How Much Does It Cost to Start an LLC?

Setting up a business as a limited liability company (LLC) can protect personal assets and shield entrepreneurs from business debts, while providing more flexibility than forming a corporation. Creating an LLC also costs significantly less. A do-it-yourself LLC can be formed for less than $100 in some states, although the final tally can be several thousand dollars if the work is handled by an attorney. You can also consider consulting with a financial advisor to explore how an LLC structure could benefit your business and personal finances.

Overview of LLC Costs

Forming an LLC can involve many different costs. Every state charges some kind of one-time fee for creating an LLC, as well as an annual fee for filing reports. Business license fees and fictitious name fees are also common fees that many LLC creators in many states will have to pay.

While state filing fees are universal and unavoidable, other expenses are optional. For example, paying an attorney or business formation service to prepare and submit paperwork can save you time and ensure the task is done correctly. However, entrepreneurs can save money by doing the work themselves.

Similarly, states require every LLC to have a person or company that will act as a registered agent. The business owner can pay a registered agent service a fee, typically about $100 to $200. Or they can do this for no cost if they live in the state where the LLC is formed. Setting up an LLC in another state will, however, require using a registered agent service.

As previously mentioned, LLC startup costs vary by state. In Kentucky , for instance, it costs just $40 to register a new LLC with the secretary of state. In Texas , meanwhile, the secretary of state's office charges $300. Many other required fees show similar variability between the states.

Some of the essential actions involved in forming a new business entity don’t cost anything. For example, any business that has employees must acquire an Employer Identification Number (EIN) from the Internal Revenue Service. This calls for filing a form with the IRS, but doesn't require paying a fee.

LLC Costs – Other Details

The filing fee is paid to the state's secretary of state in order to register the LLC as a business entity in that state. A rough average for the typical filing fee is approximately $100, although these fees may be higher or lower depending on the state.

Many businesses operate under a name that is different from the legal name given on the documents filed with the state. When this happens, states charge a "doing business as" (DBA) or "fictitious business name" (FBN) fees. These fees also vary by state, but are often around $25.

An operating agreement is a written document laying out how the LLC will be managed and operated – it describes the percentage of the company owned by each member, the members' duties and rights, how each member is compensated, and so on. LLCs aren’t required to have operating agreements, but they can be helpful. Entrepreneurs can use customizable templates for little or no cost or hire an attorney to draft one, but at a higher expense.

States, cities, towns and counties collect fees for business licenses or permits. Some jurisdictions require all businesses to have permits or licenses. In other cases, the requirements only apply to some types of firms. For example, it may be possible to start an advertising agency without a permit, while a cosmetologist has to be licensed. These fees vary widely and for some businesses, such as alcoholic beverage distributors, can be significant. You’ll want to check with your local jurisdiction to see what’s required of you.

New York LLC Costs – An Example

Looking at an individual state can give you an idea of the cost of creating an LLC . New York is one of the largest states and, in part because of the unusual notice publication requirement, one of the more costly states in which to start an LLC. Here are the New York LLC fees to be paid to the secretary of state, as well as other related costs:

• Articles of incorporation filing fee: $200
• Publishing notice of LLC formation in two local newspapers for six weeks: Varies by location and newspaper, but could be anywhere from $50 to $200
• Certificate of publication filing fee, including affidavit from newspaper: $50
• Name reservation fee (optional): $20
• Certificate of assumed name fee (equivalent to DBA fee): $25

New York businesses are also required to have a sales tax license, but there is no fee for this. Many New York businesses have to get permits from the state's Division of Licensing Services. Permit costs vary widely depending on the type of business. Finally, like all states, New York also requires an annual report. In New York, annual report filing fees range from $25 for LLCs reporting $100,000 in income to as much as $4,500 for LLCs with $25 million in income.

Miscellaneous Costs

In addition to these startup costs, LLCs must pay ongoing costs. These include annual reporting fees and business license renewal fees. LLCs using registered agent services will pay annual fees for the service. LLCs pay no income taxes , because LLC income flows through to owners' personal tax returns. However, LLCs do pay sales taxes in states where the LLC does business.

Bottom Line

Setting up an LLC costs less than a corporation and affords business owners similar protection from business liabilities. However, there are some fees associated with setting up an LLC, including filing fees. Business permits and licenses, fictitious name fees and other fees such as publication costs may apply depending on the specific type of business and the state in which the LLC is located. Different states charge much different fees for LLCs, and the ultimate cost for setting up an LLC can also vary widely depending on whether the business owner takes a do-it-yourself approach or hires an attorney or business formation service to assist with the task.

Tips for Starting an LLC

• A financial advisor can help you create a tailored strategy that aligns with your financial goals. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now .
• Depending on your personal situation, you may want to weigh the procs and cons of a trust vs. an LLC when putting together your estate plan.
• Use SmartAsset's New York Paycheck Calculator can estimate your take-home pay after accounting for federal, state and local withholding if you live in the state of New York.

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