How much does an LLC cost in 2024? (2024)

Setting up your small business as an LLC (limited liability company) helps protect your personal assets, can provide tax advantages and adds professional credibility to your business. The big question is: How much does an LLC cost to get up and running?

Let’s dive into the initial cost of creating an LLC and the ongoing costs required to keep your LLC operational.

Demystifying LLC cost and terms

When starting your LLC, you’ll see various terms and costs thrown around. States even use different terms for the same thing, making the research process confusing and frustrating. Let’s clear things up a little and break down key LLC costs and terms so you’re prepared to make the right decisions for your business.

Note: We calculated any averages/minimum costs in this article using data we pulled directly from each state’s .gov site.

Filing fee: $123 on average

Every state charges a fee to file articles of incorporation/organization. This fee registers your LLC and officially establishes your business name with the state, except in Alabama. In Alabama, you must reserve your business name before you file, using a name reservation form. For more clarification, see our LLC name reservation section below.

Annual/biennial report fee: $77 on average

Most states require LLCs to submit an annual or biennial report/form. These forms ask you to verify basic business information, such as your business name, principal office address and registered agent. Many states mail this form or a filing reminder to your LLC’s registered agent in advance of the due date and have both mail-in and online filing options to submit your report. If you don’t file the report, your LLC will lose its good standing, eventually resulting in the state dissolving your LLC.

To find your state’s annual/biennial report requirements, google “state LLC annual report site: .gov.” Your state’s page detailing annual report information should be in the first few results. Here’s a snapshot of the first page of Indiana’s annual report form as an example:

Registered agent: $0 to be your own (in most cases), $89+ per year for a service

Your registered agent is the legal point of contact for your business. Any official mail, notices, license renewals, annual report reminders, court summons, etc., are sent to the registered agent. Other than in Florida — which has an initial $25 registered agent filing fee — you can be your own registered agent for free or hire a service to handle it starting at around $89 per year.

Business license fees

Only five states (Alaska, Delaware, Nevada, Washington and West Virginia) and Washington, D.C., have a general business license requirement for all LLCs, costing anywhere from $30 to $200. Most LLC licensing is tied to the specific activities that your business will conduct and are required by the state, city and/or county where your LLC is doing business.

The best way to determine the specific licensing needs for your LLC is to call your city/county courthouse, explain what your business will be doing and ask what licenses you’ll need.

There are certain industries and activities (like farming and mining) that require licensing at the federal level. The Small Business Administration (SBA) lists some of these common business activities.

Domestic LLC versus foreign LLC

Your LLC’s origination state (or home state) is known as its domestic state. Within that home state, your LLC is categorized as a domestic LLC since it was formed there. If your business expands operations outside of your home state to another state, you’ll often need to register as a foreign LLC in the new state. This is known as foreign qualification.

For example, let’s say you form a new (not registered in any other state) LLC for a plumbing business in Kentucky. That would be considered a domestic LLC. After a year, you want to expand to Indiana and Ohio. To do that, you’ll need to form a foreign LLC in both states. When looking for the correct form to file, it’s important to know that the terms vary by state. Some states call it a certificate of authority/certification, while others refer to registering a foreign LLC or just registration. Just search for “state foreign LLC site: .gov” and the correct information should pop up.

State-specific LLC formation fees

Additional (and optional) LLC formation costs

When people talk about LLC costs, they’re generally referring to initial filing fees. However, there are additional LLC formation costs to plan for, which vary significantly by state. Here are the major ones to have on your radar:

LLC name reservation: $28 on average

Initial report fees: Start at $10

An initial report is a statement of information that includes things like your business address, registered agent, etc. and basically functions as your first annual report. Most states don’t require an initial report, but Alaska, California, Louisiana, Nevada and Washington do. Alaska and Louisiana don’t charge a filing fee. For the other three states, fees vary from $10 to over $150.

Louisiana and Nevada require the initial report to be filed with your articles of incorporation. Alaska, California and Washington require you to submit the initial report within a specific time from the date you initially filed to form your LLC (within 180 days for Alaska, 90 days for California and 120 days for Washington).

