Introduction

Opening your own LLC company is a crucial and serious step, so the issue concerning expenses is one of the most important. Knowing the costs of business formation in advance will help you budget properly. Such preparation will prevent any surprises and ensure a successful start for your company.

In this article, we'll talk about what mandatory fees are charged at different stages of an LLC incorporation and the ways to reduce startup costs. We will also touch on taxes and current state compliance costs that affect a company's reputation.

Expenses

Cost of the Registered Agent LLC service

Michael Coulson, owner of the https://bestllcservices.co/ website, states that every LLC company in America should have a representative who will ensure its stable interaction with the state. Such a person is usually called a registered agent. The Secretary of Colorado State website describes the registered agent as "the individual or business responsible for accepting service of process for an entity and isn't necessarily an owner or director. The registered agent is responsible for forwarding service of process to the entity."

A registered agent should be designated during the business formation process and, moreover, it is a mandatory condition for launching an LLC. As a company owner, you can save some money by acting as your own registered agent or hiring someone you know to do it for you. Nevertheless, it imposes additional restrictions and is associated with significant disadvantages. Thus, most business owners prefer LLC formation services providing registered agent service.

The online LLC formation industry offers many different options. You can order a registered agent service from one of the top LLC companies for an annual average fee of between $100 and $300. It is often cheaper and more efficient than another common option of hiring an accountant or attorney as a registered agent.

What's more, some LLC creation services can provide a free registered agent service for six or even twelve months, if you hire them to set up your business. These incorporation companies are, for example, ZenBusiness or Northwest Registered Agent.

Basic LLC formation costs

Unlike general partnership and a sole proprietorship, the LLC formation process involves compliance with legal requirements and mandatory fees. Nevertheless, it is much easier and cheaper to establish an LLC than, for example, a corporation. Depending on the state, the required fee for a limited liability company can range from $40 to $500. The cheapest online LLC formation is in Kentucky, and the most expensive state is Massachusetts. There are also fees for name reservations or expedited processing.

If you hire a professional website for LLC creation, then the costs for their services will vary widely. For example, the IncFile starter package will cost you just $0 + filing fees. This is a fantastic offer, taking advantage of which you will get an excellent service from one of the best LLC services and, at the same time, save some money. As for other affordable company formation services, the prices for their service packages are sometimes as high as $900. This can be quite expensive for a startup company, but the cost of hiring a business attorney is even higher, ranging from $500 to $2000. Some of them charge $150 to $350 per hour, and others charge a flat rate for setting up an LLC.

There is also a law in some states that requires an Operating Agreement. It is an internal document that sets forth the basic principles of the company's operation, procedures, and management structure. There are several ways to get one:

1. Write it yourself, using a free online template, or order a customized template from business formation service, paying from $50 to $200;
2. Hire an attorney. However, be ready for the fact that their services will be more expensive than the prices of online companies.

In some cases, basic LLC formation costs include publication fees. If you launch a business in Arizona, Nebraska, or New York, you have to publish an announcement in one of the local newspapers, paying between $60 and $120.

Finally, you may want to register a DBA name. It allows you to run your business under a different name than the official name of your company. The cost of this service varies from state to state. To save your time, you can entrust it to a DBA professional service, which will handle all the paperwork for you. For example, LegalZoom provides a DBA name for $99 + filing fees.

Maintenance costs after LLC formation

Once the formation documents are approved, your LLC is considered fully legal, but you need to obtain permits and licenses to get down to work. Their number, type, as well as cost depend on the specifics of your business and its location, since some counties and cities impose additional requirements.

To find out what licenses your company needs, you can hire a business formation service or do the research yourself. For example, Mycompanyworks offers the Business License Compliance Package for $99. For that money you will:

• Save you the time and effort of making calls, searching, and gathering information about the licensing requirements for your LLC;
• Get the completed forms and instructions in a convenient online dashboard;
• Have contact information and useful links for each licensing agency.

If you pay corporate taxes, want to open a separate bank account for an LLC, or hire employees, then you need an EIN. This service from an online LLC formation company will cost you from $50 to $100. 

However, you can get it for free by applying to the IRS yourself.

In almost all states, limited liability companies are required to file annual or biennial reports to keep them up-to-date with the state. In addition, sometimes the law requires an initial report to be filed immediately after the business is formally registered. The processing fee for these reports varies from state to state. 

If a company misses a reporting deadline, it may face negative consequences, so it is better to take advantage of online LLC formation service. LegalZoom, for example, will take care of your reporting for $55 + filing fees.

Finally, we should remember about taxes. At the federal level, as in most states, an LLC is treated as a "pass-through" tax unit by default. The company does not file its own tax return, and all profits and losses are reported on the owners' personal 1040 tax returns and/or Schedule C. However, a number of states charge an annual tax, usually called the franchise tax. Furthermore, there are various additional taxes, the type of which depends on the specifics of the business.

Conclusion

Whether you do it yourself or decide to hire one of the LLC creation services, planning your business expenses is an important part of the startup process. Some of them, such as state fees for processing the formation documents, are one-time costs. After paying them once, you will never worry about them again. While others, such as the annual report fees, are regular. They should be considered when budgeting your company to avoid possible penalties.