How Much Does it Cost to Start an LLC? 2023 Guide

How much does it cost to start an LLC?

One dollar and a dream!

Just kidding — the actual cost of starting an LLC can vary greatly depending on your state.

On average, it was $132 in the U.S. in 2022.

There are also additional services that can help make the process smoother.

Such services will also add to the initial costs.

In this article, I’ll explore the various costs of forming and maintaining an LLC

If you’ve ever wondered what it takes to start an LLC in monetary terms, read on to learn more.

LLC Filing Costs

Here are the costs involved in launching an LLC.

LLC Filing Fees

The articles of organization are one of the primary documents needed to form an LLC.

Submission of this form will likely cost anywhere from $50 to $500.

This form is filed with the Secretary of State’s office in your state.

As part of the LLC operating agreement, you may also have to register your business with state and local governments.

Most states require that you know the number of members, their roles in the decision-making process, and other essential information about the LLC.

The operating agreement must also be filed with the Secretary of State’s office for your business to become legitimate and registered.

That said, here are the base rates for LLC formation service per state.

State LLC	LLC Filing Fee	LLC Annual Fee
Alabama	$200	$100 minimum
Alaska	$250	$100 (every two years)
Arizona	$50	$0 (no fee and no information report)
Arkansas	$45	$150
California	$0 (free until June 2023)	$800 + $20 (every two years)
Colorado	$50	$10
Connecticut	$120	$80
Delaware	$90	$300
Florida	$125	$138.75
Georgia	$100	$50
Hawaii	$50	$15
Idaho	$100	$0
Illinois	$150	$75
Indiana	$95	$31 (every two years)
Iowa	$50	$45 (every two years)
Kansas	$160	$50
Kentucky	$40	$15
Louisiana	$100	$35
Maine	$175	$85
Maryland	$100	$300
Massachusetts	$500	$500
Michigan	$50	$25
Minnesota	$155	$0
Mississippi	$50	$0
Missouri	$50	$0
Montana	$70	$20
Nebraska	$105	$13 (every two years)
Nevada	$425	$350
New Hampshire	$100	$100
New Jersey	$125	$75
New Mexico	$50	$0
New York	$200	$9 (every two years)
North Carolina	$125	$200
North Dakota	$135	$50
Ohio	$99	$0
Oklahoma	$100	$25
Oregon	$100	$100
Pennsylvania	$125	$70 (every ten years)
Rhode Island	$150	$50
South Carolina	$110	$0
South Dakota	$150	$50
Tennessee	$300	$300
Texas	$300	$0 for most LLCs
Utah	$54	$18
Vermont	$125	$35
Virginia	$100	$50
Washington	$200	$60
Washington DC	$99	$300 (every two years)
West Virginia	$100	$25
Wisconsin	$130	$25
Wyoming	$100	$60 minimum

Credit: https://www.llcuniversity.com

Tax Structure And Fees

The state taxes for an LLC vary from state to state.

On your tax return, you must report the income generated from your business and any taxes paid.

Depending on your business type, you may be required to pay corporate and personal income taxes.

For example, most states impose a corporate income tax on LLCs classified as C Corporations (also known as “C Corps”).

Some states also require LLCs to pay sales or use taxes and have other tax requirements specific to them.

As your LLC grows, you may need to pay additional state taxes such as an annual franchise tax, property tax – including real estate transfer taxes – and excise taxes on specific goods.

Registered Agent Services

A registered professional agent is a third party who acts as the legal representative of your LLC on state government records.

While you can appoint yourself as the registered agent for your LLC, most states require an external registered agent.

This agent can be especially beneficial if you travel often or reside out of state.

Registered agent services help ensure that your LLC’s paperwork and other important documents are securely received and stored by someone with access to the proper filing channels.

In addition, in the case of service of process, it is essential to have a reliable, professional registered agent available to receive documents on behalf of your company.

LLC Formation Publication Costs

Apart from the operating agreements, LLC formation in some states involves letting the public know about the LLC’s existence.

This initial report involves publishing a legal notice in a local newspaper announcing the formation of the LLC.

It is essential to check with your Secretary of State for more information regarding filing publication costs.

LLC Cost and Fees Over Time

Let’s now consider the ongoing costs associated with operating an LLC.

While the highest costs occur at the start of a business, ongoing fees and expenses must also be considered when budgeting for your LLC.

