While forming an LLC can be beneficial for your business, it is not without its costs. The initial costs of formation vary by state, and you may also need to budget for recurring annual fees and taxes that help your LLC stay compliant.
These fees can range from a few hundred dollars to four figures, and are sometimes required by the state in which your LLC is formed. Using a compliance calendar can help you keep on top of these recurring expenses, and save you from legal penalties.
Annual filing fees
Every state requires statutory entities, such as limited liability companies (LLCs), to pay initial filing fees before they can legally operate. These fees vary depending on the type of business you’re forming and your state’s requirements.
Almost all states also require LLCs to file an annual report and fee every year. This report updates the state’s records on your company and its members.
A reporting fee is typically $20 to $100, although some states have a higher minimum flat fee.
In addition to reporting fees, many states have a franchise tax that applies to all LLCs. The tax can range from $800 per year in California to $250 per year in Delaware.
Finally, most states require LLCs to appoint a registered agent. This is an individual or business entity designated to accept service of process and other legal papers on behalf of your LLC.
When starting a business, getting the proper licenses and permits is essential. Failure to do so can lead to fines, penalties, and even jail time.
The cost of obtaining a business license varies by state and may be higher for businesses with more complicated structures or many members. The fees can vary from $10 to $800 or more, depending on the specifics of the business.
Most states require LLCs to obtain an occupational or general business license before a company can operate legally. These licenses may also include income tax employer identification numbers, which are required by the IRS.
Minimum annual LLC taxes
The minimum annual LLC taxes you’ll pay depend on your state. Some states levy sales tax, while others charge gross receipts tax.
Most of these fees are due by the end of your business year, usually on April 15. Alternatively, you can make an estimated LLC fee payment.
You’ll also need to pay federal and state income tax on your share of the LLC’s profits. Your local government may also impose additional business taxes.
As a result, it’s often best to start an LLC in the state in which you live or operate your business. This is because fees and reporting requirements are typically lower in your home state than in any other, while also being more business-friendly.
Registered agent fees
The annual registered agent fees for LLCs vary widely from state to state. These fees cover the costs of maintaining a registered agent, who is responsible for receiving legal documents on behalf of an LLC.
This person or company must have a physical address in the state and be available during business hours to receive important legal and tax documents. Some small business owners choose to serve as their own registered agents, while others opt for a professional registered agent service.
The cost of forming an LLC varies from state to state, with startup fees usually starting at $250 for getting Articles of Organization and Addafit of Publication. The price can go up if you hire a lawyer or a formation service to help you.
Depending on your state, you may need to file for a DBA (doing business as) name for your LLC. This is a good option for sole proprietorships and partnerships who want to do business under a different name than their legal name.
In some states, you can reserve a business name for up to 180 days for a small fee. This can prevent someone else from registering the same name and will save you the hassle of having to change it later.
Most states also require LLCs to file an annual report with the Secretary of State. This is a requirement that will help keep your company in good standing with the government and make it easier for investors to track your performance over time.