One angry customer. One accident. One lawsuit. That’s all it takes to put your personal savings at risk. That is, unless your business is set up as a limited liability company (LLC).

An LLC draws a line between your personal and business finances. This structure protects your savings while keeping taxes simple. But these benefits don’t come for free.

So, how much does it cost to start an LLC, exactly? Get the full breakdown of costs for starting an LLC below.

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What Is an LLC?

An LLC is a business structure that creates a wall between your personal finances and your business. Your business becomes its own legal entity. That means your personal assets—like your house, car, and savings—stay safe if your LLC runs into trouble.

Let’s say you own a small cafe as an LLC. If a customer slips and falls, they can only sue your business, not you personally. Or if your business can’t pay its bills, creditors can’t come after your personal bank account. This liability protection is one of the main reasons business owners choose to form an LLC.

LLCs also offer tax advantages. Unlike corporations, LLCs don’t pay their own taxes. Instead, money passes through your business directly to you, and you only pay taxes once on your personal return. This is called pass-through taxation.

Another benefit of forming an LLC is flexibility in ownership. You can own an LLC by yourself, share with partners, or even have other businesses as owners. You get to decide how to run the company. Some LLCs have designated managers to handle daily operations, while others let owners make decisions together.

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How Much Does It Cost To Start an LLC? Breaking It Down

The costs of LLC formation fall into three main categories. There are startup LLC costs you have to pay, like filing fees and annual reports. Then, there are optional LLC costs that make things easier, like hiring out for operating agreements or using a special LLC name. Finally, there are the fees you pay to keep your business up and running, like getting the right business licenses. 

Let’s break down each type of cost so you know what you’re getting into:

Startup Costs

The most basic cost for LLC formation is the state filing fee. This mandatory LLC fee varies widely by state. For example, Kentucky charges just $40, while setting up shop in Massachusetts will cost you $500.

Need your LLC set up faster? Many states offer expedited filing for an extra fee. This speeds up processing from several weeks to just one or two business days. You can handle the LLC filing yourself or hire an LLC formation service to manage the paperwork.

Optional Costs

While not mandatory, there are services available for streamlining your LLC formation. These might be a good idea if your business is especially complex or if you just want extra assurance that you’ve got all your ducks in a row.

Here are some optional costs to consider when starting an LLC:

• Operating Agreement. Your LLC operating agreement spells out how you’ll run your business. This includes things like ownership rights and member responsibilities. You can create your own operating agreement free of charge, but some business owners hire help to draft this particular LLC formation document since it’s so important. 
• Business Name Registration. If you want to use a business name for your LLC in addition to the one you chose when you first registered, you need to file a doing business as (DBA) application. Filing fees for using your own LLC name differ by state.
• EIN Application. You need an employer identification number for tax purposes and your business bank account. Apply online for free with the IRS. If you want to make extra sure you’re doing it right, you can also pay a fee for help with the application.
• Registered Agent Service. Your LLC needs someone to receive legal papers during business hours. While you can be your own registered agent, some owners hire a service to handle this task.

Maintenance Costs

Running your LLC means paying regular fees to stay in good standing. These include:

Annual Reports

Most states require yearly LLC filing fees to update your business information. The average cost is around $100, but some states charge much more, like California’s hefty $800 fee. Missing deadlines can mean penalties or even losing your liability protection.

Franchise Taxes

A handful of states, including California and Delaware, charge franchise taxes for the right to do business in their jurisdiction. Unlike regular taxes on profits, you pay franchise taxes whether your LLC makes money or not.

Business Licenses

Technically, this is both a startup cost and a maintenance cost. Depending on your industry and location, you may need a business license to form an LLC. But you also need to regularly renew your business license, which makes it an ongoing maintenance cost too.

This LLC fee ranges from about a hundred dollars to a thousand, but it can be much more for specialized business licenses like liquor permits.

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LLC Costs by State

LLC fees vary widely depending on the state you set up in. They also differ based on whether your LLC is domestic, which means it’s formed in-state, or foreign, which means it’s formed in a different state where your company does a lot of business. 

