How Much Does it Cost to Set Up an LLC in 2021

    by Luke Iovino
Updated July 23, 2021

There are 2 main components that form the bulk of start-up fees when forming an LLC

— State fees, which differ from state to state

— Filing or service fees

The state fee is the main expense in creating a business and ranges anywhere from $50-$500. Unfortunately, you cannot control or change the state fee. The state that you choose to establish your company will have a flat cost.

Service fees are much more flexible and depend on the method you decide to set up your LLC.

This article is for entrepreneurs who are trying to get a grasp and understand the major cost of forming a business. We will go through your options as a business owner, important phrases to be familiar with, and what to look out for (unnecessary fees).

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What are my LLC Formation Options?

Now that you have a ballpark range of the costs of setting up your company, let’s go over your options.

Setting up an LLC might seem overwhelming, but with a proper guide setting up your business will be a breeze.  There are a few possible options that you can take to get your business licensed.

  1. You can do-it-yourself (DIY)
  2. Hire a Lawyer
  3. Free online course
  4. Online Incorporation website

#1 DIY #2 Lawyer #3 Free Course #4 Incorporation Service
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Each way leads to the same destination- establishing your business and establishing an LLC. The differences between them vary in independence/help, amount of time, and cost.

#1 Do-it-Yourself (DIY)

Setting up an LLC for yourself is the least expensive to get your business filed.

If you want to take a crack at forming your LLC by yourself, we must note that it can be time-consuming.

If you’re not super busy running your business and you want to form your LLC as cheaply as possible, this might be a good option for you.

You will only be obligated to pay the state fee, which will be the total cost to set up your LLC.

State fees fluctuate in price depending on the state you decide to open your LLC.

#2 Hire a Lawyer

Hiring a lawyer to file your LLC is a common practice for small business owners.

Depending on the lawyer and where you are located, the cost to set up your LLC is approximately $1,000-1,500.

A lawyer is beneficial because you are hiring a professional who knows exactly what to do every step of the way. This is probably one of the easiest methods of establishing an LLC.

Of course, this certainly comes at a price.

If you are interested in a super personalized formation experience and you’re fine paying top dollar, hiring a lawyer might be a good choice for you.

#3 Free Online Course

There are countless guides and step-by-step courses on how to form an LLC. And the best part is the cost to establish your LLC is zero!

Our team has found a few free online courses that spoon-feed you through the process. This is a great option because you receive step by step guidance

While it is easy having a guide directing you on creating your business, using an online course to form an LLC is time-consuming.

There is are a few downsides to a free course. If you get stuck or need advice there isn’t anyone you guide you.

If you are interested in learning how to file your business and you want one of the cheapest setups, this option is for you.

 

#4 Online Incorporation website

Online incorporation websites are some of the most popular ways for entrepreneurs to form businesses.

These companies make the LLC formation process super easy. The online formation services take care of all the bureaucratic state filing so you can focus your energy on the business.

Many online formation services have business experts on board that explain what you need to know each step of the process.

We’ve seen Online Incorporation website prices anywhere from $100-$900.

While this can be a costly method to form an LLC, online formation services allow clients to get the best of both worlds: a fair LLC filing cost while taking care of all the filing.

These services give customers the ability to focus on their business without the legal headache.

Regardless of the method that you choose, you will still need to pay a state fee. The average state fee is $130 and ranges from $50-$500 depending on the state you wish to form your business.

State Fee Costs to Form an LLC in Every State

State LLC Filing Cost LLC Annual Fee
Alabama $212 $100 minimum
Alaska $250 $100
Arizona $85 No Annual Fee
Arkansas $50 $150
California $75 $20 Biennially + Annual franchise tax
Colorado $50 $10
Connecticut $120 $20
Delaware $110 $300
Florida $125 $138.75
Georgia $100 $50
Hawaii $50 $15
Idaho $100 No Annual Fee
Illinois $179 $75
Indiana $98 $30
Iowa $50 $45
Kanas $160 $50
Kentucky $40 $15
Louisiana $105 $35
Maine $175 $85
Maryland $197 $300
Massachusetts $520 $500
Michigan $50 $25
Minnesota $155 No Annual Fee
Mississippi $53 No Annual Fee
Missouri $52 No Annual Fee
Montana $70 $20
Nebraska $109 $10
Nevada $425 $350
New Hampshire $102 $100
New Jersey $130 $75
New Mexico $50 No Annual Fee
New York $205 $9 Biennial
North Carolina $127 $200
North Dakota $135 $50
Ohio $99 No Annual Fee
Oklahoma $104 $25
Oregon $100 $100
Pennsylvania $125 No Annual Fee
Rhode Island $156 $50
South Carolina $150 No Annual Fee
South Dakota $150 $50
Tennessee $308 $300
Texas $300 No Annual Fee
Utah $76 $20
Vermont $125 $35
Virginia $100 $50
Washington $200 $60
Washington D.C $220 $300 Biennial
West Virginia $125 $25
Wisconsin $130 $25
Wyoming $102 $50

What is a Registered Agent and Do You Need One?

