LLC Costs and Fees You Need to Know as a Small Business Owner

Author: Melissa Pedigo

Melissa Pedigo

Melissa Pedigo

7 min. read

Updated October 25, 2023

A limited liability company (LLC) is a popular business structure for small businesses thanks to its ease of operations, tax advantages, and liability protection for its owners. But forming and maintaining an LLC comes with costs. While initial filing fees may be affordable, there are additional costs and recurring expenses, like taxes, that you’ll want to consider.

How much you’ll pay depends on the state where you form your LLC and whether you hire a professional to help you. We’ll walk you through the types of initial and ongoing fees you’re likely to incur when starting your LLC.

Before registering your LLC, you’ll need to choose a business name if you haven’t already. And be sure you follow any naming rules your state requires.

For example, Texas requests all LLC names contain “limited liability company” or “limited company” or any abbreviation of these phrases. Also:

  • Names can’t be confused with governmental entities (IRS, Secret Service, etc.)
  • Certain words are restricted (using college or university requires approval from the Texas Higher Education Board)
  • Foreign words won’t be translated (Agua Blanco Farms won’t be translated to White Water Farms)

Next, check that the name is available by doing a name search with your Secretary of State. Two businesses in the same state can’t have the same name. For example, Texas won’t allow two LLCS named Jones Enterprises.

LLC formation costs

After you’ve confirmed that your business name is available, you’ll be able to start the paperwork to register your company which typically involves filling out an application, appointing a registered agent, and paying a filing fee.

The primary cost of forming an LLC is the state filing fee for your Articles of Organization. In some states, this form is called the Certificate of Organization or Certificate of Formation.  

But whatever the name, the document is the official application to register your company with your state and grants you the right to do business there.

Filing fees range between $40 and $500, depending on the state. 

Other LLC costs

All businesses will pay the state filing fee, but in reality, there are other costs to be aware of.

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Business name reservation

Most states let you reserve a business name if you’re not quite ready to file your registration documents. 

Depending on the state, name reservations are good for 60 to 180 days, and you’ll pay a small fee of $20 to $150. But this will ensure your name isn’t registered by someone else before you’re ready to file. 

Trade name, DBA, or fictitious name

If you want to register a trade name or a DBA “doing business as” for your company, you’ll have to file a form and pay a small fee between $25 and $100, depending on the state. These names are also called fictitious names in some states.

Trade names or DBAs make sense if your LLC’s legal name is too formal or too vague to help customers find you. For example, if your company’s legal name is East Coast Enterprises and you operate as a construction company, you might want to use the trade name Baltimore Home Builders.

Most states require you to renew your trade name every year or two. 

Publication fees

Arizona, Nebraska, and New York require new LLCs to publish a Statement of Formation in a local newspaper. 

Publication requirements vary. For example, in New York, the information must be included for six consecutive weeks in a daily and a weekly newspaper in the same county as your LLC’s primary place of business. 

The fees charged by the publications vary and could be as low as a couple of hundred dollars to as much as a few thousand dollars. 

Registered agent 

A registered agent is a person or professional service appointed to accept service of process and other important legal and tax documents on your company’s behalf. 

All LLCs are required to have a registered agent. 

Registered agents generally must be:

  1. At least 18 years of age,
  2. A resident of the state you’re registering your LLC, and
  3. Available during regular business hours at a physical address in your state.

A registered agent can be you, a trusted employee, or your corporate attorney or accountant. Or you can use a registered agent service. These services charge yearly fees ranging from $50 to $200 depending on the level of service they provide.

Business permits and licenses

While most states don’t require your business to have a general business license or permit, certain types of businesses may need one.

For example, Pennsylvania requires breweries to have a license issued by the state’s Liquor Control Board. And Oregon requires insurance agents to be licensed by the state’s Division of Financial Regulation.

The number and types of permits or licenses your business needs depends on your industry. As part of your LLC registration process, check with your state and local authorities to learn if you’ll need a license.

Annual registration fees

Most states require you to file renewal reports for your LLC regularly. Some states like Florida require them every year, while others like Pennsylvania require them every ten years.

These reports ensure your LLC’s contact information and ownership details are accurate with the state. And anytime your business experiences a change, you’ll need to notify the state.

LLCs and taxes

Your LLC may need to pay three different types of taxes: federal, state, and local.

Federal taxes

One of the benefits of owning an LLC is its pass-through federal taxation. The LLC won’t pay tax on its profits. Instead, the owners, called members, will pay tax on their personal tax returns.

But if you have employees, your company will need to pay federal payroll taxes, including FICA and federal unemployment tax.

State taxes

There are a few different state taxes your LLC may need to pay. Depending on your state, you may need to pay:

Sales tax 

Although you’ll collect sales tax from customers, you’ll need to send it to the state every month or quarter depending on how much you collect. And paying late can cost you hefty penalties.

Income tax 

State income tax can be called numerous things. In Oregon, it’s called corporate activity tax. In Texas, it’s the franchise tax. 

This tax is generally charged on the total profits of the LLC. Tax rates vary from state to state ranging from 2.5 percent in North Carolina to 11.5 percent in New Jersey.

Unemployment tax

If you have employees, your company will need to pay state unemployment tax for each employee. This tax provides financial benefits to workers who have lost their job through no fault of their own.

Tax is generally charged on a portion of a worker’s wage each year. For example, Pennsylvania charges unemployment tax on the first $10,000 of each employee’s pay each year.

Tax rates vary with new employers generally paying the same rate. And after a few years and your company has a history of using the unemployment system, you’ll pay a rate based on your experience.

Local taxes

Some cities and local municipalities charge tax too. There may be income taxes and if you have employees, you may pay headcount, or occupational privilege tax depending on the number of employees you have. For example, Denver Colorado charges employers in the city limits $4.00 per month per taxable employee.

To conclude: How much does an LLC cost?

When choosing to form an LLC, you’ll want to consider all the fees associated with maintaining it. Costs tend to be highest in the first year but there are ongoing expenses to factor in. Be sure to outline what your startup costs will be and don’t forget to account for all of the registration and licensing fees along with your taxes. To make it a bit easier, you may want to reference this annual cost breakdown chart as you identify your own expenses.

Annual Costs for an LLC – 1st Year
DescriptionState fees
Articles of Organization$40 – $500
Registered agent service (if needed)$50 – $200
Trade name registration (if needed)$25 – $100
Name reservation (if needed)$20 – $150
Specific permits or licenses (if needed)$20 +
Publication fees (if required)$100 – $2,000
State and local taxesvaries
Annual Costs for an LLC – 2nd Year & After
DescriptionState fees
Annual report/annual renewals$50 +
Registered agent service (if needed)$50 – $200
Specific permits or licenses (if needed)$20 +
Trade name registration (if needed)$25 – $100
State and local taxesvaries

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Content Author: Melissa Pedigo

Melissa Pedigo is a US CPA with more than 20 years of experience. She’s worked at Big 4 firms, for the government, and internationally. Now a full-time writer, she enjoys translating complex financial and tax topics into plain English. When she’s not keeping current reading IRS rules or tax legislation, you’ll find her studying foreign languages or playing tennis.