How Much Does It Cost to Start an LLC?

Business Law

Deciding to form an LLC is usually the easy part — figuring out what it’ll actually cost tends to raise more questions, especially since the number you’ll see quoted online varies so much depending on where you’re forming the business and how you go about it. Here’s a general breakdown of where the money actually goes.

The core, unavoidable cost is the state filing fee to submit your Articles of Organization (sometimes called a Certificate of Formation), which officially creates the LLC with your state’s government. This fee varies significantly by state — some states charge less than $50, while others charge several hundred dollars, and a small number sit even higher. Because this fee is set by each individual state, it’s one of the first things worth checking specifically for the state where you’re forming the LLC.

Beyond the initial filing fee, most states also require an ongoing fee to keep the LLC in good standing, often called an annual report fee or franchise tax, due every year or every other year depending on the state. Some states charge a flat fee for this, while a few — most notably a handful of states with franchise tax systems — calculate it based on revenue or other factors, which can make ongoing costs considerably higher for larger businesses. Forgetting or missing this recurring fee can eventually result in the state administratively dissolving the LLC, so it’s an important cost to budget for beyond just the initial setup.

Several optional costs commonly come up during formation, depending on how someone sets things up. Using a registered agent service (required in every state, but which some owners choose to hire out rather than serve themselves) typically adds an annual fee. An operating agreement — while not always legally required, and something many people draft themselves using templates — is sometimes drafted with attorney help for more complex ownership structures, adding legal fees. Reserving a business name before filing, obtaining a “doing business as” (DBA) name if operating under a different name than the LLC’s legal name, and obtaining any required business licenses or permits can each add their own separate fees depending on the industry and location.

Many people also use an online business formation service or an attorney to handle the filing itself, which adds a service fee on top of the state’s actual filing fee. These services range from relatively inexpensive basic filing packages to more expensive options that bundle in registered agent service, operating agreement templates, and compliance reminders. Filing the paperwork directly with the state yourself avoids this extra fee entirely, and for a straightforward, single-member LLC, many owners find the state filing process manageable without outside help.

Because these numbers vary so much by state — and because ongoing fees matter just as much as the initial cost — it’s worth looking up your specific state’s current filing fee and annual/biennial fee directly through the state’s Secretary of State (or equivalent) website before budgeting for an LLC.

State Filing Fees

The state fee to form an LLC varies widely depending on where you file. Your state’s business filing office lists the current amount, and it is the best place to confirm it.

Ongoing Costs to Plan For

Many states require annual or periodic reports with their own fees. You may also need a registered agent, which can be a service with a yearly cost.

Optional Costs

Some owners choose to pay an attorney or filing service, or to set up a business bank account and insurance. These are not always required, but they are worth budgeting for.

Name Reservation and Assumed Names

Before filing, many owners check that their chosen name is available. Some states let you reserve a name for a period of time for a small fee, which is optional if you are ready to file right away.

If the LLC will operate under a name different from its legal name, it usually has to register that assumed name, often called a DBA, with the state or county. This involves its own fee and sometimes a renewal.

Publication Requirements

A small number of states require a new LLC to publish a notice of its formation in local newspapers for a set number of weeks and then file proof with the state. Where this applies, the cost depends on the newspapers’ rates and the county, and it can be a noticeable part of the total. Check your state’s rules so this is not a surprise after you have already filed.

Registered Agent Costs

Every LLC needs a registered agent with a physical address in the state. Acting as your own agent costs nothing beyond your time, provided you meet the state’s requirements. Hiring a commercial registered agent service involves an annual fee. If the LLC registers in additional states, it needs an agent in each one.

The Operating Agreement

Most states do not charge anything for an operating agreement because it is an internal document that is not filed. The cost depends on how you prepare it. A single-member LLC may use a simple template. An LLC with several owners often benefits from paying an attorney to draft or review the agreement, since it governs ownership, profits, and what happens if an owner leaves.

