How Much Does an LLC Cost Per Year
LLC formation filing fees can range from $35 to $3,000. Other fees may cost more. Read on to uncover the full yearly expense.
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- LLC Formation Fees: $35 to $3,000+
- LLC Maintenance Fees: $0 to $3,000+
- Occasional Fees: $5 to $1,000
- LLC Expenses You Can Write Off
The cost of forming and maintaining an LLC is no joke. And you'll thank yourself in the long run if you've prepared and budgeted for all its expenses.
There's a set of fees for your first year of LLC formation. Then you'll have to pay recurring business expenses moving forward. Not to mention, there are sporadic expenses, too!
After reading this comprehensive guide, you'll be able to answer the ultimate question — Can your budget handle the yearly costs?
Year One: LLC Formation Fees
It's a common misconception that the cost of forming an LLC equals the state's filing fee. However, this isn't the case. Establishing an LLC involves many expenses beyond the initial filing fee.
The table below shows additional fees associated with LLC formation. These contribute to the overall expenses for the first year of starting your business.
| LLC Formation Fee | Cost |
|---|---|
| LLC Formation Filing Fee | $35 - $3,000 |
| LLC Statement of Information Fee | $20 - $100 |
| LLC Name Reservation Fee | $5 - $50 |
| LLC Fictitious Name Fee | $10 - $100 |
| LLC Formation & DBA Publication Fee | $0 - $500+ |
| LLC Operating Agreement Fee | $0 - $500+ |
| LLC Certificate of Correction Fee | $10 - $70 |
| Fees for Business Permits and Licenses | $0 - $1,000+ |
| Business Website Domain Fee | $20 - $30 |
| Business Insurance Premiums | $ - $$$ |
Montana has the lowest LLC filing fee at just $35.[1] However, other states may have lower overall costs when considering additional factors like annual fees and registered agent services.
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LLC Formation Filing Fee
Standard Cost: $35 to $3,000
The LLC formation filing fee is a mandatory cost to establish your LLC in a specific state. It's a one-time fee usually paid to the Secretary of State when you submit the formation documents.
Some states charge different fees for domestic and foreign LLCs. Generally speaking, foreign LLCs pay more for formation. This is mainly due to the additional administrative processes in approving an already established LLC.
You can't avoid paying the LLC formation fee. Otherwise, you're not complying with the state's business regulations. You could be charged with penalties or be forced to close shop.
- Domestic LLCs are required to submit an Articles of Organization. It contains important information about your business, like your business name, registered agent's address, and the LLC's members.
- Foreign LLCs, on the other hand, need a Certificate of Authority. It allows your already existing LLC to do business in a state other than your home state.
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LLC Statement of Information Fee
Standard Cost: $20 to $100
A Statement of Information or an Initial Report is an additional document few states require on top of the Articles of Organization. It may include updated information about your LLC, such as the business address and purpose.
For example, California[2] and Washington state[3] require LLCs to submit a Statement of Information. You usually need to submit it within a specific period after your LLC has been formed.
Yes, veterans can form an LLC for free in some states. For example, in Texas, LLCs 100% owned by honorably discharged veterans are eligible for a waiver of the formation fees and the Texas franchise tax for up to five years.[4]
LLC Name Reservation Fee
Standard Cost: $5 to $50
There's usually no cost to naming your LLC. It should be included when you pay the LLC formation filing fee. However, it could take a while for you to gather all the information needed in the Articles of Organization.
If you're not ready to submit your filing documents, you can reserve your desired business name first. This will prevent other businesses from using your desired name.
The name reservation period depends on the state rules. It typically ranges from 60 to 180 days. If you need more time, some states allow you to renew the name reservation period for an additional fee.
Review the state's naming regulations so the Secretary of State can approve your business name. Additionally, before paying a name reservation fee, check the availability of your desired name through the state's business name database.
LLC Fictitious Name Fee
Standard Cost: $10 to $100
A fictitious name allows your business to operate under a different name other than your legal LLC name. Paying for one is ideal if you want to use a more marketable name or one that doesn't have an "LLC" at the end.
