Setting up a limited liability corporation (LLC) for your business could be the next best step. An LLC is a flexible and popular business structure that comes with tax-related benefits as well as protection from personal liability risks associated with running a business. 

Before you dive in and complete the paperwork to get your LLC off the ground, you probably want to know how much does it cost to start an LLC. The answer is that it varies based on several different factors. For example, knowing the cost to create an LLC in your state can help a lot in your planning.

We cover all of these details and more below. Read on to learn how much it costs to start an LLC and understand what the LLC price might be based on your specific needs.

What is an LLC?

A limited liability company (LLC) is a common business structure in the U.S. for small business owners. An LLC is a legal identity that is separate from the business owner. Opening an LLC allows you to conduct business under a company name and protects your personal assets from certain business liabilities.

LLCs are one of the more common business structures, including sole proprietorships and S-corporations. LLCs offer more legal protection than sole proprietorships. There is no maximum number of members for an LLC, as stated by the IRS.

LLCs combine the limited liability with certain tax advantages of a corporation. “Business owners may choose to open an LLC for its limited liability protection, flexible management structure, and additional tax advantages,” Jonathan Feniak, General Counsel at LLC Attorney, shared. He added that potential cons may include self-employment taxes and the cost to register an LLC depending on the state you're registered in.

State Filing Fees

The cost to create an LLC vary from state to state. For example, in Kentucky, the filing fee is only $40, while in Massachusetts, the fee is $500. State filing fees are only one of the fees you will need to pay to form an LLC.

Here are the filing fees in 2024 by state, according to Wolters Kluwer:

Name Reservation Fee

A name reservation fee is an additional payment you would make to your state government to secure the right to use your LLC name before you formally register it. This step may be a good idea if you want to guarantee your business name is available before you file for an LLC and are not yet ready to submit your LLC documentation. While fees vary by state, they are typically between $10 and $50.

Registered Agent Fees

A registered agent is a designated person or company that will receive legal correspondence from your company. LLCs are required to list a registered agent and they must be in the same state as your business. While you can list yourself, this could be an issue if you travel and are not able to receive mail. You can hire a registered agent service for an annual fee that typically ranges between $50 to $300 per year.

Publication Fees

Some states require that your LLC formation be officially announced in a publication. "In certain states like New York and Arizona, LLCs must publish a notice of formation in local news for a specific length of time. The cost to form an LLC may increase due to these fees, with the cost of publication varying from $60 in Arizona to $1200 in New York,” Feniak said.

Most states do not have publication fees. However, for the ones that do, there is typically a period of time the notice needs to run. In New York, LLCs must publish a notice of formation in a publication for six consecutive weeks. This depends on the paper but notices typically cost between $500 to $2,000, with an additional filing fee of $50. In Arizona, on the other hand, LLCs must publish daily for three consecutive weeks.

Operating Agreement

An operating agreement is a contract that specifies the roles of each member in the LLC. While you are not obligated to create one, it helps establish the roles and contributions of each owner. 

Since an LLC is a flexible corporate form, you can decide the ownership structure, including who owns how much of the LLC, and whether it’s a 50/50 partnership or 70/30 partnership, for example.

As an owner of an LLC, you and your business partners can draft your operating agreement on your own for free without the help of an attorney. If your business structure is more complex, consider getting input from an attorney or legal service provider. While there’s a small fee (typically between $50 to $200), professional assistance can ensure everyone’s interests are protected. 

Business Licenses and Permits

You may need specific licenses or permits to run your business. The typical cost to start an LLC could include these fees, depending on your location, type of business, license duration, and revenue.

For example, if your LLC sells alcohol, you might need a liquor license. The typical cost of certain licenses and permits depends on factors like your location, type of business, license duration, and revenue.

Some examples of common permits and licenses include liquor licenses, casino licenses, environmental permits and transportation permits. The costs and requirements associated with licensing and permit fees are determined at a local city, county, and state level. To find an estimate of the cost, contact your local city and state business regulatory agency.

Additional Costs

In addition to the costs listed above, you may also need to pay for these additional fees to form an LLC:

• Annual report fees: Many states require that you file an annual report to maintain good standing. Fees vary from $0 to $500.
• Franchise taxes: A franchise tax is a fee some states charge to do business in the state. This annual fee can range from $100 to $800, as is the cost in California.  
• Professional service fees: You might need to pay a lawyer or an accountant to handle different aspects of your LLC. For example, you may want a lawyer to review your operating agreement before finalizing it or an accountant to file your taxes and set up your bookkeeping. These fees usually range from $300 to $2,000.

Total Estimated Costs

Ways to Save on LLC Formation Costs

You might be overwhelmed by the costs of opening an LLC. While they can pile up, there are also ways to save and still make sure you are completing the process correctly. 

• DIY filing vs. hiring a professional service: You’ll save on the cost of a professional service fee, which can typically cost between $100 and $500.
• Bundled service packages: Some providers offer a package of several services for a fixed price, which can save you money. For example, a provider may offer name registration, state filing and a registered agent as a bundle offer. 
• Utilizing online resources: Official state websites have forms and filing instructions you can use should you choose to file without a professional service. State websites also include helpful filing instructions. 

Case Study

Anna formed an LLC in New York for her digital graphic design company. She had previously been working as a sole proprietor. As a single owner, she did not have to create an operating agreement. 

However, she felt more comfortable using a professional to walk her through the process, and she paid an extra fee for that. 

Anna did hire a registered agent because she travels often. She did not need any specific permits or licenses. Since she was in New York, she did have to pay fees for publications. 

In total, Anna spent around $1,600, which includes the state filing fee, professional service fee, registered agent fee, and publication fee. Looking back, Anna may have chosen to form her LLC without the help of a professional because she would have saved $500. 

Conclusion

There are several major benefits to setting up an LLC for your business, including protections against personal liabilities. However, it’s best to go into the process with an understanding of how much it will all cost. 

Once you apply these costs to your specific needs and location and get an estimate, you’ll be able to better assess whether opening up an LLC makes sense from a financial perspective — or perhaps another business structure like an S-corp is a better choice. 

While forming an LLC has multiple steps, there are many professional resources, including LLC formation services, available to help you through the process.