The Cost of Forming an LLC

By Stephanie Kurose, J.D.

The Cost of Forming an LLC

By Stephanie Kurose, J.D.

A limited liability company, or LLC, is a popular type of business structure that has the flexibility of a partnership but the liability protection of a corporation. It's the reason why this particular business structure has become an attractive option for individuals looking to start their own business. Before you begin the formation process, it's a good idea to get a general sense of how much money you need to start your venture.

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State Laws and Costs Associated with LLC Formation

State law governs the creation, maintenance, and dissolution of an LLC and this practice is fairly new. Until 1988, state authorization of these business structures was nonexistent. Today, however, all fifty states have some sort of statute governing these business structures, making them less costly and less complicated to form than a corporation.

Because each state has its own unique laws, the costs associated with forming an LLC vary. There are multiple costs that you incur throughout the formation process. The primary cost is the state filing fee, which can range from $40 to $500 depending on your state. All states require an initial filing fee, but beyond that, state laws vary as to what additional costs they require.

Annual, Recurring Fees

In addition to the initial filing fee, most states charge a nominal fee to maintain an LLC in the state. Maintenance usually only requires filing an annual or biennial report to keep the state updated with regard to the name, address, and ownership of the company. Annual report fees vary by state. However, some states also require certain state taxes, known as franchise taxes. Franchise taxes are often a flat tax but can vary according to the company's earnings in certain states.

Some states charge renewal fees. If you fail to renew your company in a timely manner, you may be required to refile with the state and repay the initial filing fee.

Publishing Requirements

Many states have a requirement that the LLC must make the public aware of their new business. To do this, legislation typically requires the business owner to publish in at least one newspaper of general circulation their intent to form a new business. The County Clerk, or similar office, where the company has its principal place of business should have a list of newspapers that meet the statutory requirements. Publication fees vary depending on the specific newspaper.

Retaining Expert Advice

You can complete many, if not all, of the steps required to form an LLC on your own. However, some people wish to obtain expert assistance from an attorney or accountant who has prior experience setting up business entities. Retaining an attorney can help ensure your company is set up legally and correctly to avoid any future problems. This can make forming your company more expensive, though, especially if you have a lawyer do everything for you.

Most states have made forming an LLC fairly straightforward so that there are fewer impediments for aspiring business owners. Before you start this venture, however, you should understand the specific laws of your state and consider these potential costs.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.