For example, if you have an LLC that operates multiple restaurants, each with its distinct name, you must pay for separate fictitious names for each restaurant.
In some states, a DBA is registered through the Secretary of State's office. Others handle registration at the county level.
- DBA (Doing Business As)
- Trade Name
- Assumed Name
You may be required to publish a notice of your DBA in a local newspaper. The LLC publication fee is discussed below.
LLC Publication Fees
Standard Cost: Up to $500+
There are two types of publications you might encounter when forming an LLC. The cost depends on several factors, such as:
- Rates charged by the newspapers
- Number of newspapers the state mandates the notice to be published in
- Duration of the publication
- Administrative filing fee for the Certificate of Publication (if any)
That said, only a few states, like New York[5] and Arizona[6], still require newspaper publication.
Your fees depend on the type of publication you need:
- LLC Formation Publication
Newly formed LLCs must publish a notice in a local newspaper. The notice typically includes essential information about the LLC, such as its name, address, and business purpose. - DBA Publication
If your LLC wants to operate under a fictitious business name, it must publish a notice in a local newspaper about this intent. This informs the public that your LLC will be conducting business under a name other than its official registered name.
LLC Operating Agreement Fee
Standard Cost: Up to $500+
An operating agreement is a legal document that details important rules for managing the LLC. It also defines the roles and responsibilities of the members or managers. It's designed to prevent and solve any business disputes that may arise later on.
The costs associated with it come in the drafting of the document. You can create an operating agreement for free by using templates online. It could cost upwards of $500 if you hire an attorney.
In most states, LLCs are member-managed by default. This means all members have equal voting rights. However, this can lead to gridlock when making management decisions.
LLC Certificate of Correction Fee
Standard Cost: $10 to $70
If you spot a mistake in your approved Articles of Organization within the first year of your LLC formation, you'll need a Certificate of Correction.
States typically charge a minimal administrative fee to process the correction. For example, in North Carolina, the correction fee is $10.[7] In Pennsylvania, it costs $70.[8]
Common mistakes that require correction include typos, incorrect addresses, and wrong names.
A Certificate of Correction is for fixing mistakes in initial filings. Meanwhile, a Certificate of Amendment is for updating key details as the LLC evolves.
Business Permits and Licenses
Standard Cost: Up to $1,000+
The business location and industry will indicate the permits and licenses that your LLC needs to get. For example, if you run a restaurant, you'll likely need a health permit, liquor license, and a food handler's license.
Additionally, city and county governments each have their own set of required permits and licenses. Fees vary from one jurisdiction to another, but you should budget a few hundred dollars for all the initial permits and licenses.
Lastly, if your business has a significant environmental impact, you might need to pay for environmental permits. Examples of activities that require environmental permits include emitting air pollutants and discharging wastewater.
Only a few states require a statewide business license. As of the time of publishing, this includes Alaska[9], Nevada[10], and Washington.[11]
Business Website Domain Fee
Standard Cost: $20 to $30
A website provides a dedicated online space for your business. It's essential for marketing, customer engagement, and brand visibility in today's digital world.
Even if you're not planning to build a business website now, it's a good idea to buy the domain name at least. This prevents others from using your LLC's name as a web address.
Domain squatters often monitor newly registered LLC names. They purchase corresponding website domains and then resell them at significantly higher prices.
Business Insurance Premiums
Standard Cost: Varies
Business insurance premiums are the annual or monthly fees for coverage against various risks. While an LLC provides some legal protection to personal assets, business insurance covers expenses from unexpected events like lawsuits, property damage, and employee injuries.
Additionally, most states require businesses with at least one employee to have workers' compensation insurance. This ensures employees receive financial compensation for medical expenses and lost wages if injured on the job, regardless of who was at fault.
Year 2 and Onwards: LLC Maintenance Fees
After paying the initial filing fees in your first year of business, you'll need to stay on top of recurring costs, too.
