When you’re considering starting a limited liability company (LLC), one of the first questions that likely comes to mind is, “How much will this cost me?” It’s a valid concern, as the expenses associated with forming and maintaining an LLC can vary widely depending on several factors. In this article, we’ll break down the costs you can expect when starting an LLC and provide you with a clear understanding of the financial commitment involved.
We at The Law Dictionary understand that the legal process of setting up an LLC can be overwhelming. That’s why we’ve taken complex legal concepts and transformed them into straightforward, actionable steps. Our goal is to empower you with the knowledge you need to confidently establish your LLC, whether it’s for a rental property or any other business venture.
LLC Startup Costs
The initial costs of forming an LLC can vary depending on your chosen method and state requirements. Let’s explore the different expenses you might encounter during the startup phase.
Startup Cost Varies Depending on the Formation Method
You have three main options when it comes to forming your LLC: doing it yourself (DIY), using an online formation service, or hiring an attorney. Each method comes with its own set of costs and benefits.
| Service | Pricing | Cost Range | Primary Offerings |
| LegalZoom | 3 tiers | $0 – $299 + state fees | Extensive legal services, attorney network access, compliance alerts |
| ZenBusiness | 3 tiers | $0 – $299 + state fees | Affordable pricing, user-friendly platform, compliance support |
| Tailor Brands | 3 tiers | $0 – $249 + state fees | Branding services, legal assistance, user-friendly platform |
| Swyft Filings | 3 tiers | $0 – $299 + state fees | Fast processing times, straightforward pricing, customer support |
| Bizee | 3 tiers | $0 – $299 + state fees | Budget-friendly options, free registered agent for 1 year, lifetime company alerts |
| Northwest Registered Agent | Single tier | $39 + state fees | Privacy-focused service, personalized support, transparent pricing |
If you choose the DIY route, you’ll only need to pay the state filing fees. This can be the most cost-effective option if you’re comfortable handling the paperwork yourself. However, it requires more time and effort on your part.
Online formation services typically charge between $39 and $79 for basic filing, in addition to state fees. These services can save you time and provide peace of mind that your documents are filed correctly. Some services also offer additional features like registered agent services or operating agreement drafting for an extra cost.
Hiring an attorney is usually the most expensive option, with flat fees ranging from $1,000 to $1,500. While this method is costlier, it provides personalized legal advice and can be beneficial if your business has complex needs or you want extra assurance that everything is done correctly.
LLC Name Reservation
Before officially forming your LLC, you might want to reserve your business name to prevent others from claiming it. The cost for name reservation varies by state, typically ranging from $10 to $140. Some states, like Alabama, require name reservation, while others, like Florida, don’t offer this service at all.
We recommend reserving your name if you’re not ready to file your formation documents immediately. It’s a small investment that can save you the headache of having to choose a new name if someone else registers it before you do.
Filing Fee
The filing fee is the cost you pay to the state to process and file your LLC formation documents, usually called the Articles of Organization. This fee varies significantly from state to state, ranging from as low as $40 in Kentucky to as high as $500 in Massachusetts. Most states charge between $50 and $100.
Remember, this fee is unavoidable regardless of which formation method you choose. It’s a one-time cost that officially establishes your LLC with the state.
Operating Agreement
An operating agreement is a crucial document that outlines how your LLC will be run. While not all states require you to file this document, we strongly recommend creating one for every LLC. It can help avoid misunderstandings and conflicts among members down the line.
You can draft an operating agreement yourself for free using online templates, or you can have it created by an online service or attorney. If you opt for professional help, expect to pay between $50 and $200 for this service.
Registered Agent
Every LLC must have a registered agent – someone designated to receive legal documents and official correspondence on behalf of the company. You can act as your own registered agent for free if you have a physical address in the state where your LLC is formed.
Alternatively, you can hire a professional registered agent service. Many online formation services offer this as part of their packages, often free for the first year and then $50 to $300 annually after that. Using a professional service can offer privacy and convenience, particularly if you don’t have a physical address in the state or prefer not to use your home address for business purposes.
