Starting an LLC involves more than just paying state filing fees. You need to understand the full spectrum of costs. Currently, LLC filing fees alone range from as low as $35 in Montana to as high as $500 in Massachusetts. However, this initial expense is just the beginning.
Here, we’ll dive into the comprehensive costs of forming and maintaining an LLC, compare this with other business structures, and highlight strategic considerations that you need to make.
This is what’s in store:
- LLC Cost by State: Initial Formation and Annual Fees
- Why File an LLC Over Other Business Structures?
- Frequently Asked Questions
- Final Takeaway
LLC Cost by State: Initial Formation and Annual Fees
Explore the initial LLC formation costs and annual expenses across all 50 states and outlying territories. From the affordable options in states like Montana and Kentucky to the higher fees in Massachusetts and California, each state varies in its initial filing fees and ongoing compliance costs.
So, how much does an LLC cost?
| LLC Cost | Annual/Biennial Fee | |
| Alabama | $200 | $50 minimum (every year) |
| Alaska | $250 | $100 (every 2 years) |
| American Samoa | Fees vary | Contact local authorities |
| Arizona | $50 | $0 (no annual fee) |
| Arkansas | $45 | $150 (every year) |
| California | $70 | $800 (every year) + $20 (every 2 years) |
| Colorado | $50 | $10 (every year) |
| Connecticut | $120 | $80 (every year) |
| Delaware | $90 | $300 (every year) |
| Florida | $125 | $138.75 (every year) |
| Georgia | $100 | $50 (every year) |
| Guam | $100 | $100 |
| Hawaii | $50 | $15 (every year) |
| Idaho | $100 | $0 (information report annually) |
| Illinois | $150 | $75 (every year) |
| Indiana | $95 | $31 (every 2 years) |
| Iowa | $50 | $30 (every 2 years) |
| Kansas | $160 | $50 (every year) |
| Kentucky | $40 | $15 (every year) |
| Louisiana | $100 | $35 (every year) |
| Maine | $175 | $85 (every year) |
| Maryland | $100 | $300 (every year) |
| Massachusetts | $500 | $500 (every year) |
| Michigan | $50 | $25 (every year) |
| Minnesota | $155 | $0 (information report annually) |
| Mississippi | $50 | $0 (information report annually) |
| Missouri | $50 | $0 (no annual fee) |
| Montana | $35 | $20 (every year) |
| Nebraska | $100 | $13 (every 2 years) |
| Nevada | $425 | $350 (every year) |
| New Hampshire | $100 | $100 (every year) |
| New Jersey | $125 | $75 (every year) |
| New Mexico | $50 | $0 (no annual fee) |
| New York | $200 | $9 (every 2 years) |
| North Carolina | $125 | $200 (every year) |
| North Dakota | $135 | $50 (every year) |
| Mariana Islands | $350 | $150 (every year) |
| Ohio | $99 | $0 (no annual fee) |
| Oklahoma | $100 | $25 (every year) |
| Oregon | $100 | $100 (every year) |
| Pennsylvania | $125 | $7 (every year) |
| Puerto Rico | $250 | $150 (every year) |
| Rhode Island | $150 | $50 (every year) |
| South Carolina | $110 | $0 (no annual fee, unless taxed as S-Corp) |
| South Dakota | $150 | $50 (every year) |
| Tennessee | $300 | $300 (every year) |
| Texas | $300 | $0 (No annual fee or reports) |
| Virgin Islands | $350 | $150 (every year) |
| Utah | $54 | $18 (every year) |
| Vermont | $125 | $35 (every year) |
| Virginia | $100 | $50 (every year) |
| Washington | $200 | $60 (every year) |
| Washington DC | $99 | $300 (every 2 years) |
| West Virginia | $100 | $25 (every year) |
| Wisconsin | $130 | $25 (every year) |
| Wyoming | $100 | $60 minimum (every year) |
This table’s a solid start, but always do your own homework before diving into setting up your LLC. State rules can change, which affects how much you’ll pay for filing and annual/biennial fees over time.
Note that this table gives you the initial and yearly costs, but it doesn’t cover other expenses like licenses, agent fees, or taxes.
For the latest details, head to your state’s Secretary of State (SOS) website, check out the SBA for general info, or talk to a legal or financial expert.
Recommended: Secretary of State Offices Directory | Where to File a Business License
Don’t Forget Business Licensing and Insurance
Setting up your LLC with the Secretary of State is just the beginning. In many states and cities, you might need additional business licenses or permits to operate legally. And, small business insurance is crucial to safeguard against unexpected liabilities.
For instance, in New York City, certain industries like auto sales or construction may require specific licenses beyond your LLC registration. So, you’ll need to account for these as well—they could cost anywhere from $5 to $50, depending on the type and duration
Moreover, certain fields require licensure beyond a license to practice. For example, a salon owner in California needs what’s called an “Establishment License” (in addition to their board certificates) before they can legally serve clients. It costs $50 to apply for one of these.
Annual LLC insurance costs can vary widely, typically ranging from $500 to $2K depending on your required coverage.
Remember, every state and municipality has its own regulations. So, research and comply with local laws to make sure your business legally operates and is adequately protected.
