How Much Does It Cost to Form an LLC?

Starting an LLC typically costs around $129, making it one of the more affordable business structures to establish.

While legal formation is just one of many upfront expenses you’ll encounter when launching a business, forming an LLC is often the most popular choice due to its affordability and liability protection.

That said, the actual cost of forming your LLC can vary based on your state and whether you choose to handle the formation yourself or outsource it to an attorney or a business formation service.

For entrepreneurs looking to save time, reduce hassle, and ensure compliance, using a service like doola can simplify LLC formation and help you take the first step to fulfilling your American dream.

What Is an LLC?

A Limited Liability Company (LLC) is a business structure that provides owners (known as members) with personal liability protection.

This means that, in most cases, your personal assets — such as your home, car, and savings — won’t be at risk if your LLC faces lawsuits or debts.

An LLC combines:

The flexibility of a sole proprietorship/partnership with the liability protection of a corporation.

It is particularly popular among small businesses because it offers several benefits, including:

✔️ Limited Liability: Personal assets are protected from business liabilities.

✔️ Tax Flexibility: LLCs can choose to be taxed as a sole proprietorship, partnership, or corporation.

✔️ Simple Management: LLCs have fewer formalities than corporations, making them easier to manage.

The perfect balance of simplicity and protection makes LLCs an attractive choice for many entrepreneurs, but understanding the costs involved in forming one is equally essential.

LLC Startup Costs

The first expense you’ll encounter when forming an LLC is the startup cost, which primarily includes state filing fees. These fees can vary greatly depending on where you’re forming your LLC.

State Filing Fees

To officially form an LLC, you need to file Articles of Organization (also known as a Certificate of Formation) with your state. Depending on the state, the filing fees for this document range from:

As low as $40 to as high as $500.

Here are some examples of LLC filing fees by state:

On average, most states charge around $100 to $150 for LLC formation.

But it’s important to check with your specific state to get an accurate number.

If you’re forming your LLC in multiple states (known as foreign LLC registration), you’ll need to pay the filing fee in each state.

Additional Startup Costs

Aside from state filing fees, there are other potential expenses to consider when forming an LLC.

For example, some states, like New York, require you to publish a notice of formation in local newspapers, which can significantly increase your startup costs.

If you opt hiring legal or consulting professionals to assist with the LLC setup, you’ll need to factor in those fees as well.

These extra steps can add up, so it’s important to budget for them upfront to avoid surprises.

When you rely on doola, you don’t need to worry about keeping track of all these expenses — our tax experts are there to simplify the process for you.

Ongoing LLC Maintenance Costs

Once your LLC is formed, there are ongoing costs to keep your business compliant with state regulations.

These maintenance fees typically include:

Annual or Biennial Report Fees

Many states require LLCs to file an annual or biennial report that updates the state on your business’s key details, such as your address and the names of your LLC members.

The filing fee for this report varies by state, and here are a few examples:

✔️ California: $800 (franchise tax)

✔️ New York: No annual fee, but biennial report costs $9

✔️ Texas: No annual report fee, but a franchise tax report is required

Taxes and Compliance Costs

LLCs may also be subject to state-specific taxes, such as franchise taxes or gross receipts taxes. These costs can range from a flat fee to a percentage of your LLC’s earnings.

Examples:

Delaware charges an annual LLC tax of $300, while California’s franchise tax is $800 per year.

Ongoing Legal and Accounting Fees

LLCs that want to remain compliant often need legal and financial assistance, which can incur additional costs.

Whether you hire a registered agent, an accountant for tax filings, or legal counsel for periodic compliance checks — these costs should be factored into your ongoing budget.

Optional Costs When Forming an LLC

Forming an LLC can be as cost-effective or pricey as you choose, aside from the mandatory state filing and annual report fees.

Some entrepreneurs opt for the Do It Yourself (DIY) approach, avoiding extra expenses altogether. Others prefer the convenience of hiring a third-party service like doola to handle the filing and provide ongoing support.

Depending on your business needs, here are a few optional costs you might encounter:

Hiring a Registered Agent

A registered agent is a person or company that receives legal and tax documents on behalf of your LLC. While you can act as your own registered agent, many businesses prefer to hire a registered agent to ensure documents are handled professionally.

Registered agent services typically cost between $100 and $300 per year.

Creating an Operating Agreement

Although not legally required in most states, a well-drafted operating agreement is a critical document that outlines how your LLC will be run, including:

• Roles and responsibilities

• Procedures for resolving disputes

Hiring a lawyer to draft this agreement can cost $500 to $2,500.

But using a formation and compliance pro like doola can offer more affordable options.

