Costs are an important consideration when deciding to set up an LLC. Because each state has its own LLC laws, the amount and type of costs vary considerably depending on where you form the LLC. All states have a mandatory fee to file the LLC formation document, but further costs may also be incurred for publication, licensing or franchise tax fees that are necessary to complete the state’s LLC formation requirements.
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Mandatory State Filing Fees
No state will accept an LLC's formation document, usually called the articles of organization or certificate of formation, without payment of a filing fee. The document and fee are submitted to the state agency charged with overseeing business entities, such as the secretary of state or department of corporations. As of December 2010, this fee varies from $70 in California to $300 in Texas and as much as $750 in Illinois if you are forming a special type of LLC called a series LLC.
Additional State Fees
Although the state will accept your formation document with the filing fee, the process of forming your LLC may not be complete without taking additional action. Failure to take the additional action will cause your LLC to be suspended or canceled. For example, within 30 days of filing articles of organization in Nevada, you must file an Initial List with LLC member information and apply for a business license. As of December 2010, the fee for the Initial List is $125 and $200 for the license application. New York LLC law requires publication of the articles of organization after filing, which in some counties can be more than $1,000. Although California's LLC filing fee is only $70, an $800 payment is also required at the same time to the Franchise Tax Board.
Optional State Fees
Not all state fees associated with setting up an LLC are mandatory. All states have some fees that are optional but may be necessary depending on your business needs. For example, if you have decided on a name for your LLC yet do not want to form the LLC for several weeks or even months, you can reserve the name in most states by filing a name reservation application. Fees for this service vary significantly. As of December 2010, Nevada charges a $25 name reservation fee while Illinois charges $300. Many states also charge an additional fee for expediting the filing service if filing your LLC formation document is an urgent matter. States that offer such services typically guarantee processing your filing within 24 hours for an additional charge of between $25 and $100. In Nevada, your LLC documents will be processed within an hour of filing for an expedited fee of $1,000.
If you retain the services of a company or individual, such as a lawyer or accountant, to assist with setting up your LLC, you will pay additional fees on top of the state fees. Although no state requires you to use any professional services to set up an LLC, in some situations it may be advisable to do so. For example, in states that require every LLC to have a written operating agreement, such as New York and Missouri, a lawyer's services will be a good investment to ensure the agreement is properly prepared for your business needs, particularly in situations in which the LLC will have more than one owner.
References & Resources
- California Secretary of State: Articles of Organization (Form LLC-1)
- Texas Secretary of State: Fee Schedule
- Illinois Secretary of State: A Guide for Organizing Domestic Limited Liability Companies
- Nevada Secretary of State: Initial List, Registered Agent and State Business License Application
- eMinutes Magazine: New York’s Irrational LLC Publication Requirements
- Nevada Secretary of State: LLC Fee Schedule
- Law Offices of Craig Delsack, LLC: Do You Need an Operating Agreement for Your Small Business LLC?