The Cost of Forming an LLC

By William Pirraglia

Because LLCs (limited liability companies) are creations of the state rather than the federal government, official costs to form an LLC vary. Most states charge fees that are similar to the charges for registering a new corporation. Some states, however, choose to set their fees notably less or more than new corporation costs. You may also face other expenses for retaining expert assistance from an experienced attorney and/or accountant to set up your LLC properly.

Individual State LLC Fees

Although popular in Europe for many years, LLC legislation is still relatively new to the United States. Prior to 1988, state authorization of LLCs was all but nonexistent. Now, every state has LLC legislation. The original intent of legislation was to make forming an LLC both less costly and less complicated than creating a corporation. Most states have maintained this philosophy, but not all. Check your state's current regulations to determine its fees for LLC formation.

"Publishing" Requirements

Some states have a publishing requirement, which adds to the cost of forming an LLC. This feature requires the owners (members) of a new LLC to publish in at least one local newspaper their intent to form a new business. While the publishing time required is usually short, costs for this necessity can vary widely depending on your state and newspaper insertion rates. A few states simply charge you a flat fee, payable to the secretary of state -- or appropriate state agency -- to cover publication requirements and costs. After publication, you should submit a publication affidavit to ensure your state has written evidence of your requirement fulfillment.

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Expert Advice and Assistance

While state LLC rules were designed to make formation easier than for a corporation, you still may wish to solicit experienced advice and help from an attorney and/or an accountant. Many LLC organizers -- who typically do not need to be members -- want to be sure that their new company is set up legally and correctly. Experienced lawyers and accountants can give you this assurance. Usually, their fees are less than corporation formation expenses, since it is less time consuming to file for creation of an LLC. Ask any professionals you are considering to quote you a cost before you proceed. You can also do-it-yourself without serious risk.

Other Cost Considerations

Choosing your state of organization and evaluating costs should include an understanding of annual, recurring fees. While forming your LLC is paramount, you should, at least, be aware of the repetitive costs you'll face in your company's future charged by your organization state. While most states impose relatively modest fees after organization, some have larger costs you should consider. For example, although California charges a modest ($70 as of 2010) filing fee to form your LLC, annual renewal (tax) charges are much higher ($800), regardless of your company's profit level. If your LLC generate large profits, this "flat" tax will increase.

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