Cost to Set Up an LLC

By Steve Aycock

The LLC is a popular business legal entity choice due, in part, to low setup cost. Basic setup costs for an LLC include preparing and filing articles of organization with the state in which the LLC will operate. Beyond the basic setup costs, there may be other costs that owners (called members) should consider when setting up a new LLC.

State Fees

Each state has an official filing fee to register a new LLC. The fee varies from state to state and generally ranges from about $50 to $300 or more. Also, some states provide additional services, such as certificates of status and certified copies of the articles of organization, for additional fees.

Articles of Organization

The articles of organization can be as simple as a one-page form. The cost of preparing the articles of organization can vary depending on whether the form is drafted by the owners, by a document preparation service or by an attorney. Most states offer a fill-in-the-blank form or template for the articles of organization that may be suitable for simple LLCs. Generally, the articles of organization includes items such as the LLC name, list of members, registered agent and place of business. Each state sets its own laws and rules regarding setting up new LLCs. Some states require management information on the articles of organization, so members may need to do some business management planning prior to filing the articles of organization.

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Operating Agreement

Another cost of setting up an LLC may be drafting or preparing an operating agreement, which typically includes such details as profit distribution, voting process and other operational details of the LLC. Because operating agreements contain important details that may affect the legal and tax status of the LLC, obtaining legal and tax counsel when preparing the operating agreement may be a good investment. The cost of preparing an operating agreement varies with the complexity of the LLC and with the nature of the business. A single-member LLC may have an operating agreement that is a simple, fill-in-the-blank form, while a larger business having a multi-member LLC and with potentially more money at stake may need one or more attorneys to prepare the operating agreement, which can cost from several hundred dollars to thousands of dollars, depending on the situation.

Tax Advice

One of the many advantages of an LLC are the numerous tax treatment options. Income from an LLC can be treated for tax purposes as partnership, C corporation or subchapter S corporation income, depending on a numbers of factors. To benefit from the flexibility of an LLC, some decisions may need to be made within a certain time period. Members setting up a new LLC should plan on at least the basic setup costs and, depending on the particular situation, additional costs of professional tax and legal advice. The cost of initial tax planning advice for a small start-up company generally ranges from several hundred to several thousand dollars, depending on the complexity of the tax situation.

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Different Kinds of LLCs

An LLC is a business entity created by statute and governed by state law. Each state has its own legislation regarding LLCs, but the legal principles are broadly similar. LLC owners are known as members. An LLC can be either domestic or foreign and can be organized by a single member or multiple members. A series LLC is a complex group of linked companies. Consult a corporate lawyer regarding the most appropriate form of LLC to set up.

Do it Yourself LLC

A limited liability company, or LLC, is an organization run by a member or members. Unlike a corporation or partnership, members of an LLC have limited liability for the company's debts. An LLC can be created by filing a legal document, usually called Articles of Organization, with an appropriate state agency. Although it may sound simple to file one document, there are many legal intricacies of which you should be aware when endeavoring to start an LLC.

Can a Sole Proprietor Deduct Attorney's Fees Related to Starting a Business?

When operating a sole proprietorship, your business and personal assets and liabilities are one in the same. As a result, you report all business income on your personal tax return using a Schedule C. You can, however, report the same deductions that other business structures can, which may include attorney fees you pay during the startup phase of the business.

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