How Much Does It Cost to Start an LLC? Unraveling the True Expense of Business Formation

Founder & CEO, Newfoundrz
Passionate about helping small businesses establish LLCs

Imagine standing at the foothill of your entrepreneurial journey, eyes sparkling with ambition, heart brimming with ideas.

You've already envisioned the peak - a successful Limited Liability Company (LLC) that stands testament to your hard work and determination.

But before you embark on this thrilling climb, you've got an important question on your mind: "Just how much does it cost to start an LLC?"

Well, you're not alone.

Countless aspiring entrepreneurs grapple with this very question every day.

And today, we're going to decode this mystery together. Because understanding the financial groundwork of your dream is just as crucial as the dream itself. It's time we rolled up our sleeves and dove headfirst into the world of LLC expenses.

Just like any great expedition, understanding the terrain is key.

The terrain, in this case, involves everything from filing fees and legal costs to potential operating and annual costs. And that's exactly what we're here to do - take each of these factors, unravel them, and present them in a way that's as clear as a sunny day.

By the end of this journey, you'll have a comprehensive roadmap of the true costs of starting an LLC, arming you with the knowledge you need to carve out your own business path. 

So, buckle up! This is not just an exploration of numbers and fees. It's an exploration of your entrepreneurial dreams and how to make them come true. Let's get started, shall we?


In this chapter:

Disclaimer: This LLC Guidebook ("Guidebook") is provided as a general informational resource and is not intended to be a comprehensive source of legal or professional advice. It is designed to provide broad and general guidelines on the topic of forming and managing a Limited Liability Company (LLC).

Understanding the Basics of LLC

Costs to start an LLC
Costs to start an LLC

So, you're ready to take the leap and start your own business. You've got a great idea, a solid business plan, and now you need to know how much it will cost to get started.

If you're considering forming an LLC, I'm here to break down your potential costs.

First things first, let's talk about LLC cost. The total amount can vary greatly depending on your specific state and business type. 

However, there are some common fees that almost every new LLC will encounter.

  • State filing fees for LLC: This is the fee charged by your state to file the necessary paperwork for starting an LLC. These fees typically range from $50 - $500.
  • Operating Agreement costs: While not always required by law, I highly recommend drafting an operating agreement for your LLC. Costs associated with this can range anywhere from $200 - $1000 if professionally done.
  • Business License Costs: Depending on your type of business and locality, you may need one or more business licenses or permits. Fees can vary significantly based on these factors.

EIN Registration Costs: An EIN (Employer Identification Number) is basically like a social security number for your business. It's free to obtain directly from the IRS.

State Average Time for LLC Approval Possible Time Delay Paperwork Mistakes Uniqueness of Name State Workload Standard Processing Time Expedited Processing Time Mode of Application Turnaround Cost Type Typical Cost Range
California 20 business days Varies Few Days to Weeks Weeks to Months Weeks to Months 2-4 weeks 2-3 days Online 1-5 days State Filing Fee $50 - $500
New York 6 to 7 weeks Varies Few Days to Weeks Weeks to Months Weeks to Months 2-4 weeks 2-3 days Mail 10-15 days Operating Agreement $200 - $1000
Florida 2 to 3 weeks Varies Few Days to Weeks Weeks to Months Weeks to Months 2-4 weeks 2-3 days Online 1-5 days Business Licenses & Permits Varies Greatly
Texas 2 to 3 weeks Varies Few Days to Weeks Weeks to Months Weeks to Months 2-4 weeks 2-3 days Mail 10-15 days EIN Registration Free
Delaware 10 to 15 business days Varies Few Days to Weeks Weeks to Months Weeks to Months 2-4 weeks 2-3 days Online 1-5 days

But remember folks, these are just the initial setup costs! After launching your LLC, there will also be ongoing annual fees that differ from state to state but generally hover around the $100-$800 ballpark annually.

Here’s a full breakdown of the costs associated with starting an LLC across states:

State Estimated Initial Filing Fee (2021) Estimated Annual Report Fee (2021)
Alabama $200 $100
Alaska $250 $100
Arizona $50 $45
Arkansas $50 $150
California $70 $20
Colorado $50 $10
Connecticut $120 $80
Delaware $90 $50
Florida $125 $138.75
Georgia $100 $50
Hawaii $50 $15
Idaho $100 $0
Illinois $150 $75
Indiana $90 $50
Iowa $50 $45
Kansas $165 $55
Kentucky $40 $15
Louisiana $100 $30
Maine $175 $85
Maryland $100 $300
Massachusetts $500 $500
Michigan $50 $25
Minnesota $135 $45
Mississippi $50 $25
Missouri $105 $45
Montana $70 $20
Nebraska $105 $10
Nevada $75 $350
New Hampshire $100 $100
New Jersey $125 $125
New Mexico $50 $0
New York $200 $9
North Carolina $125 $200
North Dakota $135 $50
Ohio $99 $99
Oklahoma $100 $25
Oregon $100 $100
Pennsylvania $125 $70
Rhode Island $150 $50
South Carolina $110 $0
South Dakota $150 $50
Tennessee $300 $300
Texas $300 $0
Utah $70 $15
Vermont $125 $35
Virginia $100 $50
Washington $200 $60
West Virginia $100 $25
Wisconsin $130 $25
Wyoming $100 $50

It's worth noting that while these numbers might seem daunting at first glance, starting an LLC offers many benefits, such as personal asset protection and potential tax advantages – perks that often outweigh the startup costs, in my opinion!

