When forming a business in the United States you have the option to do so either as a corporation or an LLC. Limited liability companies (LLCs), depending on the state, have a variety of fees that need to be paid. Some annually and other fees only when the LLC is initially formed, called your state filing fees.
LLC state filing fees range between $40 and $500 depending on the state you form in. As of 2021, the average LLC filing fee in the United States is $132.
Outside of state filing fees, there are other LLC fees that you, as a business owner, need to be aware of when setting up your LLC. These fees are one of the downsides of forming an LLC versus operating as a sole proprietorship or partnership, and they are something to think about.
How Much Does it Cost to Start an LLC?
Starting your own business is a great way to make money. But as the old saying goes “it takes money, to make money.” The cost to form an LLC is not overly expensive in the grand scheme of things but there are 4 initial costs you should be prepared to pay.
You pay each cost of starting an LLC when you file your paperwork with the state you are operating in.
Filing Fee: The LLC filing fee is a one-time fee. It is required if you wish to form as a business entity. Also known as the certificate of formation or organization, your LLC is not official until this fee is paid and received. Typically it is filed with the Secretary of State, and ranges anywhere from $50 to $250.
Name: Choosing a name to identify your business is important because it separates you and gives you a brand. Names for LLCs must be unique, and this often causes a bit of an issue during formation. You want to have something that properly explains your company, but also has it stand out from the crowd. If your LLC has not been completely filled and you have a name in mind, you can reserve the name. This will cost as little as $10 or up to $50. Although optional, it is recommended.
File DBA: DBA stands for “doing business as.” If you want to file under a name that is not the same as the official name of your business, you will need a DBA. In order to operate under a fictitious business name, you must file an application and pay another filing fee. Average cost is anywhere from $50 to $100.
Business license: Most businesses require a business licence. This will come from the city or county in which you formed. Business licenses usually cost anywhere from $50 to $100.
What are the Annual Fees Associated with an LLC?
Although you pay a startup cost when you officially form your LLC, you still have more bills that need to be paid annually. LLC annual fees vary state to state just like the state filing fees. They must be paid once a year and on time or your company will face a penalty.
Here are 5 annual fees your LLC will have to pay to be legally recognized as a business in your state.
LLC Annual Fee: The LLC annual fee is an annual or biannual fee that is paid to the state. This is necessary to keep your LLC in compliance and in good standing. It’s usually paid every 1 or 2 years and is anywhere from $20 to $100.
Minimum Annual LLC Taxes: Also known as franchise taxes, this tax must be paid based on a flat fee. This costs $800 per year in California, but in most other states the minimum tax is $100 to $400. Not all states require this tax to be paid.
Registered Agent Fees: Every LLC must have an agent. This is necessary for the service of the process in the state it is formed. If you decide to pay a professional registered agent rather than designate someone within your LLC, you will need to pay them annually. The annual fee these companies charge is usually $100 to $300.
Business License Renewal Fees: Every so often your LLC must renew its local or state business license. This may even be as often as every year and usually is around $20 to $100.
Reporting Fees: In addition to your LLC filing fees, there are also reporting fees. For example in New York, these fees may increase based on how many partners or members are within the LLC. These start at a minimum of $325 to a maximum of $10,000. Other states charge a lower flat fee and may be as low as $20 a year. This is in addition to a franchise tax.
What Happens if You Don’t Pay Your LLC Fees
If you fail to pay your annual LLC fees on time the state can dissolve your LLC. It does not matter if your LLC was profitable that year or not, you are still required to pay the annual LLC fee.
Some states require you to submit paperwork alongside payment for your annual fees. You can find the paperwork on your state’s website for easy access. Before submitting your LLC annual fees make sure to review your state’s annual LLC reporting requirements to ensure you comply with state guidelines.
You are required to renew your license each year at the beginning of the year or on your company’s anniversary start date.
The fees associated with starting and operating an LLC vary from state to state as does the process of filing and the paperwork needed. A business attorney can help make sure you file your annual LLC report and fees correctly.