Here are the crucial LLC costs to consider.

LLC Annual Report

Getting a certificate of good standing helps businesses maintain their legal status, especially when dealing with banks and other financial institutions.

Keeping an active annual report on file for each state in which the LLC does business is essential.

Business Bank Account

To form an LLC, business owners need a bank account to separate their personal and business finances.

Such accounts might require an annual fee to stay active and provide the features a business needs.

From low APR to high-yield savings accounts, there is a bank account option for any business or budget.

With such distinct types of accounts (and different costs), doing your research is vital.

Business Website

Business owners must also consider their online real estate when forming an LLC.

A website influences how they come across and conduct business with potential customers.

A well-designed, modern website that provides visitors with valuable information can be invaluable.

The cost of website design varies greatly and depends mainly on the size of the website and its complexity.

Business Licenses

Various business license fees also occur as a result of an LLC formation.

Depending on the type of industry, there might be government or local requirements for specific licenses and permits to operate a business within certain areas or jurisdictions.

Business license renewal fees depend on how often one must renew the license.

Business Taxes

Here are the various types of business taxes that a business might have to pay:

• Federal tax: Paying federal income taxes is a must for most companies in the United States.
• Franchise tax: Certain states charge this tax on businesses that have their headquarters located in those states or companies doing business within the state’s boundaries.
• Income tax: Depending on the company’s taxable income, an LLC may be required to pay a corporate income tax. As a legal business entity, an LLC is separate from its members and must pay taxes on profits.

Marketing and Advertising

With various marketing and advertising options available today, there are plenty of ways to promote a business.

Search engine optimization (SEO) can be an investment that businesses make to increase their presence online and rank higher in search results.

On the other hand, paid advertising is another way for a business to reach potential customers, which also requires investments of time and money.

The costs of SEO, advertising, and other digital marketing tactics vary widely based on the goals and resources of the company.

Office Or Retail Space

Depending on the type of business, some LLCs may need to rent or purchase office space.

Office space requirements can include anything from a small desk in your home to renting a large office building.

In addition, these costs might include the installation of phone lines and internet services, as well as security or alarm systems.

Professional Services

Other professional services can include legal advice for contracts and agreements, accounting software to manage finances, and IT support in case of any technical issues.

In addition, if a business needs specialized help in consulting, outsourcing, or freelancing work, this cost should also be considered when setting up an LLC.

How To Start An LLC Quickly

Here are the main tips to consider when starting an LLC quickly.

Be Well-Organized

Knowing the costs involved before starting the LLC filing process ensures a straightforward process.

This knowledge ensures you won’t be surprised as the LLC fees start coming at you fast.

Use Accelerated Processing

Some states offer a way to get the job done at a faster rate than traditional LLC formation.

Depending on the state, accelerated processing may be available for an additional fee.

Ensure Complete Formation Documents

Another critical factor is to complete formation documents wholly and accurately before submitting them.

Being thorough with the paperwork can save going back and forth between you and the state.

Meet All Standards required

Another consideration is ensuring your business meets the necessary standards before filing your formation documents.

For example, if your business name has already been taken, there’s no point in starting the LLC formation process.

LLC naming information

Speaking of names, choosing the right business one for your LLC is essential.

Choosing the right LLC name means finding something that represents your business well while complying with your state’s rules.

As part of the LLC naming requirements, your business must have a unique name (i.e., it cannot be confused with any other existing business).

One can also go through a name reservation process, ensuring the name remains available for 30 days.

Business owners can do this to ensure they spend less on filing fees if someone else registers a similar name during this period.

Submit Your Paperwork Online (if available in your state)

Having to go to a physical office and wait in line to file your LLC paperwork is not only inconvenient but also time-consuming.

With some states offering online submission options, this makes it easier for entrepreneurs to start their LLCs without having to leave their homes or office.

Make Use of An LLC Filing Service

If you want to ensure the process runs as smoothly as possible, consider using an LLC filing service.

These LLC filing services can help you get your LLC started quickly and help with your business’s ongoing compliance.

Here are some examples of popular LLC filing services:

• Zenbusiness
• Northwest Registered Agent

Bank Requirements

When opening a bank account for an LLC, there are a few factors to consider.

These can help you in the short and long term, as they will affect how you manage your finances.

Charges

Not all banks (and account types) are created equal in terms of fees.