Fictitious name applications: $37 on average

A fictitious name or dba (doing business as) is something you’ll need if you want to do business under a name other than the one you use to form your LLC. A good example of this is a restaurant group. If you form an LLC that will own multiple restaurants, each with a unique restaurant name, you’ll need dbas for each restaurant instead of calling them by your “official” LLC name.

Some states use different terminology, so look for assumed or trade name if you’re having trouble finding info using the term dba. Certain states — California and Georgia, for example — require filing for a dba at the county (not state) level, and associated fees vary. New Mexico is the only state that doesn’t require fictitious name registration of any kind.

Publication fees: Varies

Professional legal and tax advice: Varies

It’s tempting to try to start your LLC on your own, but getting professional legal and tax advice upfront can save you a lot of time and money in the long run. For example, if you have a multimember LLC with one member as the primary investor and another managing the business directly and taking most of the profits, it’s vital to make sure the profit split and any applicable investment agreement are structured correctly to prevent costly conflicts between members.

According to the Bureau of Labor and Statistics, as of 2022, the average hourly rate was around $44 for accountants and $80 for lawyers/attorneys.

If your LLC is a simple, single-member LLC, using a free template for things like your operating agreement may be adequate. Here’s a sample LLC operating agreement:

But, if your LLC is more complex, having legal help is critical. Perhaps you develop a unique product or process and need to file a patent claim at the federal level to protect your intellectual property. Or, maybe you want to hire employees and need to ensure you comply with state labor laws. For these and many other reasons, having a legal professional could save you thousands of dollars and — in extreme cases — even be the difference between whether your LLC succeeds or goes under.

A business accountant is also an important resource. They can advise you on which tax classification to select for your business (more on this below), make sure you are paying the right amount of business tax at the right time of the year, help you write off big business expenses in the most tax-advantaged way and manage payroll. A business accountant can also provide important protection if the IRS ever audits your LLC.

Expedited filing service fees: $25 and up

Some states provide the option to process your LLC filings faster. This expedited filing service, naturally, costs extra. Fees vary by state and depend on how quickly you want your filing processed (24 hours, same day, one hour, etc.), but expect to pay at least $25 — and in some cases as much as $1,000 — to get your filing processed quicker than the standard turnaround time.

Ongoing maintenance costs for an LLC

Once you pay your initial LLC filing and license fees, you’ll get a little break from shelling out cash. But, there are ongoing LLC costs that are important to plan for. Here are a few of the main ones and an idea of how much they’ll set you back.

Annual report fees: $77 on average

According to the US Chamber of Commerce’s small-business resource website, an annual report is essentially your state verifying “who owns the company, what products or services it sells and how to contact the people in charge.” Each state’s form is different, but most ask for basic info like your business’s office address, a summary of business activities (no specific financials) and your registered agent address. For example, New Jersey’s taxes and annual report page explains that the state requires an annual report to ensure that your “registered agent and address are up to date.”

Amendment fees: $60 on average

If you decide to change your official business name, update text in your original articles of organization/incorporation, or add/remove members, you’ll need to file an amendment with your state. In some states, like Texas and Illinois, you can make multiple changes at once using a single form. In others, like Pennsylvania, you’ll need to file multiple forms if, for example, you want to change both your business name and business address.

Registered agent change fees: $20 on average

At some point, you may need to change your LLC’s registered agent or registered agent’s address. Reasons vary — maybe you need to move your business’s office or shuffle business responsibilities between LLC members. Some states, like Illinois and Kansas, allow you to change registered agent info on a general amendment form (as discussed above). Many others, like Kentucky and Missouri, require you to fill out a separate registered agent change form. Most states that require a separate registered agent change form give you three options on a single form: registered agent name change, registered agent/office address change, or both.

LLC income tax

Business taxation is too big a topic to fully tackle here. But, some basics of LLC taxation are important to understand.

A business’s elected tax status or classification is separate from its entity designation. LLCs, by default, are viewed as disregarded entities and pass-through businesses (more on this below). New LLCs can elect to be taxed as a corporation at any time. This doesn’t change it from an LLC to a corporation; it just changes how it’s viewed for tax purposes. If you change your LLC’s tax election status, you have to wait 60 months to change it again.