Evaluating the 6+ Different Costs to Form an LLC:

When you're thinking about starting an LLC, it's crucial to understand the costs associated. The LLC setup cost isn't a one-size-fits-all situation; it can differ based on factors like your location and the complexity of your business.

Let’s break them down.

1. Breaking Down State Filing Fees.

I've been down this road before, and let me tell you - the cost of starting an LLC can vary quite a bit depending on your location.

Why's that?

State filing fees for LLC registration are one significant factor in this equation.

Now, you're asking about state filing fees for an LLC.

Well, this is your first step into the world of formalizing your dream. Think of it as your business's ticket to the big league, the price of admission to the great entrepreneurial fair.

In essence, a state filing fee is what you pay to your state's Secretary of State office when you submit the necessary paperwork to form your LLC. It's a bit like saying, "Hey there, Mr. or Mrs. Secretary of State, I've got this fantastic idea, and I want to make it official."

In some states like Missouri, you can get your LLC up and running for as low as $50. On the other hand, if you're starting an LLC in Massachusetts, be prepared to shell out more than 10 times that amount - a whopping $520!

Let's take a closer look at how these costs rack up across different states:

State Average Time for LLC Approval Possible Time Delay Paperwork Mistakes Uniqueness of Name State Workload Standard Processing Time Expedited Processing Time Mode of Application Turnaround Cost Type Typical Cost Range
Missouri LLC Registration Cost $50
Texas LLC Registration Cost $300
New York LLC Registration Cost $200
Illinois LLC Registration Cost $150
California LLC Registration Cost $70 initial, then $800 annually

2. Importance of an Operating Agreement and Its Cost.

By now, you're probably getting a pretty clear picture about the costs involved in starting an LLC.

There's more to it than just the LLC registration cost or state filing fees for LLC.

One aspect that's critical to your business startup costs is the operating agreement.

Let me tell you, when I was setting up my first LLC, I didn't fully grasp how important this document would be.

It essentially outlines how your business will run, who makes decisions, profit sharing details and so much more.

Now, here comes the big question: What's the cost of forming an LLC with a proper operating agreement?

Well, it varies.

Some online services offer free templates while others may charge anywhere from $50 to $200+. If you opt for legal assistance from LLC formation providers (which I highly recommend), prepare to shell out between $200 and $1000+. Remember - don't skimp on these legal fees for LLC setup!

Here’s a quick breakdown:

Service Cost
Free Template $0
Online Paid Template $50-$200+
Legal Assistance $200-$1000+

These numbers might seem intimidating at first glance but let me reassure you - they're worth every penny!

An operating agreement effectively safeguards your personal assets from business liabilities.


It’s not just about one singular "LLC cost", it’s myriad expenses coming together into what ultimately becomes your total cost to start a business.

But trust me on this one: planning and understanding these costs can save you from major headaches down the road!

3. Deciphering Business License and Permit Fees.

Diving straight into the nitty-gritty, let's talk about business license and permit fees when starting an LLC.

These fees can significantly impact your overall LLC cost. They're not always top of mind when calculating how much it costs to start a business, but they should be.

Every state has different requirements for licenses and permits for businesses, including an LLC. You'll need to do some research to figure out exactly what your state mandates. Typically, expect these costs to range from $50 up to several hundreds of dollars annually.

Here's a little markdown table that gives you a rough idea:

State Licensing Fee
California $800
Texas $300
New York $200

In addition to the state licensing fee, there may also be local or city permits required depending on your business type and location.

These fees vary considerably, so I can't provide an exact number here.

Apart from these direct costs, remember that time is money too! The process of obtaining these licenses and permits takes time, which adds indirectly to the cost of forming an LLC.

As you can see, understanding business license and permit fees is essential in accurately estimating how much it'll cost you when starting an LLC.

4. Weighing the Annual Report Fee Impact.

Let's take a moment to discuss one of the significant ongoing costs you'll encounter when starting an LLC – the annual report fee.

It's important to consider this as we navigate through understanding the cost of forming an LLC. An annual report fee isn't a one-off cost, it recurs yearly and can significantly impact your business startup costs in the long run.