It is essential to know what the bank’s fees are.

Fees include opening fees, maintenance fees, ATM fees, transaction charges, and international banking costs.

Location

The bank location has a lot to do with both convenience and costs.

Some states may have restrictions on which banks you can open an LLC bank account with, so it’s essential to research what options are available in each state before deciding on one.

Services And Features

When selecting a bank for your LLC, think about the services it offers.

These can include access to ATMs, online banking, mobile banking, security features (like fraud protection), overdraft protection, and other features that might be helpful for your business.

Customer Service

Having someone available to help you with any questions or issues can be a real lifesaver for business owners.

Look for banks that offer customer support at all hours of the day and in multiple ways (phone, email, chat).

Applying for a US Business Bank Account

Since time is money, here are the key steps to follow when opening a bank account that ensures you don’t waste either.

Research And Compare Banks

A business bank account in one bank will vary from another in terms of fees, features, and customer service.

As a business entity, getting favorable terms can help you manage your finances more efficiently.

Research And Compare Business Accounts

Even within the same bank, some accounts might better suit an LLC’s needs than others.

Be sure to read any fine print carefully before making your decision so that you understand all the features included in each account type.

3. Complete the application process

Once you’ve decided which bank and account to select, get your employer identification number and other necessary documents ready for submission.

Ensure that the legal documents are in place and that you complete the paperwork accurately.

Submit Your Application

With everything ready, submit your application to the bank of your choice.

Submissions can usually be made either online or through a physical branch.

Fund Your Account And Activate It

The last step to activating an account is usually funding it with a minimum amount.

Various banks will have different limits, so check before making any deposits.

Once funded, you can access and use your LLC bank account as needed.

LLC Processing Time

As a future small business owner, money is one of many factors to consider.

Knowing how to start an LLC and the timeframes associated with the process is essential.

Generally, a week to ten business days is the processing time needed for an LLC to be approved.

However, each state has different requirements, meaning some might take longer.

As mentioned earlier, various services can make the startup process faster.

Some state governments provide expedited filing services for an additional fee, which usually cuts the wait time in half.

Additionally, some filing companies offer express services that can get an LLC filed within as little as 24 hours.

How Much Does it Cost to Start an LLC – FAQ

Is A Sole Proprietorship Better Than An LLC?

In terms of costs, a sole proprietorship might mean less initial startup costs than an LLC.

However, an LLC offers liability protection for the business owner that a sole proprietorship doesn’t have.

Why Is The Structure Of An LLC Appealing?

As a business structure, a limited liability company offers various options to consider during the incorporation process.

These options include filing as a member-managed, multi-member LLC, or single-member LLC.

You also have to choose whether to elect corporate tax status.

LLCs can also be taxed as an S corp, which benefits businesses looking to save on taxes and receive more favorable treatment from the IRS.

What Is A DBA?

A DBA (Doing Business As) is the ability to use a fictitious business name.

It allows sole proprietorships to conduct business under a different name (than their own) to differentiate themselves and create an identity for their business.

Does Forming A Foreign LLC Consist Of Additional Costs?

Yes, additional fees are usually associated with registering for or operating an LLC in another state.

These can include filing fees, registration fees, taxes, and other administrative costs.

Why Do State Filing Fees Differ From One State To Another?

Every state imposes its filing requirements and fees, so the amount of money you need to pay can vary from state to state.

Additionally, some states may require specific documents or procedures that could add costs to forming an LLC.

What Is Different About Filing An LLC In New York?

Creating an LLC in New York requires more paperwork than in other states due to its stringent regulations.

Additionally, it requires all businesses in the state to appoint and maintain a registered agent within the state at all times.

Wrap Up.

Knowing the costs involved in forming limited liability companies is one of the first steps to a successful business.

Depending on your chosen state, filing fees and other expenses can vary significantly.

It’s essential to research and understand the application process before getting started.

Further reading on AdamEnfroy.com: Do you know the differences between a sole proprietorship and a limited liability company?

This knowledge can help you decide which business structure works best for you.

Also, consider the business model you choose will affect your goals, resources, and preferences.

For example, to start an ecommerce business, you need to understand the basics of creating an online store and how to portray products and services to your customers in the best light.

The right ecommerce platforms can help you launch your business quickly and efficiently.

On the other hand, if you start a blogging business, you need to know the essentials of blog monetization and how to drive traffic to your website.