How much does it cost to start a LLC in each state.
When you plan to run your own small business or even a sideline business venture, it makes sense that you spend some time and effort to do so formally. It’s especially beneficial to set up an LLC, or a limited liability company. You can establish your own brand name, boost your professional image, and protect your personal assets from your business creditors.
But a business requires an investment. To earn money, you have to spend money first. That includes spending some money in order to form your LLC in the first place. The good news is that, all things considered, the costs of the entire process isn’t really exorbitant.
Costs of Filing: State Filing Fee
You will have to file your LLC with the state government, and this involves a state filing fee. The exact amount of the fee depends on the state in which your business is based. You have to pay this fee, regardless of how you file your LLC.
A Kentucky LLC requires the lowest state filing fee at just $40. At the other end of the scale, you have Nevada where it will cost a hefty $450 fee to form an LLC. However, in most cases the fee is between $100 to $200.
LLC Annual Fees
Once you’ve formed your LLC, most states will still charge you regular fees to maintain your LLC in good standing. This is either annual or biennial (every 2 years). The vast majority of states will shut down your LLC if you fail to pay these fees.
Some LLCs are lucky, such as if they’re filed in Arizona, Minnesota, New Mexico, Ohio, South Carolina, Texas, or Idaho. These states don’t require these fees at all.
On the other hand, Maryland, Tennessee, and Delaware ask for an annual fee of $300 for their LLCs. California is even worse, with annual fees of $800 plus $20 every 2 years.
Formation Method Fees
Back in the bad old days, you may have had to deal with a lawyer (and their hefty hourly legal fees) to help you navigate through the required paperwork and steps in the LLC formation process. You can still do that today, and that legal service will set you back somewhere between $1,000 to $1,500 to see through the entire process. For a small business, that’s rather hefty.
You can also do it yourself, simply by forming your LLC online. That considerably lowers the costs. But it will cost you some worry, since you’re probably not an expert in this LLC formation process. You’ll have to spend time and effort researching what documents you need to prepare to make sure that the process goes smoothly.
The most convenient way is to simply make use of a reputable online LLC formation process. Some of the best online service providers charge less than $100 for their most basic package, though their premium packages may be a lot more expensive. There are also several other online formation service providers that charge a bit more.
At least you can be sure that the process will be done right, and will go quickly and smoothly. You may also get various other services as part of the package, though they may also cost extra as well.
Registered Agent Services
Regardless of whether you’re forming an LLC or a corporation, all states require that you also have a registered agent. The job of the registered agent is to receive state notices and other legal documents sent to your LLC. These notices may inform you of certain regulations that your LLC must follow, or even legal notices in case your LLC is sued. You need to have these registered agent services to keep your LLC in good standing.
A registered agent must meet the following requirements:
A physical address within the state
A person must be in that physical location during business hours to receive all official documents
In most states, the registered must be an adult (at least 18 years old)
It’s true that one of the owners of the LLC can act as the registered agent. But this isn’t really optimal. That means this person (you, if you’re the sole owner of the LLC), will have to be at home all the time during business hours. That may prevent you from going out when it’s needed for your business.
You can appoint a friend or relative to act as your registered agent, but they may not be utterly reliable. You’re out of luck if they decide to leave the premises.
Or, you can opt for professional registered agent services. They’re not hard to find, since most of the time, the online formation services also offer registered agent services as well.
The costs may range from $100 to $300, and these are paid yearly. However, some online services may offer free registered agent services, at least for the first year, as part of the LLC formation package you get. You may then have to pay for these registered agent services yearly, starting in the following year.
The costs are actually more than reasonable, since professional outfits offer a lot of advantages. For one, they use their own local address. That way, you don’t need to have your private address listed in any official LLC document. If you have any problems with unreasonable customers, they can’t come to your home to complain and bother you.
You’re also freed from the tedious task of receiving various types of mail sent to your business. Registered agent services can sort out the received mail and get rid of spam and junk mail. They’ll then notify you if they receive truly important notices for your LLC.
In fact, many of these professional registered agent services can email you regarding any important notices they receive. They can also maintain an online document storage platform, from where you can then download the notices in electronic form.
