Key takeaways
- The cost of creating an LLC varies depending on which state you live in and whether or not you use a third-party formation service.
- Initial state filing fees and annual reporting fees to the state are two of the most significant costs you can expect to incur.
- A limited liability company (LLC) helps you to escape double taxation and provides personal liability insurance in the event the company is sued.
- You’ve come up with a great business idea and are getting ready to bring it into effect. However, before you start your company, you’ll need to establish a legal entity.
- A limited liability corporation (LLC) is simple to set up and provides small business owners with advantages such as personal liability insurance and tax pass-through. If you form an LLC yourself, you’ll save money on startup costs. However, there are a few things to think about that will affect how much you’ll have to pay.
- This guide outlines limited liability companies (LLCs) and the advantages of doing business with them. You’ll also learn how to form a limited liability company (LLC) and get an answer to the question, “How much does it cost to start an LLC?”
What is an LLC and what are the benefits?
A limited liability company (LLC) is a corporate arrangement that incorporates the best features of other types of businesses, such as sole proprietorships, partnerships, and companies. You also prevent double taxation and cover your personal properties in the event of legal action.
Personal liability protection
Personal liability insurance is provided by LLCs, just as it is by companies. This means that if the business is sued, your personal assets will be covered, and you will not be held liable financially. Partnerships and sole proprietorships do not have the same level of immunity.
Pass-through taxation
Corporations are taxed on both their corporate profits and their personal tax returns. Double taxation is the term for this situation. Pass-through taxation is possible for LLCs, which ensures that gains are distributed to you directly. Instead of filing two separate tax returns, you can record any earnings on your personal tax form. As a result, you will be able to keep more of your earnings because you will not be subjected to double taxes.
Easy to start
Putting together an LLC on your own is a fast and painless operation. Forming an LLC needs less paperwork than creating a C company. You also prevent annoyances such as having to hold annual meetings to record meeting minutes or delegate formal officer positions.
Flexible
LLCs are also extremely adaptable. You can either form a single-member LLC or a multi-member LLC. You may also name a manager to handle the LLC on behalf of the members.
How much does it cost to start an LLC?
The cost of forming an LLC is determined by a number of factors. Every state has its own set of fees for creating a limited liability company. The total cost would also differ depending on whether you register your small business yourself or through a third party. It would be much less expensive to form an LLC on your own than it would be to hire a lawyer or use a third-party service.
So, how much does it cost to form a limited liability company (LLC)? If you file on your own, you can expect to pay about $130. A lawyer will set you back between $1,000 and $1,500. The cost of an online incorporation program ranges from $100 to $900.
You will be responsible for initial formation costs as well as ongoing annual costs, regardless of which path you choose. The following is a list of the different fees:
Service fees
An LLC can be shaped in one of three ways. You have the choice of doing it yourself, hiring a company lawyer, or using an online incorporation website.
Creating an LLC on your own is both free and easy. It’s also the most affordable alternative. You would, however, have to pay filing fees, annual expenses, and other fees (more on this below).
You may also employ a lawyer to do all of the paperwork on your behalf, which is the most convenient but also the most expensive choice. It would cost between $1,000 and $1,500, not including any additional filing fees or annual expenses.
Using an online incorporation website is your third choice. Online incorporation pages, similar to using a lawyer, can manage the entire incorporation process. The difference is that you would pay a fraction of what you would if you hired a lawyer. These online services range in price from $99 to $900.
State filing fees
The Articles of Organization must be filed with a state department, such as the Secretary of State, as the first step in forming an LLC. Depending on the state you’re in, this document is also known as a Certificate of Organization, Certificate of Formation, or Articles of Formation.
The Articles of Organization are the legal documents that form your company in the state where you live. The cost of forming an LLC varies by state, but it usually costs between $40 and $500.
The name of your company must be available before you file. When you file the Articles of Incorporation, your exclusive business name is legally reserved, prohibiting any companies from using the same name. You may also choose to reserve the name of your organization before filing.
In most states, business name reservations aren’t needed, but if you want to reserve a name ahead of time, you can do so for less than $150.
Registered agent
Any legal documents are accepted on your behalf by a licensed agent. Registered agent services are, for the most part, optional. It would cost between $100 and $300 a year to hire a licensed agent.
At no cost to you, you can serve as your own registered agent. A family member may also serve as your registered agent. When you don’t have a street address in the state where you’re starting your firm, you’ll need a registered agent.
Operating Agreement
An Operating Agreement sets out the rules for how your business will run. It explains how the organisation is organised, who is in charge, and what the company’s goal is. Operating agreements aren’t needed, but they’re a good idea to have if there are any disagreements among LLC members.
Your Operating Agreement is free if you file on your own. You can also buy pre-populated Operating Agreement models for $50 to $200 on the internet. If you’re using a lawyer or an online incorporation website, the expense of an Operating Agreement should be included in the total amount.
Federal Tax ID Number (EIN)
To open business bank accounts and begin doing business, you’ll need a Federal Tax ID, also known as an Employer Identification Number (EIN). This number can also be used to file taxes, get financing, and apply for company credit cards.
The IRS website allows you to apply for an EIN for free. Don’t be misled into paying someone else to do it for you; it’s a simple process that costs nothing.
Annual Report
You’ll need to file Annual Reports to your state once your company is up and running. Annual reports ensure that the company is in good faith, allowing you to continue operating.
The majority of states demand an Annual Report and will charge you a fee per year. The cost of these fees varies by state, but on average, they cost about $90 a year.
Additional fees
Depending on the nature of your company or the state you’re in, you might be required to pay extra fees. Business licences, permits, and publication fees are only a few examples.
A restaurant, for example, would need a food service licence, a certificate of occupancy, and possibly a signage permit. Depending on the type of company you have, you will even need to pay for a liquor licence or a music licence.
Other types of extra costs, such as publication fees, can be incurred. In certain states, such as New York, Arizona, and Nevada, you must place a legal ad in your local newspaper announcing your business’s launch. A newspaper fee and a certificate of publishing fee are included.
Launching your LLC
Limited liability companies (LLCs) are one of the most common business structures for small businesses, and there are many advantages to using one.
Forming an LLC protects you from personal responsibility, ensuring that your personal assets are never jeopardized. You will also benefit from pass-through taxation, which allows you to stop paying double taxes.
How much would it cost to form a limited liability company (LLC)? It usually costs $130 to file it on your own. If you use a lawyer or an online incorporation program, however, the cost will quickly rise to hundreds (or even thousands) of dollars. Other one-time and ongoing fees can apply, so make sure you understand the requirements of the state where you’re doing business.
Once you’ve formed an LLC and launched your company, list it on Bevvit to gain visibility and attract your first customers.