Here are the major LLC maintenance fees to budget for:
| LLC Maintenance Fee | Cost |
|---|---|
| LLC Annual/Biennial Report Fee | $0 - $3,000 |
| LLC Registered Agent Services Fee | $0 - $400 |
| LLC Accountant and Legal Service Providers Fee | $0 - $1,000+ |
| LLC Franchise Tax | $0 - $800+ |
| LLC Self-Employment Tax and Other Taxes | 15.3% - 37% |
| Business Permits and Licenses Renewal Fees | $0 - $1,000+ |
| LLC Fictitious Name Renewal Fee | $10 - $100 |
| Business Website Domain Renewal Fee | $20 - $30 |
| Business Insurance Premiums | $ - $$$ |
Yes, you must pay certain fees to maintain an LLC every year. The specific costs and requirements vary per state. However, one of the main ongoing expenses is the fee for filing an annual or biennial report.
LLC Annual/Biennial Report Fee
Standard Cost: Up to $3,000
An annual or biennial (every two years) report generally includes updated information about the business. This includes the current address, the names of members or managers, and changes in contact details.
The report is typically submitted to the Secretary of State, along with the filing fee. Some states remind your registered agent a few weeks before the deadline.
If you fail to submit your annual or biennial report for your LLC, most states will impose late fees. These fees can accumulate over time. And if the report is not filed for an extended period, the state could dissolve your LLC.
For example, Texas and Arizona state do not have this requirement. But for states that do, each has specific regulations for the frequency of submission, deadline, and fees.
LLC Registered Agent Services Fee
Standard Cost: Up to $400
Most states require LLCs to have a registered agent. They act as an official point of contact and receive important legal documents for the company, like summonses and subpoenas.
To save money, you can be the LLC's registered agent. However, you must be at least 18 years old and have a physical address in the state where your LLC is doing business. Additionally, you must be available during regular business hours to receive these documents.
Some states require a written statement from the appointed agent confirming their willingness to serve in that role. Even if it's not required, it's always best to appoint someone who understands the full responsibility of receiving sensitive legal and tax documents.
LLC Legal Service Providers
Standard Cost: Up to $1,000+
Although not required, hiring accountants and legal service providers is crucial for your LLC's smooth operation. An accountant helps keep track of your LLC's income and expenses so you can maintain an accurate record of your LLC's finances.
On the other hand, legal service providers ensure that your LLC complies with state and federal laws. They can help identify potential legal risks and provide advice on how to prevent them.
Hiring an accountant or lawyer for your LLC is not a requirement, but it is recommended. If you have a small-scale LLC, you might be able to handle accounting and legal tasks on your own. However, as your business grows or encounters complex issues, hiring professional services may be helpful.
LLC Franchise Tax
Standard Cost: Up to $800+
A franchise tax is a fee that an LLC pays to the state for the privilege of doing business within that state.
For this reason, it's also called a privilege tax. However, not all states require a franchise tax.
Business Taxes
Standard Cost: 15.3% (Self-Employment Tax) | Up to 37% (Income Tax)
LLC members are considered self-employed and must pay self-employment taxes on their share of the profits. The current combined self-employment tax rate is 15.3%, with 12.4% going to Social Security and 2.9% to Medicare.[14]
Additionally, most LLC members must pay both federal and state income tax. In 2024, the federal income tax rate is 10% to 37%.[15]
In most states like California and New York, income tax rates are based on your taxable income.[16] Meanwhile, some states like Arizona and Michigan have a flat income tax.[16]
Consult with an accountant or tax lawyer to know more about the federal, state, and local taxes that your LLC needs to pay.
Depending on the purpose and nature of your business, your LLC might be subject to more tax. If your LLC has employees, it will need to pay payroll taxes.
LLC Renewal and Ongoing Fees
Some of the fees you paid during the formation of your LLC or in its first year of operation are not one-time costs. The following are recurring fees, meaning they need to be renewed periodically—some annually and others every few years:
Sometimes, the cost of renewing these items can be cheaper than their initial registration fees.
