Starting your own business is a major step that involves many decisions, not the least of which is choosing the right business structure. For many entrepreneurs, forming a Limited Liability Company (LLC) is an attractive option. LLCs offer the liability protection of a corporation combined with the tax benefits and operational flexibility of a partnership or sole proprietorship.
However, forming an LLC comes with its own set of financial considerations, including various state fees for business Incorporation. This comprehensive guide aims to demystify these costs, providing an in-depth look at the different fees involved in LLC formation and maintenance, as well as tips for budgeting and planning for these expenses.
What’s the Deal with State Fees for LLC Formation?
State Filing Fees for LLC Formation
The first fee you’ll encounter when forming an LLC is the state filing fee. This one-time payment goes to your state’s Secretary of State office (or its equivalent) to process your LLC formation documents. The cost can range from as low as $50 in states like Arizona and Arkansas to as high as $500 in Massachusetts.
These fees are subject to change, so it’s always a good idea to check the most current rates with your state’s business filing office. For a quick reference, here’s a table showing the current LLC filing fees in each state as of 2021.
| State | Filing Fee |
|---|---|
| Alabama | $200 |
| Alaska | $250 |
| Arizona | $50 |
| Arkansas | $45 |
| California | $0 |
| Colorado | $50 |
| Connecticut | $120 |
| Delaware | $90 |
| Florida | $125 |
| Georgia | $100 |
| Hawaii | $50 |
| Idaho | $100 |
| Illinois | $150 |
| Indiana | $95 |
| Iowa | $50 |
| Kansas | $160 |
| Kentucky | $40 |
| Louisiana | $100 |
| Maine | $175 |
| Maryland | $100 |
| Massachusetts | $500 |
| Michigan | $50 |
| Minnesota | $50 |
| Mississippi | $50 |
| Missouri | $50 |
| Montana | $35 |
| Nebraska | $105 |
| Nevada | $425 |
| New Hampshire | $100 |
| New Jersey | $125 |
| New Mexico | $50 |
| New York | $200 |
| North Carolina | $125 |
| North Dakota | $135 |
| Ohio | $99 |
| Oklahoma | $100 |
| Oregon | $100 |
| Pennsylvania | $125 |
| Rhode Island | $150 |
| South Carolina | $110 |
| South Dakota | $150 |
| Tennessee | $300 |
| Texas | $300 |
| Utah | $70 |
| Vermont | $125 |
| Virginia | $100 |
| Washington | $200 |
| Washington DC | $99 |
| West Virginia | $100 |
| Wisconsin | $130 |
| Wyoming | $100 |
LLC Name Reservation Fees
Before you can officially form your LLC, you need to choose a unique name for your business. Once you’ve decided on a name, you can reserve it with your state’s Secretary of State office to ensure that no other business can take it while you’re in the process of forming your LLC. Name reservation fees vary by state, but they typically fall in the range of $10 to $100.
Publication Fees for LLC Formation
In some states, including Arizona, Nebraska, and New York, newly formed LLCs are required to announce their formation in a local newspaper. Known as publication fees, these costs can vary significantly depending on the newspaper’s ad rates and the length of time the announcement needs to run. Be sure to factor this into your budget if you’re forming an LLC in one of these states.
Getting Down to Business: Understanding Ongoing LLC Fees
Once your LLC is up and running, you’ll need to plan for a series of ongoing fees to keep your business in good standing with the state.
Annual Report Fees
Most states require LLCs to file an annual or biennial report detailing the company’s activities over the past year. These reports typically include information about the company’s finances, ownership, and business activities. Depending on the state, annual report filing fees cost up to $500.
Franchise Tax
Some states charge an annual “franchise tax,” also known as a “business privilege tax.” This fee is essentially a cost for the privilege of doing business in the state, and it’s typically based on the company’s income or assets. States with a franchise tax include Alabama, Arkansas, California, Connecticut, Delaware, the District of Columbia (D.C.), Rhode Island, Tennessee, Texas, and Vermont.
Registered Agent Fees
Every LLC is required to have a registered agent — a person or business entity that agrees to accept legal papers on the company’s behalf. While you can serve as your own registered agent, many businesses choose to hire a professional registered agent service. These services typically charge an annual fee, which can range from $100 to $300.
Expedited Processing Fees
If you’re in a hurry to get your LLC formed, some states offer expedited processing for an additional fee. This can be a valuable service if you need to form your LLC quickly but be ready to pay extra for the convenience.
Conclusion
The costs may seem daunting initially, but they are a small price to pay for the legal protection and tax advantages an LLC offers. In the end, the cost of forming an LLC is just one of many factors to consider when starting a business. Other important considerations include the type of business you want to start, the market you’re entering, and your long-term business goals.
