Starting a business can be an exciting adventure rife with challenges. And to cushion any potential business problems, most entrepreneurs register their business as a Limited Liability Company (LLC).
LLC is a business structure many business owners love because it protects personal assets while providing flexibility in management and taxation. This type of business entity often suits the needs of new business owners. It offers more benefits than shielding an entrepreneur from potentially financially debilitating business errors.
If you’re interested in forming an LLC, you might wonder how much money would be needed to form and maintain one. If so, you should continue reading below to learn more about it.
Costs Of Forming An LLC
The costs of forming a limited liability company depend on where you’ll register it. And as early as now, know that the costs may change over time. So, by the time you’re done reading this, the current fees associated with registering an LLC in your state may vary a bit.
Each process in forming an LLC, like filing articles of organization, may cost you. Some of these processes are the following:
- Registering a company name: Your business name must be unique, and no other company has it. It may cost you around USD$40–USD$500.
- Reserving your company name: There may be cases in which you’re not ready to register your business yet, but you want to ensure that other companies will not use the name you selected. To do that, you must reserve your company name. It may cost you around USD$50–USD$100.
- Filing your articles of organization: This is a document where most of your business information will be stated. It may cost you around USD$50–USD$800.
- Publication of statement of formation: This can be optional, and only a few states require this. It may cost you around USD$40–USD$1,500.
- Making your operating agreement: This is a document where you indicate how multiple stakeholders and other members will manage the business in your LLC. It may cost you around USD$100.
- Acquiring an employer identification number (EIN): Most third-party companies can do this before you, and the cost may vary depending on who you’ll get this from.
Aside from the cost of forming an LLC, there will be some cases in which you may need to hire a few people to help you. It can add costs, so you should plan and research if you need help or can do everything independently. And if you need help, ensure you’ll only hire reputable people and companies. It’d be good to check review sites like this review page for Northwest LLC reviews.
Add all those costs mentioned above, and you’ll get an idea of how much money you’ll need before starting an LLC. Unfortunately, the fees and payments don’t stop there. You must worry about the money you need to maintain your LLC too, which will be discussed in the next section.
Costs Of Maintaining An LLC
Having an LLC means having to pay ongoing fees. Like the fees involved in filing or forming an LLC, the cost of maintaining an LLC may vary by state. And some places may even require a few more things you must pay for.
Nonetheless, you should primarily worry about the three most common maintenance fees you need to be aware of, and they’re the following:
- Annual franchise tax: Note that the profits of your LLC won’t be taxed by most states. Nonetheless, they do impose a yearly flat tax. The cost may vary wildly, but it can be as cheap as USD$250 and as expensive as USD$800.
- Reporting fees: On top of the annual tax, you should pay yearly reporting fees as well. The cost may vary depending on the number of members your LLC has. The price may range from USD$20 up to USD$10,000.
- Compliance fees: Most states have different additional fees related to maintenance and your compliance with their policies.
Be sure to have your business banking account ready to make dealing with these costs easier, primarily if you operate your LLC overseas. In addition, having a business banking account helps make it easier to acquire business loans and separate your finances from your company.
Conclusion
An LLC is a very convenient business structure most entrepreneurs can take advantage of. It protects its owners from disastrous events that can make them bankrupt in the blink of an eye.
Nevertheless, as convenient as it is, it still has some associated costs you must be aware of and pay for. As you can see, the costs aren’t that high. Still, they can quickly stack up and debilitate you, especially if your business isn’t performing well or you’re living and doing business in busy states like California and New York.