Cost Setting Up an LLC
So, you’re ready to form an LLC.
First, I want to say congrats to you for taking advantage of the liability protection, potential tax advantages and ability to build business credit that come with setting up a separate legal entity for your business.
I’m sure you’ve been thinking; should I do it myself, hire a lawyer or use an online incorporation service?
In today’s post we’re going to breakdown all the costs for setting up an LLC so you can decide which option is best for you. When it comes to determining how much it costs to form an LLC, there are two costs to consider: 1. Formation costs, and 2. Maintenance costs.
Now keep in mind beyond the actual setup and maintenance costs, there are other costs that are optional but important to consider which we’ll cover as well.
So, let’s get started.
As you know you can file everything yourself, but if you want to save the time it takes to file, administer and maintain all the documents required to keep your company running legally; consider a lawyer or online incorporation service.
Now if you want to go the lawyer route than be prepared to pay between $1,000 and $1,500. If you use an online incorporation service such as MyCorporation, it can cost as little as $89. But, if you pay just the $89, you’ll pay extra for things such as an operating agreement, resident agent service, Federal Tax ID, etc.
Here is a breakdown of the cost setting up an LLC:
State filing fee: Once you settle on a name for your business, you will need to prepare the LLC’s articles of organization also known as certificate of organization or certificate of formation.
Next, you’ll need to file the document with your secretary of state which requires you to pay a one-time state filing fee.
No matter which option you choose (DYI, lawyer or online incorporation service), you will have to pay a state filing fee regardless. Each state is different so the fee can range between $50 and $500.
For a complete list of the current LLC filing fee for each state check out our LLC State Filing Fees List.
Annual maintenance fee: Most states have an annual LLC maintenance (report) fee to keep your Limited Liability Company in good standing. If you don’t pay this your LLC will not be in good standing with the state which may result in the state dissolving and closing your LLC.
For a complete list of the current LLC annual maintenance fee for each state check out our LLC State Annual Maintenance Fees List.
Online incorporation service: In addition to a state filing fee, if you plan to use an online incorporation service then be prepared to pay a service fee for them to do all the work. For example, MyCorporation charges $89 to form your LLC.
Registered Agent: In the U.S., every legal entity is required to have a designated party (registered agent) to accept delivery of any legal documents on behalf of the LLC in the state where it is formed.
If you have a street address located in the state where you are setting up your LLC, then you can be your LLC’s registered agent. If that’s the case then there is no cost or fees for you to pay.
If you don’t have a physical location in the state in which your business is registered, you will need to designate a registered agent, P.O. boxes are not acceptable addresses for registered agents.
The main reason to consider a resident agent service is one word: privacy.
An LLC’S registered agent’s address is public so anyone has access to it. So, to avoid receiving unsolicited junk mail for your business and keeping your personal address information confidential, consider using a registered agent service.
You can either hire a resident agent or use a registered agent service which many online incorporation services offer for a fee.
Publishing Requirement: Some states have a publishing requirement, which adds to the cost setting up an LLC.
If required, the owners (members) of a new LLC will need to publish in at least one local newspaper their intent to form a new business. The cost for this varies depending on the state and newspaper insertion rates.
Operating Agreement: This is one of the most important documents that get created for your LLC. It’s important because it lays out all of the decisions and rules about your business. This includes the member responsibilities and duties, profit distribution, voting process and other key details.
No states require an operating agreement to be filed with the Secretary of State but instead to keep them with your records. If you do it yourself, you will need to purchase an operating agreement online which costs anywhere from $50-$250.
If you use a lawyer than most likely it will be included in their total fee. Some online incorporation services include an operating agreement while others charge an additional fee to create one.
Federal Tax ID (EIN): Once your LLC is officially filed and approved you will need to obtain a Federal Tax ID Number (EIN). Your EIN will be used for filing taxes, opening a business bank account, establishing a credit identity for the business and acquiring business credit to name a few.
Now getting a Federal Tax ID Number is a free service provided by the IRS so there is no fee to pay to do it yourself. You can always pay an incorporation service to do it for you for a fee. This of course is an optional service they offer and not required.
Licenses and Permits: It’s important to understand that setting up an LLC is not the same as getting a business license or permit. Although license and permit fees are not part of the LLC’s set up fees I thought it’s important to add it here because it’s a cost which gives you the right to operate.
It does depend on what kind of business you have and where you live. It may be a zoning permit, permit from the health department, professional license, a general business operation license, etc.
You can check on your own to determine which licenses and/or permits are required for your business. Another option is to pay for license research which many incorporation services offer for a fee.
Ready to set up your LLC?
Whether you do it yourself, hire a lawyer or use an online incorporation service such as MyCorporation; forming an LLC is not as hard as most people think. Now that you know the breakdown of the cost setting up an LLC the next step is getting started.
Ready to build a credit identity for your LLC? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($497 value) =>
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, Business.com, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.