A Registered Agent is a person or a company that agrees to accept service of process on behalf of your entity (any legal issues that may arise). Basically, if you, a friend or a family member lives (has an address) in the state where you are forming your LLC, then there is no need for a registered agent.

If you do not have a friend or family member and you yourself live outside the state that you wish to set up your LLC, a registered agent service will be necessary.

The average cost to hire a registered agent is $150 a year.

Having a registered agent or address to rely on is mandatory in the formation of an LLC. It doesn’t matter how you choose to get licensed (DIY, Lawyer, website or free course).

To save you some time, we’ve mapped out the best-registered agent services online.

Important!- We have found many online websites that “force” you into hiring them as registered agents and then, of course, charge you each year for their service. It’s very important to read the agreement.

We have found that most business owners are their own registered agents (if they have an address in the state they opened their LLC). This would be a great way to save an unnecessary yearly expense and we would highly recommend it.

Make sure you read the fine print!

 

Operating Agreement

An Operating Agreement is a testimony describing how the business is going to run.

This document is the foundational format of how the business is going to operate.

Your operating agreement should reflect the core business and how it’s going to run.

There is no right or wrong way to write out an operating agreement, yet there are important questions to answer.

Some questions your operating agreement should address are:

  • What percentage of ownership does each LLC member have?
  • How will LLC members divide yearly profits?
  • What powers and responsibilities does each LLC member have?
  • How are new LLC members appointed?
  • What is the process and procedures for a dissolution (who gets what)?

If you DIY, you can purchase an operating agreement online for $50-$150 or find a free operating agreement template online.

Many free online courses provide operating agreements without cost.

Usually, when you hire a lawyer, the operating agreement is included in the deal of forming a business.

Online incorporated websites should include an operating agreement in the basic formation package. If it’s not, then the operating agreement will be an additional cost ranging from $50-$100.

Just a reminder, an Operating Agreement isn’t a legal obligation so again, there is no “wrong” way to write it up.

Make sure the essential details of the “core operating business” are included in the document.

When it comes to the Operating Agreement, less is more. If you have doubts about adding information, add it.

Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a 9 digit identification number given to your LLC by the IRS. The IRS uses the EIN of an entity to identify taxpayers.

As an LLC you will use your EIN for obtaining finances, credit cards, and tax purposes.

If you DIY, the EIN will be free! But there is something you need to look out for.

You must wait until your LLC is approved before obtaining your EIN.

If you apply for an EIN before being LLC approved, then the EIN will be attached to your personal ID as a sole proprietorship (which is another form of business).

If you’d like to apply now, click here. Just be sure that you are LLC APPROVED!

With a lawyer, this again should be included in the package business formation deal. Some might charge extra. If that’s the case, the cost shouldn’t be more than $100.

If you’re using online incorporation websites, the EIN should be included. If not, the fees range from $50-$100.

Annual Fees

Not all, but most states require an annual fee to keep your LLC legitimate.

Failing to do so will result in the state shutting down your LLC.

This is a rule that’s not worth playing with. Make sure you pay attention to the requirements of your state.

If you decide to establish an LLC yourself or use an online course, you must be compliant with the annual fees.

Make sure to set a yearly reminder. State regulators are not the most forgiving.

Most lawyers and online formation services offer yearly compliance. If you decide to use one of those services, they will most probably take care of the paperwork for your annual state fees.

Depending on the state, the annual fees range from zero dollars to $800. Although annual, not all states require the annual fee yearly. Some require every 2, 5, or 10 years. Most states require yearly annual fees.

What to Look Out For!

There is a fair amount of dirtbags trying to stuff fees and unnecessary costs into your LLC package. Here are a number of those that we stumbled upon. The following should be red flags:

Forced Registered Agent

It is very important to understand what you’re paying for. Make sure you check the website’s pricing page to ensure you’re not purchasing something you don’t need.

LLC Kit & Seal

Websites make this term sound “legal”, or something that you need. Truth be told, It’s a binder with your documents that you pay extra for. Seriously overpriced and unneeded.

LLC Membership Certificates

Another legal-sounding certificate that is completely useless aside from hanging up on your wall. Again, if you want it all the power to you, but it’s by no means a legal requirement.

We are sure there are more hidden costs scattered around. Make sure you read the fine print and go with your gut.

We hope you find our articles and resources useful in your business journey. Leave a comment and tell us what state you’re forming your LLC! If you have any questions feel free to ask below.

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