Starting a business can be an exciting and rewarding endeavor. However, it also requires careful planning and consideration of costs. If you're looking to form an LLC, you may be wondering: how much does it cost to start and maintain one?
While the process for forming an LLC may vary slightly by state, there are certain fees and expenses that are common across jurisdictions. In this blog post, we will discuss the costs associated with an LLC in 2023.
For those unfamiliar with the term, an LLC (or Limited Liability Company) is a type of business structure that combines elements of both corporations and partnerships. Unlike sole proprietorships or partnerships, LLCs offer their owners limited liability protection — meaning they are not personally responsible for business debts or lawsuits.
Additionally, LLCs have flexible profit distribution and management structures, and they can choose to be taxed as a corporation or a partnership.
Before you begin the LLC formation process, you must consider where you will register your LLC name. Many new business owners choose to register in the state where they plan to operate and/or have their headquarters located.
For example, if you live and operate your business in California, you should register a California LLC. If you operate your business in California, but register a Wyoming LLC, you’ll have to pay fees for both states.
However, if you're not a US-resident, you can register an LLC in any state. States like Delaware and Wyoming often have a reputation for being "business-friendly" and the the most common amongst non-US residents. It may just require a little extra paperwork and fees to qualify as a foreign entity. A recent example of this occurs quite frequently with DAOs.
DAOs, or decentralized autonomous organizations, often have members located all over the world. They share a common online platform and decision-making process but may not have a physical headquarters. As you can imagine, deciding where to register the business would be difficult.
As such, these DAOs often choose to register in Wyoming, which recently passed legislation specifically for DAOs to register in the state. However, it is important to consider whether registering in a different state may pose legal complications or extra fees before deciding.
One factor that may affect your decision on where to register your LLC is the fees associated with the formation in each state. This filing fee is also called the "Articles of Organization" or "Certificate of Formation" fee. You can pay it when you initially file your LLC or sometime afterward. The money goes directly to the state in order to form your LLC.
In Delaware, for example, the filing fee for forming an LLC is $90. There is also a recurring annual franchise tax, the amount of which is $300. In contrast, the filing fee in California is $70, and the recurring annual fee is $800. Other states, like Idaho, have zero recurring fees. However, you must file a separate annual report to provide information on the LLC's status and any changes in members or management.
The most expensive state to form an LLC in is Massachusetts, with a filing fee of $500 and an annual report fee of $500. As for the lowest cost state, you'll find states like Mississippi and Nevada with filing fees of only $50.
Lastly, newspaper publication fees may also apply. In certain states like New York, business owners must publish notice of their LLCs' formation in a local newspaper. This can range from $100 to over $1,000, depending on the publication and the length of time you choose to advertise for.
It's important to note that these are just the statutory fees set by each state. You can pay online or by mail, but some states may charge an additional fee for online filing. Depending on your specific circumstances, you may also need to hire a lawyer or registered agent to assist with the formation process.
If you don't see your state listed here, check out our dedicated LLC fee guide by state for more information on LLC filing fees and other costs. There, you'll find all the LLC fees for every US state in one convenient location.
On top of the state fees associated with forming an LLC, other expenses are also to consider. These may include costs for obtaining an Employer Identification Number (EIN) from the IRS, purchasing business insurance, and registering for local licenses and permits.
Additionally, you may want to invest in a professionally designed logo and website for your business. These expenses can vary greatly based on your specific needs and preferences. Speaking of branding, you can reserve your LLC's business name with the state for a small fee, typically ranging from $10-50.
Doing so will prevent other businesses from using the same or a similar name in your state. However, it's important to note that this does not automatically give you trademark protection for your brand or logo. It usually lasts for 1-2 months and can be renewed.
Another cost to consider for your LLC is the fee for a registered agent service. A registered agent, also known as a resident agent or statutory agent, is responsible for accepting legal correspondence and official documents on behalf of the LLC.
The registered agent must have a physical address in the state where the LLC is formed and be available during business hours to accept important documents. Some business owners choose to serve as their own registered agents, but this may not be the best option for everyone.
Hiring a registered agent service ensures that someone is always available to accept important documents and can provide an added layer of privacy and professionalism for your business. For example, lawsuits or other legal documents served to your registered agent will not be made public. The cost for a registered agent service can reach up to $300 per year.
Our company, doola, offers registered agent services for only $197 per year, which includes a host of other benefits for your LLC. It's an all-in-one solution for LLC compliance and registered agent needs.
