form an LLC in other states because they offer benefits such as reduced taxes or fees. For example, Delaware is often considered a great state to form an LLC because it has reasonable fees & tax obligations. A lot of businesses will form an LLC in Delaware even if they don’t think they’ll be doing any business there.
Some of the best states to form an LLC are:
- Wyoming – Wyoming offers a number of benefits for LLCs, including no state income or franchise tax, low asset requirements, and no personal property tax.
- New Hampshire – New Hampshire is another great state for LLC formation; it offers no franchise tax, no personal property tax, and no income tax, making it a great option for businesses with low-income taxes.
- Delaware – Delaware is a great state for LLC formation because it offers a number of benefits, such as no state income or franchise tax, no personal property tax, and relatively low asset requirements.
- Nevada – Nevada is another great state for LLC formation because it offers a number of benefits, including no state income or franchise tax, no personal property tax, and relatively low asset requirements.
Which is Better, LLC or Sole Proprietorship?
Due to a lack of liability protection, a sole proprietorship should only be used for a business that can operate with a very low risk of liability. An LLC provides more flexibility for your taxation needs in addition to limiting liability in the case of a lawsuit. Your LLC can be taxed via pass-through taxation, as a C Corp, or as an S corp.
Every business is different, so it’s best to do your research to determine which business structure will provide the most taxation benefits. It’s often best to seek the help of a professional to receive the best guidance. A tax accountant familiar with your type of business will be able to point you in the right direction. Consulting with a lawyer can also ensure you’re taking the right legal steps in the process.
Should I Start an LLC for My Insurance Agency
Forming an LLC can benefit your insurance agency in several ways:
- You can protect your personal assets in the event of a lawsuit,
- Enjoy pass-through taxation benefits,
- Scale your business comfortably,
- Gain credibility with your customers.
Forming an LLC is an exciting step for your new business, but it’s important to get it right the first time. It’s best to consult with a professional in your state that can provide proper guidance based on your business needs.
The information contained in this post and on this website is provided for informational purposes only and should not be construed as legal advice. Please consult with your lawyer regarding legal concerns for your business.