The No. 1 rule of business taxation is to talk to a business tax professional. The ins and outs of business taxation are not for the faint of heart. A qualified accountant who understands the intricacies of the specific tax rates and requirements in your state can give you solid guidance on how to set up your LLC for maximum tax advantages in your state.

Here’s a quick breakdown of the different classification options.

Pass-through taxation: Sole proprietor, partnership or S corporation

New LLCs are treated as pass-through entities (single-member LLCs are treated as sole proprietors and multimember LLCs are treated as partnerships). This is simply a fancy way of saying that your business income is not taxed on its own; instead, it’s “passed through” to your personal tax return and the returns of your LLC’s other members (if applicable, based on the income split detailed in your operating agreement). For LLCs taxed as sole proprietors or partnerships, all business income passes through to the members, who are required to pay both self-employment tax (15.3%) and income tax on their earnings.

An LLC that elects to be taxed as an S corporation is also considered a pass-through entity. The difference is that in an S corporation, members are paid an income from the business and are only required to pay self-employment tax on that income. They are essentially considered employees of the business instead of owners. Any income that is not paid via salary can be given to members as dividends as long as they are actively involved in the business’s operations. Dividend income is not subject to self-employment tax.

For an LLC to elect S corporation tax status, it must:

• Be formed in the US
• Have no more than 100 owners
• Have only US residents as shareholders
• Have no preferred shareholders or members
• File forms 8832 (Entity Classification Election) and 2553 (Election by a Small Business Corporation)

Read More: Sole Proprietorship vs LLC

C corporation taxation

In most states, C corporations have different tax requirements than LLCs (and must deal with more red tape). For tax purposes, states generally classify your business the same way it’s classified at the federal level. If you elect to have your LLC taxed as a C corporation, your business is taxed twice (known as double taxation), once at the entity level (on net business profits) and then again at the individual level for the income you receive from the business.

Although C corporations are taxed twice, in certain states the lower tax rates on corporations may mean you pay less overall in taxes if you elect to be taxed as a C corporation than as a sole proprietor or partnership. Also, C corporations have more flexibility than LLCs on what they can deduct and how they can deduct it.

Minimum annual tax: $50 to $800 (in certain states)

Eight states have some kind of minimum annual tax that they charge to LLCs in addition to the regular income tax rate. Terminology differs, but franchise tax, annual tax and privilege tax are a few of the most used terms. Let’s run through them.

Note: These rates are minimums, and some LLCs may be taxed more than this based on their earnings. Also, LLCs electing to be taxed as C or S corps may have different minimum annual tax amounts/rates.

• Alabama: $50 (business privilege tax)
• Arkansas: $150 (franchise tax)
• California: $800 (annual tax)
• Delaware: $300 (annual tax)
• Kentucky: $175 (limited liability entity tax)
• New York: $25 (annual filing fee)
• Rhode Island: $400 (minimum annual tax)
• Tennessee: $100 (franchise tax and excise tax)*

*For tax periods ending after December 31, 2023, businesses are no longer required to pay an annual business tax as long as they do not exceed $99,999 in earnings within an individual city or county in TN

Comparing LLC costs to other business structures

When you compare LLC startup costs to another business structure, like a C corporation, the results are all over the place.

In some states (Montana, Alabama and Kentucky, for example) filing fees are the exact same for LLCs and C corporations. In Rhode Island, it’s $80 more to file for a C corporation versus an LLC. But, in Florida, it’s $55 cheaper to file for a C corporation (including the initial registered agent fee) than it is an LLC. In Michigan, costs could be nearly identical, around $50 to $60 to file, if you are a C corporation with less than 60,000 shares. But, if you happen to have multiple investors and more than 5 million shares, it will cost you around $450 more to form a C corp than an LLC.

Comparing business structure startup costs can be tricky. The only way to get an accurate answer is to look up your state’s filing costs and compare two business structures side by side. The easiest way to do that is with an online search of “state LLC filing fee schedule site: .gov.” In most cases, LLC and corporation filing fees are in the same document. If the fees are not in the same document, search “state corporation filing fee site: .gov” and the right document should pop up.