A limited liability company, also known as an LLC, is a form of legal ownership used by people that need the advantages of a corporation while working on a sole proprietorship or partnership. The limited liability company will be taxed just like a normal sole proprietorship or partnership, with all profits and losses passed to the LLC owners and no income taxes on the business, unless the owners of the LLC choose something else. The LLC members/owners will not be held personally liable for any debts of the company, the same as for any corporation. Create an LLC also if you need something more flexible than a legal corporation, that usually is very rigid and very strictly structured.
How Much Will an LLC Cost?
The fees for State filing to set up an LLC can go anywhere from $75 to $1,000, or even more. Before getting started, be sure to contact your Secretary of State office and ask about the requirements and fees for creating an LLC in your state. If you’ll have to publish the creation of your company in a local newspaper, be ready to pay at least $50 to $125, although some publications will charge as much as $2,500.
If you don’t like to go through all the process yourself, you can hire one of the many online firms that can assist you set up your LLC for a fee of $35-$400, depending on the services they offer and the speed of processing. Be aware that the cost of the service usually won’t include local newspaper publication costs and state filing fees.
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If you want to hire a CPA or certified public accountant, you need to know that they can guide you through the whole decision making and paperwork process of launching your LLC, but won’t be able to provide legal advice. A CPA’s services will usually cost $400 to $900, or more, depending on their location and the complexity of the services they will provide. This will be an addition to all of the expenses and fees we presented above.
You can hire an attorney to guide you through the process of setting up your LLC, for anywhere from $100 to $400 or even more per hour, depending on how complex your partnership will be, the number of members involved, and your location. You will usually end up spending around $1,000-$3,000 in total attorney costs for creating the LLC. You might even end up spending around $3,500 to $5,000 or even more on attorneys fees if you have too many LLC members or different percentages of ownership among the members or any other situations or arrangements that make the process more complicated. Ask your attorney if he’ll cover any other expenses like state fees in the total cost because this varies from one attorney to another.
Here’s what you’ll need:
Although some details might vary by state, there are a few usual steps you’ll have to take in order to set up your LLC. They include:
- Choosing the name of your business;
- Checking if the name is free and can be registered;
- Registering your name;
- The creation of the LLC agreement;
- Creating the Articles of Organization for your particular LLC;
- The publishing of your LLC creation in a local newspaper, if required by your state laws;
- Articles of Organization filing for your limited liability company;
- Starting the process for obtaining all the licenses and permits.
Although the process might seem complicated, it usually isn’t. the Articles of Organization shouldn’t be more than one page long in most states. Get expert advice before you set up your LLC because in some cases it might be better and easier to form a corporation, depending on what business you’re starting.
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Once you set up your limited liability company, expect annual expenses of around $20-$200 in maintenance fees, depending on the state. Many states charge an annual franchise tax that can vary from $100 to $800, or even higher, depending on your business.
If you want to get help from an online company, do your due diligence and be sure that the company you choose to work with has fresh information for your state and great reviews. If you’re overwhelmed by the process, be sure to get the help of a local attorney or accountant.
Should the average working Joe set up an LLC?
You should start an LLC only if you plan to start a business. If you’re already employed, then you shouldn’t be required to start an LLC. If you want to start an LLC but you feel that it might be too expensive, you can cut down the prices by doing your own research and going through all the steps without the help of a lawyer, accountant of web service.