You will need a federal tax number (the employer identification number, or EIN), for your LLC. This is needed in order for you to open a separate bank account for your business, so you can make sure you separate your business bank account from your personal bank account. You can’t really use your personal bank account for your LLC, or else you risk you bank account when creditors come around demanding payments. That defeats the main point of establishing an LLC in the first place.
The EIN is also crucial for filing business taxes, obtaining business credit cards, and also for obtaining finances. You’ll also need it if you’re hiring employees.
Just make sure that you get your EIN after you form your LLC. That way, the EIN is attached to the LLC. Obtaining the EIN before you form the LLC means that the EIN is attached to you personally.
You can always do this yourself, and it’s not even all that difficult. You just need to go to the IRS website and follow the directions. There’s also no cost involved when obtaining your EIN. It’s absolutely free. If some online service says there’s an IRS fee attached, it’s a scam.
It’s free, which is why plenty of online formation service providers include the service as part of their online formation package. They can then obtain your EIN for you, and you’re spared from spending time and effort on this.
It’s true that some online services may also charge separately for obtaining the EIN, though the price is usually low. At least that’s better than hiring a lawyer to do this for you. That’s just a waste of your money, as they may even charge you their hourly rate for legal services.
These services may cost you about $50 to $100 for obtaining the EIN. But in most cases, you don’t really need to pay anything at all, even when a pro obtains the EIN. It’s usually a free service as part of either the formation or registered agent service.
So, let’s recap. You’ve finished the following steps:
Filed for LLC formation and paid the state filing fees
Arranged for registered agent services
Obtained the EIN for your LLC
Made sure you can pay the maintenance annual fees in the succeeding years.
Basically, you’re done.
But there are other products and services that you may want for your LLC, which you can either do on your own or hire a pro to do it for you. It’s up to you whether you decide to go the DIY route or hire professional services to do the job (or provide the item you want).
This is part of the package for most online formation services. But you can do this yourself, by checking out the website of your secretary of state to make sure your LLC name is legal and unique. Just make sure you follow all the LLC naming rules.
This is actually not part of the official LLC formation. But you have to admit, it’s a crucial part of any business. A website gives you ample tools for advertising and marketing. You can use it to sell your products online. Many consumers these days won’t trust any business without its own website (or at least a dedicated Facebook page).
However, you don’t have to rely on online formation services to establish your LLC website online. There are more specialized online services for website creation and design, although you may have to pay more.
Some of these outfits may also offer to create your business logo, or perhaps offer a business phone. Again, you have other options other than the online formation provider.
LLC Kit, Seal, Certificates
These are items that make your LLC look official, and they’re great for your records (or scrapbook). While some online formation services provide these items for a fee, you can just get them through your state government website (or make them yourself).
So, let’s compute the total costs, shall we? You can go the DIY route the entire way. That means you take care of the paperwork and the whole formation process yourself. You, or a buddy, can act as the registered agent. You obtain your own EIN.
In this scenario, you can then just pay the state filing fee. That’s your only expense at all when forming your LLC. You can then pay the annual fees, and do stuff like set up your own website. These are needed to run your business, but it’s not strictly part of the LLC formation process.
What you don’t really want to do is to use a lawyer for any of these steps. That’s just paying too much for these services. No one really makes use of lawyers for LLC formation.
The best middle ground between DIY and lawyers is to go with a reputable online formation service. Many of these services can provide you with all the necessary stuff. They’ll tell you what you have to do, and file the documents for you.
These online services can also provide the registered agent service as well. This may even be part of the formation process, at least for the first year. The benefits you get tend to outweigh the costs, though you do need to be careful when picking the online formation service and the registered agent service.
There are even high-end formation packages that provide you with unnecessary stuff. That’s to say, items like website creation and design aren’t formally part of the LLC formation and maintenance process. But if you want a one-stop shop for all your needs, a good online formation service can provide.
So, what do we recommend? We suggest that you do yourself a favor is get a good online formation service, that comes with name research and registered agent services. That way, you pay less than with lawyers, but you get a lot of value for your money.
Lawyers aren’t the optimal option, and neither is the completely DIY approach. You’re better off with a professional outfit to make sure you don’t make mistakes during the LLC formation process. Better yet, go with an online formation service that offers a topnotch but reasonably affordable registered agent service as well. That makes sure your LLC can maintain its good standing, and you don’t have to overpay for the services.