Occasional Fees for LLCs
In addition to the regular annual LLC fees, it's important to budget for unexpected expenses, too.
Here are some of the most common occasional fees for LLCs:
| LLC Occasional Fee | Cost |
|---|---|
| LLC Fees for Expedited Services | $50 - $1,000 |
| LLC Certificate of Good Standing Fee | $10 - $75 |
| LLC Certified Copy of Business Document Fee | $10 - $75 |
| LLC Certificate of Amendment Fee | $10 - $75 |
| LLC Change of Registered Agent Fee | $5 - $50 |
| LLC Reinstatement Form Fee | $50 - $500 |
| LLC DBA Name Trademark Fee | $350+ |
LLC Fees for Expedited Services
Standard Cost: $50 to $1,000
If you want the LLC formation process to be completed faster than the standard processing time, you can pay an expedited fee.
It varies by state, and the amount depends on how quickly you want to receive your LLC formation documents.
You can choose from 48 hours to 1 hour processing time. The more you pay, the faster your LLC will be processed.
In some states, most of your LLC documents can be expedited for a fee. This includes the Certificate of Good Standing and Certificate of Amendment. The cost depends on how quickly you need the documents to be processed.
LLC Certificate of Good Standing Fee
Standard Cost: $10 to $75
As the name suggests, a Certificate of Good Standing verifies that your LLC has met all its legal requirements. This includes filing annual reports, paying taxes, and maintaining a registered agent.
It also tells banks and investors that your LLC is legally compliant and active.
That said, the Certificate of Good Standing is often necessary to:
- Open a bank account
- Conduct business outside of your home state
- Qualify for business insurance
- Apply for business loans
Like most administrative processes, you may have to pay a minimal fee to get a Certificate of Good Standing.
Pay any outstanding penalties and fees. You must also file any required annual or biennial report if it's late. Afterward, file an LLC Reinstatement Form along with the filing fee. The cost and process vary depending on state rules.
LLC Certified Copy of Document Fee
Standard Cost: $10 to $75
Certified copies of business documents are official, state-certified copies of documents your LLC filed with the state.
For example, you might need a certified copy of your Articles of Organization, amendments, or annual reports for opening a business bank account or expanding your LLC in another state.
Like most administrative processes, you may have to pay a minimal fee to get them.
A Certificate of Good Standing focuses on your LLC's legal status. On the other hand, certified copies provide the legal details and structure of your LLC.
If you need to prove that your LLC is compliant with state regulations, a Certificate of Good Standing is appropriate. If you need proof of your LLC's information (like the formation date and the members' names), then certified copies of business documents are needed.
LLC Certificate of Amendment Fee
Standard Cost: $10 to $75
You might need to pay an amendment fee when significant changes occur in your LLC. These changes include a new business name, new members, or any detail that affects the information in your original Articles of Organization.
A Certificate of Amendment updates the official records of your LLC with the state. It's crucial for maintaining legal compliance and ensuring that public records about your LLC are accurate.
No. A certificate of amendment modifies specific portions of your existing Articles of Organization, rather than completely replacing them.
LLC Change of Registered Agent Fee
Standard Cost: $5 to $50
An LLC can change its registered agent's details anytime. If this happens, you must submit a Statement of Change to the Secretary of State as soon as possible. Changes include the registered agent's name and address.
You might have to get a signed acceptance form from your new agent. Failure to submit a Statement of Change along with the acceptance form may cause time-sensitive legal documents to be sent to the wrong address.
The Certificate of Amendment is used to change the business name, business purpose, and other details. The Statement of Change is focused solely on changes regarding the registered agent. However, some states use the same form for all changes or business updates.
LLC Reinstatement Form Fee
Standard Cost: $50 to $500
You might need to pay for a reinstatement form if your LLC is no longer in good standing with the state. This could happen for several reasons, including:
- Failure to file annual/biennial reports
- Non-payment of annual fees or taxes
- Failure to update accurate details of your registered agent
Should any of the circumstances above happen, the state could also have the right to close your business.