Each state has its own set rate for these fees.

In some places, they're relatively low. For instance, in Kentucky, it's only $15 annually! However, other states might make you dig deeper into your pockets. Let’s say you’re in Nevada; prepare yourself for a hefty charge of approximately $350 each year!

Here's a quick comparison:

State Estimated Annual Report Fee (2021)
Alabama $100
Alaska $100
Arizona $45
Arkansas $150
California $20
Colorado $10
Connecticut $80
Delaware $50

Another aspect worth considering is whether or not your chosen state requires an annual report at all! Yes, indeed.

Some states don't necessitate filing an annual report every year. This could potentially save you some bucks and reduce your overall cost to start a business.

But there’s more than meets the eye here - missing out on submitting these reports can lead to penalties or even result in dissolving your company by the state authorities! So while it may seem like just another expense added onto your LLC setup cost, remember it plays a crucial role in maintaining good standing with local laws.

5. Reviewing Professional Service Charges.

When it comes to starting an LLC, professional service charges can be a bit of a wild card in the overall LLC cost. These fees might catch you off guard if you're not prepared. So, let's take a deep dive into what these expenses could entail.

First off, we have legal fees for LLC formation.

If I decide to hire an attorney to ensure my business is legally sound, I'm looking at anywhere between $1,000 and $5,000.

It isn't cheap but it's certainly a worthy investment when considering the potential legal pitfalls that could occur in the future.

But hey wait! Maybe I don't want to fork out thousands on legal counsel right now?

There are online services that'll do most of the heavy lifting for me at a fraction of the price. Services like ZenBusiness or Rocket Lawyer offer packages ranging from $50 - $500 depending on how much assistance you need with your LLC setup cost.

Let's break it down further:

Service Cost
Attorney Fees $1,000 - $5,000
Online Formation Services $50 - $500

6. The Role of Insurance in Your Budget Plan.

When you're calculating the cost to start a business, it's essential not to overlook the role that insurance plays in your budget plan.

Insurance is crucial when starting an LLC because it guards against unexpected losses and liabilities.

Depending on your industry and location, certain types of insurance may be legally required. Even when they're not mandated by law, they provide a safety net that can save your business from financial ruin in case of unforeseen circumstances.

There are different types of insurance coverage you might need when starting a business:

  • General Liability Insurance: This covers claims like bodily injury or property damage due to your operations.
  • Professional Liability Insurance: Sometimes called Errors and Omissions (E&O) Insurance—this protects if someone sues you over the services you provided.
  • Worker’s Compensation: If you have employees, most states require this type of insurance which covers medical expenses and lost wages if an employee gets injured on the job.

The cost varies widely based on factors like industry risk level, number of employees, and coverage amounts. Generally speaking though, small businesses could expect to pay anywhere from $500 to $3,000 annually for general liability coverage.

Type Average Annual Premium
General Liability $500 - $3000
Professional Liability $1000 - $3000

Remember: these are just rough estimates! You'll need to get quotes specific to your situation for an accurate figure.

Wrapping Up: Starting an LLC on a Budget

So, you've made it to the end of our deep dive into the costs of starting an LLC. I'm glad you're still with me and hopefully, you've gathered some valuable insights into what it takes financially to get your business off the ground.

Let's break down those costs one more time. The initial setup cost for forming an LLC can vary greatly by state. Typically, state filing fees for LLC formation range anywhere from $50 to $500. Legal fees for drafting your operating agreement could run up to a few hundred dollars if you choose to hire a professional.

Keep in mind that there are also annual fees for maintaining your LLC status which can be as low as $0 in states like Arizona and New Mexico, or as high as $800 in California! Yeah, it's quite the range.

Then we have additional charges such as obtaining your EIN number from the IRS (free if you do it yourself) or getting a business license (again varies by location).

Here’s a quick rundown:

Cost Amount
State Filing Fees $50 - $500
Legal Fees Up to hundreds
Annual Fees $0 - 800
Business License Costs Varies by location
EIN Registration Costs Free

As I’ve mentioned throughout this guide, these are general figures and actual costs may differ depending on specific circumstances surrounding your startup.

But don't let these numbers scare you away from starting an LLC! It might seem like a lot upfront but remember this is an investment towards protecting yourself legally and giving your business venture a solid foundation. Plus, many of these expenses are tax-deductible!

What matters most is having thorough knowledge about all possible expenditures because knowledge truly is power when it comes down to managing budgets effectively.

I hope this post has helped illuminate some of the financial aspects of launching an LLC. Thanks for reading along! Best wishes on your entrepreneurial journey – may it be fruitful and exciting!

CEO & Co-Founder

Nick Cotter

Nick is a seasoned entrepreneur with a wealth of experience in establishing and managing successful Limited Liability Companies (LLCs).