The EIN Is Free

An Employer Identification Number is the federal tax ID most LLCs need to open a bank account, hire employees, or file certain returns. The IRS does not charge for issuing an EIN, and the application can be completed directly with the IRS. Some websites charge a fee to submit the application for you, which is a convenience service rather than a government requirement.

Business Licenses and Permits

Forming an LLC does not by itself authorize you to operate. Depending on your location and industry, you may need a general business license from your city or county, a state seller’s permit if you sell taxable goods, professional or occupational licenses, health permits, or zoning approval. Fees and renewal schedules vary widely, so check with your city, county, and state licensing offices.

Expedited Filing and Certified Copies

Standard processing times for formation documents range from days to weeks, depending on the state. Many states offer expedited processing for an added fee. You may also want a certified copy of your formation document or a certificate of good standing, which banks, lenders, and other states sometimes request; each typically carries a small charge.

Banking and Bookkeeping

A separate business bank account is important for keeping the LLC’s finances distinct from your own. Some accounts have monthly fees or minimum balance requirements, while others do not. You may also choose to pay for accounting software or a bookkeeper. These are not formation fees, but they are part of the real cost of running an LLC properly.

Insurance

An LLC limits personal liability in many situations, but it does not pay claims or legal defense costs. Depending on the business, you may need general liability insurance, professional liability insurance, commercial property coverage, or commercial auto coverage, and most states require workers’ compensation insurance once you have employees. Premiums depend on the type and size of the business.

Professional Fees

You can form an LLC without professional help, but many owners pay for some. An attorney may charge a flat fee for formation and a custom operating agreement. An accountant can advise on how the LLC should be taxed and set up your books. Formation services charge their own fee on top of the state’s. Ask for prices in writing and compare what is actually included.

Doing Business in Other States

If the LLC does business in a state other than the one where it was formed, it generally must register there as a foreign LLC, paying that state’s registration fee, maintaining a registered agent there, and filing that state’s periodic reports. Forming in a different state to save money can therefore end up costing more for a business that really operates at home.

Taxes Are a Separate Category

Formation fees are only part of the picture. Depending on the state, an LLC may owe an annual franchise or minimum tax regardless of income. Owners typically pay income tax on their share of the profits, and members who work in the business may owe self-employment tax. If you have employees, payroll taxes apply. An accountant can estimate these based on your expected income.

Watch for Unnecessary Add-Ons

Formation services often offer extras during checkout, such as compliance kits, corporate seals, document templates, or subscriptions that renew every year. Some are useful; many are optional. Official-looking letters that arrive after formation, offering to file a report or supply a certificate for a fee, are sometimes private solicitations rather than state requirements. When in doubt, check the state filing office’s website directly.

Ways to Keep Costs Down

File directly with your state’s business filing office instead of through a reseller. Serve as your own registered agent if you qualify and are comfortable with your address being public. Apply for the EIN yourself. Use your state’s official resources to identify required licenses. Put renewal dates on a calendar to avoid late fees, and spend professional fees where they matter most, such as the operating agreement and tax setup.

A Checklist for Estimating Your Total

To build a realistic estimate, list each item and look up the current amount for your state and city: formation filing fee, any name reservation or assumed name fee, any publication cost, registered agent, operating agreement, licenses and permits, the first annual report or franchise tax, insurance, bank and bookkeeping costs, and any professional fees. Adding these gives a far more accurate figure than any single advertised price.

The Cost of Closing an LLC

It is easy to overlook the cost of ending a business. Dissolving an LLC usually requires filing a document with the state, sometimes with a fee, and settling any outstanding taxes and annual reports first. Simply abandoning an LLC can leave fees and penalties accumulating, so if the business stops operating, formally close it.

Are Formation Costs Tax Deductible?

Costs of starting and organizing a business may be deductible, in whole or in part, under federal tax rules, sometimes spread over a number of years depending on the amounts involved. Keep receipts for filing fees, professional fees, and other startup expenses, and ask your accountant how they should be treated on your first return.

Frequently Asked Questions

Related Reading

• LLC vs. Corporation: What’s the Difference?
• Do You Need a Lawyer to Start an LLC?

Photo credit: see Image Credits.