Aside from receiving your LLC's legal documents, you could also hire a registered agent to do additional tasks for your business. Additional services include filing your annual/biennial report and paying franchise taxes.
LLC DBA Name Trademark Fee
Standard Cost: $350+
The bigger and more popular your business becomes, the more you'll want to protect its branding and reputation. In the future, you may want to secure exclusive legal protection for your DBA name on a federal level.
Trademarking gives you legal grounds to enforce your brand. It helps you maintain a unique identity in the market, and if needed, sue for trademark infringement.
No. The DBA name fee is paid to register a fictitious business name that your LLC wants to use. A trademark fee is paid to the United States Patent and Trademark Office (USPTO) to legally protect your LLC's brand name, logo, or slogan.
LLC Expenses You Can Write Off
The long list of LLC expenses above may be overwhelming. But the silver lining awaits in the form of tax deductions.
Some of the expenses you incur in the formation and maintenance of an LLC can be written off. This includes but is not limited to:
- LLC formation filing fee
- LLC formation publication fee
- Annual/biennial report fee
- Fees for business permits and licenses
- Insurance premiums
According to the IRS, your LLC can deduct up to $5,000 of qualified startup costs in the first year of operation if the total startup cost is less than $50,000.[17] Any costs exceeding this amount are deducted over 15 years.
Bottom Line
The cost of running an LLC in its first year goes beyond just the filing fee. You must also budget for business permits, licenses, and insurance premiums.
Business Formation Service - $39 + State Fees
- Form Your LLC, Corporation, or Nonprofit Today
- A Fully-Formed Business
- Registered Agent Service
- Business Address
- Mail Forwarding
- Privacy by Default
From the second year onwards, your LLC will incur ongoing costs. These include annual or biennial fees, fees for registered agent services, and any applicable franchise or privilege taxes.
There may be sporadic expenses, too. These include fees for amending your LLC's information or registering a DBA trademark.
That said, you'll need to pay fees continually to maintain your LLC. This amount also gets bigger and bigger as your business grows, so it's best to budget well for them.
References
- ^ Montana Secretary of State. Business Services Filing Fees, Retrieved 01/09/2024
- ^ California Secretary of State. Statements of Information Filing Tips, Retrieved 01/09/2024
- ^ Washington Office of the Secretary of State: Corporations & Charities Division. Instructions: Initial Report RCW 29.95.255, Retrieved 01/09/2024
- ^ Texas Secretary of State. Business Information for Veterans, Retrieved 01/09/2024
- ^ New York State. Certificate of Publication for Domestic Limited Liability Company, Retrieved 01/09/2024
- ^ Arizona Corporation Commission. Articles of Organization, Retrieved 01/09/2024
- ^ North Carolina Secretary of State. Articles of Correction, Retrieved 01/09/2024
- ^ Pennsylvania Department of State Bureau of Corporations and Charitable Organizations. Statement of Correction, Retrieved 01/09/2024
- ^ Alaska
Department of Commerce, Community, and Economic Development. Business Licensing, Retrieved 01/09/2024 - ^ Nevada Secretary of State. State Business License Requirements, Retrieved 01/09/2024
- ^ Department of Revenue Washington State. Apply For a Business License, Retrieved 01/09/2024
- ^ Delaware Division of Corporations. LLC/LP/GP Franchise Tax Instructions, Retrieved 01/09/2024
- ^ State of California Franchise Tax Board. Limited Liability Company, Retrieved 01/09/2024
- ^ Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes), Retrieved 01/09/2024
- ^ IRS. IRS provides tax inflation adjustments for tax year 2024, Retrieved 02/16/2024
- ^ Tax Foundation. State Individual Income Tax Rates and Brackets for 2023, Retrieved 02/05/2024
- ^ Internal Revenue System. Guide to Business Expense Resources, Retrieved 02/16/2024
Nicole King is a research analyst at CreditDonkey, a business formation services comparison and reviews website. Write to Nicole King at nicole.king@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.
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