Applying for an Employer Identification Number (EIN)

An EIN is essentially a Social Security Number for your business. Securing an EIN is important for tax purposes. It is also required if you plan to hire employees.

While you can obtain an EIN for free from the IRS, some businesses prefer to pay for assistance with the application.

Form your LLC with doola and let the experts guide you on these optional costs and more.

Should You Hire a Service to Help With LLC Formation?

There are two main ways to form an LLC: go the DIY route or hire a professional service.

Each approach has its pros and cons. Let’s help you understand what’s right for your business.

DIY LLC Formation

Filing your LLC on your own is the most affordable option, as you only need to cover the state filing fees.

However, while cost-effective upfront, it can be time-consuming, and any mistakes made during the process could lead to compliance issues later, which may end up being more expensive down the road.

Using a Service

Trusted and highly rated services like doola simplify LLC formation by handling the paperwork, compliance, and even ongoing maintenance tasks like filing annual reports and managing taxes.

Although this comes with a slightly higher upfront cost, it saves time and ensures that your LLC is set up and maintained correctly.

With doola, you get more than just help with LLC formation.

You gain access to a comprehensive suite of services, including:

• Reliable business banking

• doola Bookkeeping services

• Tax preparation and guidance

Thus, making it an all-in-one solution for entrepreneurs looking to set up and grow their businesses efficiently.

Costs of Forming an LLC by State

LLC formation costs can vary significantly depending on where you form your LLC.

Here are a few examples:

Remember:

When choosing a state, it’s essential to consider both the formation and ongoing maintenance costs, as some states may have low filing fees but high annual taxes or other hidden costs.

Is an LLC Right for Your Business?

An LLC is a great choice for many businesses, especially those looking for liability protection without the complexity of forming a corporation.

It’s an ideal business entity for:

• Small business owners

• E-commerce entrepreneurs

• Freelancers or consultants

• Real estate investors

There’s no required revenue threshold to form an LLC, making it an appealing option for businesses of all sizes compared to a sole proprietorship.

Meanwhile, an LLC can also be a great option for businesses looking to avoid corporate taxation.

However, as your business expands and you seek external investors or long-term growth, transitioning to a corporation may offer additional benefits in terms of structure and investment opportunities.

Word of Caution:

While LLCs typically provide liability protection, there are important exceptions to be aware of.

As an owner, you could still be held personally responsible for your business’s debts if you:

🚩 Co-sign on loans

🚩 Mix personal and business finances

🚩 Engage in fraudulent activities.

These situations can pierce the veil of protection, putting your personal assets at risk.

Proceed with caution and always maintain clear separation between your personal and business matters to preserve your LLC’s legal shield.

Alternatives to an LLC

While LLCs are a popular choice, you may want to explore other business structures as your venture grows.

Here are a few LLC alternatives:

✅ Sole Proprietorship

A sole proprietorship is the simplest and most affordable option — it’s automatically created when you start operating a business without forming a legal entity.

Like an LLC, it offers pass-through taxation, meaning profits flow directly to the owner’s personal income tax.

Point to Note:

There’s no legal distinction between the business and the owner, which means you could be held personally responsible for business debts and liabilities.

✅ Corporation

A corporation takes the separation of business and owner one step further. It establishes the business as a completely distinct legal entity, offering the highest level of liability protection for its owners.

Corporations also allow for more opportunities to raise capital, including attracting private investors or going public with stock offerings.

Do Corporations Have Their Limitations?

The corporate structure comes with drawbacks — primarily double taxation.

🚩 Corporations pay a 21% corporate tax on profits, and owners must also pay individual income taxes on their earnings from the company.

Additionally, starting a corporation can be costly, with filing fees, franchise taxes, and legal fees potentially running into the thousands.

While sole proprietorships and corporations are the most common alternatives, other structures like partnerships or S-corporations exist depending on the number of owners and tax preferences.

Ultimately, every business will fall into one of these categories: sole proprietorship, LLC, or corporation, so it’s crucial to weigh the pros and cons based on your specific business needs.

Why Use doola for LLC Formation?

Forming an LLC doesn’t have to be complicated or stressful — doola makes it easy.

With doola, you get:

1. Transparent Pricing

There are no surprises — just clear, affordable plans starting at $299.

2. Ongoing Support

We’re more than just an LLC formation service. From annual report filings to tax preparation and bookkeeping, we keep you compliant year-round.

3. Comprehensive Solutions

Beyond LLC formation, doola offers a full suite of services, including business banking services, compliance, and more, making it a one-stop shop for small businesses.

Ready to start your journey with us?

Book a free consultation with us today, and let’s grow your business together!