EIN Application
An Employer Identification Number (EIN) is like a Social Security number for your business. It’s required if your LLC has more than one member or employees, but it’s a good idea to get one even if you’re not required to. You can apply for an EIN for free on the IRS website.
Some formation services offer to handle the EIN application for you, usually for an additional fee of $50 to $100. While this isn’t necessary, it can be convenient if you’re already using their other services.
LLC Maintenance Costs
Once your LLC is up and running, there are ongoing costs to consider. These expenses help keep your LLC in good standing with the state and federal government.
Annual Reports
Most states require LLCs to file annual or biennial reports to keep their information up to date. The cost for this varies widely, from free in some states to as much as $800 in others. Typically, the filing fee for this is around $50.
Some states don’t require a report but instead charge an annual franchise tax. Either way, it’s important to stay on top of these requirements. Failing to file or pay on time can result in hefty late fees or even the dissolution of your LLC.
Business Licensure
Depending on your business type and location, you may need to obtain various licenses or permits. While there’s usually no statewide business license required for LLCs, many counties and cities require local business licenses.
The cost of these licenses varies widely depending on your location and industry. For example, a general business license might cost around $50, while specialized licenses (like a liquor license) can cost significantly more. Be sure to research the specific requirements for your business and location.
Taxes
One of the benefits of an LLC is its tax flexibility. LLCs are typically treated as “pass-through” entities for tax purposes, meaning the business itself doesn’t pay taxes. Instead, profits and losses pass through to the members, who report them on their personal tax returns.
However, you may still have to pay self-employment taxes, estimated taxes, and possibly state and local business taxes. The amount you’ll owe depends on your business’s income, your state’s tax laws, and other factors. We recommend consulting with a tax professional to understand your specific tax obligations.
Compliance Services
To help stay on top of ongoing requirements, some LLCs choose to use compliance services. These services can assist you in keeping track of important deadlines, file necessary reports, and maintain your LLC’s good standing.
Compliance services typically cost between $100 and $300 per year. While not strictly necessary, they can provide peace of mind and help prevent costly mistakes, especially if you’re new to running a business.
Overall LLC Cost
The overall cost of starting and maintaining an LLC can vary significantly based on your state, the method of formation, and the specific needs of your business. If you choose to DIY and your state has low fees, you might be able to form an LLC for as little as $50 to $100. On the other hand, if you use a formation service or attorney and opt for additional services in a state with higher fees, your costs could easily exceed $1,000 for the first year.
Remember, while it’s important to be cost-conscious, the cheapest option isn’t always the best. Consider the value you’re getting for your money and choose the options that best fit your business needs and comfort level.
Forming an LLC in Your State
Each state has its own specific requirements and costs for forming an LLC. It’s important to research the exact process and fees for your state. Some states, like Delaware or Wyoming, are known for being business-friendly and may offer advantages for certain types of businesses.
We recommend checking your state’s Secretary of State website for the most up-to-date information on LLC formation requirements and costs. Remember, you’re not limited to forming your LLC in your home state – you can choose to form it in any state, although doing so in a different state may require additional fees and complications.
Frequently Asked Questions
What’s a DBA and do I need one?
A DBA (Doing Business As) allows you to operate under a name different from your LLC’s legal name. You might need one if you want to use a different brand name for marketing purposes.
What are the best online formation services?
Top-rated formation services include ZenBusiness, LegalZoom, and Incfile. Each offers different packages and features, so compare them to find the best fit for your needs.
Can I start an LLC for free?
While you can’t completely avoid state fees, some formation services offer $0 + state fee packages. However, these often come with upsells for additional services.
How much does it cost to form an LLC with an online service?
Basic LLC formation with an online service typically costs between $39 and $79, plus state fees. More comprehensive packages can cost $200 or more.
How much is a Texas LLC?
In Texas, the state filing fee for an LLC is $300. Additional costs may include name reservation, registered agent fees, and ongoing compliance expenses.