While we've covered the financial costs associated with forming an LLC, it's also crucial to consider the time and effort that goes into the process. Just like launching an Amazon business or a C-corporation, the formation process for an LLC can be time-consuming and overwhelming. Filing the necessary paperwork and gathering all the required information can take several hours or even days.
Here's everything you need to consider in terms of time for starting an LLC. First, forming the LLC may take several weeks, depending on the state's processing timeline and whether you choose to expedite the process for an additional fee. It also depends on the load of the state's business division at the time of filing.
Next, you'll need to get an Employer Identification Number (EIN) from the IRS. If you're a US resident, you'll need to provide your Social Security Number (SSN) to apply for an EIN. You can accomplish this online in a matter of a week. If you don't have an SSN, you can use a service like doola to apply for an EIN in 3-4 weeks. Processing times may vary depending on the IRS's workload.
In most cases, you'll also need a US bank account for your LLC. Opening a business bank account may take several days, as the bank will need to verify the LLC's formation and EIN before finalizing the account. For out-of-country business owners, 1-2 weeks may be necessary to gather all the required information and documents for opening an LLC bank account. Amongst other things, you'll need a passport to open a business bank account as a non-US resident.
Finally, you'll need to connect your bank account with a payment processor to begin accepting payments for your goods or services. This can be done in a few days online with most payment processors, such as PayPal or Stripe.
As you can see, forming an LLC involves financial costs, time, and effort. It's important to consider all these factors before deciding to start your LLC. With doola, we make it easy to form an LLC and handle all the essential steps for ongoing compliance. Visit our process page to learn more about how we can help streamline LLC formation for you.
Our LLC formation package starts at just $197 and includes a year of registered agent services. This package also includes annual report filing, which is required in most states for LLCs to maintain good standing. Additionally, our package is available for all American states, unlike other registered agent services only available in a select few.
doola also comes with world-class support and a satisfaction guarantee. We want to ensure that you have the support you need for the success of your business. Our team is always available to assist with any questions or concerns about your LLC. You can contact us any time via live chat or email. One of our team members will be happy to assist you.
With this incredible offering on the table, you might wonder how doola can afford to provide such comprehensive services at such a competitive price. The answer is simple: we believe in the power of technology and automation to streamline business processes, saving both time and money for our clients. When you use your debit card, VISA will charge a small fee to the merchant for processing your payment. doola will receive a fraction of this fee in exchange for providing LLC formation and compliance services to our clients.
To get started with our unbeatable prices, visit our pricing page and provide information about your company. In just about 3 minutes, you'll be presented with your personalized LLC formation package and can begin the exciting journey of starting your own small business. You may choose a wide range of payment options, including credit cards.
Last but not least, let's go over some additional costs that may be associated with maintaining your LLC. These are the fees for ongoing compliance and business operations rather than the initial cost of formation. Many business owners omit these costs in their budget planning, so it's important to consider them from the outset.
First, you'll need to file annual reports and pay annual tax fees. After disclosing your earnings to the IRS, you'll also need to pay state and federal income taxes and applicable sales tax. Additionally, depending on your industry, you may need to obtain licenses or permits for conducting business in your state.
If your LLC has employees, you'll also need to pay for their salaries and benefits and adhere to employment laws and regulations. Furthermore, you may consider purchasing business insurance to protect against potential lawsuits or financial losses.
As a business owner, it's essential to budget for these ongoing costs and plan for them from the beginning. If you have money to waste, you might be tempted to hire someone else to handle your compliance and tax payments. However, this can result in higher overall costs and a lack of control over critical business decisions.
At doola, we provide ongoing compliance support to ensure that you stay on top of these expenses and meet all necessary filing requirements. We also offer guidance on navigating the world of taxes and employment laws. When you partner with doola, we'll be there to support you every step of the way in your business journey. Simply upgrade to the total compliance package for the best value and peace of mind.
In conclusion, starting an LLC will come with initial costs for the formation and ongoing expenses for compliance and business operations. Each state has its own fees for filing articles of organization and registering a registered agent. Plus, you'll need to factor in the cost of ongoing compliance support and taxes.
You must also remember that your time is valuable as a business owner. It's crucial to consider the cost of DIY vs. hiring a professional to handle LLC formation and compliance for you. At doola, we offer affordable packages with comprehensive services to save both time and money for our clients.
Get started on your business journey today with the help of doola.