You might also like: Complete Guide to Small Business Insurance in New Jersey
Why File an LLC Over Other Business Structures?
The right business structure is crucial. Here’s a quick overview of sole proprietorships, partnerships, corporations, and LLCs to help you decide.
- Sole Proprietorships are the easiest to set up with minimal costs, typically just the price of licenses or permits ($50-$300). You have complete control, but you’re personally liable for all business debts.
- Partnerships share financial commitment and expertise among partners. Startup costs range from $500 to $2,000 for agreements and licenses. Partners share liability, which can be a downside.
- Corporations offer strong liability protection and can raise capital through stock. However, they are expensive to set up ($1,000-$5,000) and maintain, with double taxation and extensive paperwork.
- LLCs provide personal asset protection and flexible tax options, combining the benefits of partnerships and corporations. Costs vary by state ($40-$500 for initial filing, $100-$800 annually). LLCs protect your personal assets from business debts and offer flexible tax treatment, avoiding double taxation.
LLCs often hit the sweet spot with liability protection, tax flexibility, and fewer formalities, making them a popular choice for a majority of small business owners—Plus, it’s a good structure to use when building business credit.
Recommended: Sole Proprietorship VS LLC: How to Choose Your Entity Wisely
What Can Happen When You Choose the Wrong Structure?
It’s crucial to consider all factors, not just initial fees, to find the best fit for your business needs. Choosing the wrong business structure can also have serious financial and legal repercussions.
Suppose you start a tech company as a sole proprietorship to save on startup costs. If your business faces a lawsuit, your personal assets are at risk because sole proprietorships don’t offer personal liability protection. An LLC, however, would have protected your personal assets from business liabilities.
Several things can go wrong when you choose the wrong structure:
- Higher compliance costs
- Legal complexities
- Tax implications
- Limited liability risks
- Operational inconvenience
Each structure has different management and operational requirements. Corporations require extensive record-keeping, regular board meetings, and formalities that might be overkill for a small business, while an LLC offers more operational flexibility.
Recommended: Low-Risk NAICS Codes +Best SIC Codes for Business Credit in 2024
The Pros and Cons of Out-of-State Business Formation
Many entrepreneurs choose to file their LLCs in states like Delaware due to its business-friendly laws:
- The state’s Court of Chancery handles business disputes without juries and gives you a more predictable legal environment.
- Delaware’s General Corporation Law offers flexibility in corporate structures and operations (which is particularly beneficial for corporations seeking venture capital or planning to go public).
Choosing states like Wyoming (for low costs) or Delaware (for added protection) can save money with lower initial filing fees and ongoing costs. Some states offer tax benefits, reducing overall tax burdens. States such as Nevada and Wyoming prioritize business owner privacy, providing strong protections.
However, operating out-of-state means extra registration costs and compliance obligations as a foreign entity. Managing compliance across states is complex and can lead to legal issues. Tax complications may arise with potential obligations in both home and formation states.
Consider LLC Formation Services
When it comes to forming your LLC, deciding whether to enlist a service or go the DIY route depends largely on your comfort level with legal processes and your budget. Opting for a professional service can be advantageous if you prefer expert guidance and want to make sure you comply with state regulations without the hassle of paperwork.
Services like ZenBusiness, Northwest Registered Agent, and Swyft Filings offer tailored packages that can simplify the process for you, starting at competitive prices. For instance, ZenBusiness provides LLC formation for free with a tone of paid compliance upgrades. Meanwhile, Northwest Registered Agent offers comprehensive solutions including registered agent services that start at $125 per year.
On the other hand, if you’re familiar with the requirements and keen on minimizing costs, handling the LLC formation yourself might be a viable option. Your own needs and preferences will help you make the best decision for launching your business efficiently…and legally.
Recommended: How to Create a Business Credit “Entity”
Frequently Asked Questions
How much does it cost to open an LLC in the US?
Initial filing fees vary by state, ranging from $35 to $500. Annual fees and other compliance-related costs may also apply.
How much does an LLC cost per year?
Annual costs include state filing fees, registered agent fees, and potential business license renewals, varying by state.
Can I deduct LLC startup costs on my taxes?
Yes, you may be able to deduct up to $5,000 in startup expenses in your first year of business, with the remainder amortized over 15 years. Speak with a tax professional for advice about your specific circumstances.
What is the difference between an LLC and an S Corp?
LLCs offer flexibility in taxation and management structure, whereas S corporations have stricter ownership requirements and pass-through taxation.
Final Takeaway
Beyond initial filing fees, annual expenses and compliance costs vary widely by state. Choosing an LLC over other structures like sole proprietorships or corporations offers benefits like asset protection, tax flexibility, and is a good structure for business credit. But, the wrong choice can mean higher expenses and legal issues.
Deciding whether to handle LLC formation yourself or use services like ZenBusiness or Northwest Registered Agent depends on your comfort with legal processes and budget.
Always check state resources or consult with experts to stay informed and make the best decisions for your LLC’s success.
Do you want to learn how to obtain up to $100K in business credit in as few as 30 days? Join Business Credit Workshop today!