Here’s the full breakdown:

State	Domestic LLC Filing Fee	Foreign LLC Filing Fee	Annual Fee
Alabama	$200	$150	$0
Alaska	$250	$350	$100 biannually
Arizona	$50	$150	$0
Arkansas	$45 online or $50 by mail	$270 online or $300 by mail	$150
California	$70	$70	$20 biannually$800 annual franchise tax
Colorado	$50	$100	$10
Connecticut	$120	$120	$80
Delaware	$110	$200	$300 franchise tax
District of Columbia	$99	$220	$300
Florida	$125	$125	$139
Georgia	$100	$225	$50
Hawaii	$50	$50	$15
Idaho	$100	$100	$0
Illinois	$150	$150	$75
Indiana	$100	$125	$32 online or $50 by mail biannually
Iowa	$50	$100	$30 online or $45 by mail biannually
Kansas	$160	$165	$100 online or $110 by mail biannually
Kentucky	$40	$90	$15
Louisiana	$100	$125	$30
Maine	$175	$250	$85 domestic, $150 foreign
Maryland	$100	$100	$300
Massachusetts	$500	$500	$500
Michigan	$50	$50	$25
Minnesota	$155 online or $135 by mail	$220 online or $200 by mail	$0
Mississippi	$50	$250	$0 domestic, $250 foreign
Missouri	$50 online or $105 by mail	$105	$25
Montana	$35	$35 ($0 if filed before April 15)	$0
Nebraska	$100 online or $110 by mail	$100 online or $110 by mail	$25 online or $30 by paper biannually
Nevada	$75	$75	$150
New Hampshire	$100	$100	$100
New Jersey	$125	$125	$75
New Mexico	$50	$100	$0
New York	$200	$250	$9 biannually
North Carolina	$125	$250	$203 online or $200 by mail
North Dakota	$135	$135	$50
Ohio	$99	$99	$0
Oklahoma	$100	$300	$25
Oregon	$100	$275	$100 domestic, $275 foreign
Pennsylvania	$125	$250	$7
Rhode Island	$150	$150	$50
South Carolina	$110	$110	$0
South Dakota	$150 online or $165 by mail	$750 online or $765 by mail	$50 online or $65 by mail
Tennessee	$300-$3,000	$300-$3,000	$300 to $3,000
Texas	$300	$750	$0
Utah	$54	$54	$18
Vermont	$125	$125	$35 domestic, $125 foreign
Virginia	$100	$100	$50
Washington	$200 online or $180 by mail	$200 ($180 paper)	$70
West Virginia	$100	$150	$25
Wisconsin	$130 online or $170 by mail	$100+	$25 domestic, $80 foreign
Wyoming	$100	$150	$60+ depending on assets

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4 Tips for Starting an LLC

Here are a few handy tips for starting your LLC out on the right foot:

1. Evaluate LLC Service Providers

If you’re thinking about using a third-party service to handle LLC formation, weigh the costs against your time. Some services charge hundreds of dollars for tasks you could do yourself. Read reviews and compare prices before choosing help. Remember, basic filing fees will be the same whether you file yourself or use a service.

2. Separate Your Finances

Keep your personal and business finances separate from day one. Open a business bank account as soon as you get your LLC paperwork approved. This protects your limited liability status and makes tax time easier.

3. Avoid Common Pitfalls

Watch out for these common mistakes when starting an LLC:

• Not researching business license requirements
• Missing annual report deadlines and other filing fees
• Choosing an unfavorable state for LLC formation
• Using your business bank account for personal expenses
• Keeping poor business records
• Misclassifying owners or employees

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Use Invoice Simple’s Business Expense Tracker

When you have an LLC, keeping clean financial records is essential for staying in good standing and protecting your liability status.

And with Invoice Simple, tracking expenses has never been easier. The business expense and receipt tracker lets you scan any receipt and capture key info automatically. All expense data is ready to export into a summary report whenever you need it.