How Much It Actually Costs to Start an LLC — and the Fees Most New Owners Don’t See Coming

Starting a limited liability company involves more than simple filing fees. Many entrepreneurs encounter unexpected expenses such as annual franchise taxes, professional registered agent services, and mandatory publication requirements. This guide explores regional price variations across the United States, common administrative pitfalls, and the importance of maintaining separate records to ensure full legal protection.

More than 5.2 million new business applications were filed in the United States in 2024, according to U.S. Census Bureau data. A huge share of those were LLCs. And if you talk to the people behind those filings, most of them will tell you the same thing: they had no idea what it was actually going to cost. Not the filing fee itself — that part’s easy enough to look up. According to LLCBuddy, which tracks LLC formation requirements and costs across all 50 states, filing fees range from $35 in Montana to $500 in Massachusetts. The national average sits around $130. That’s the number people plan for. It’s everything else that blindsides them.

The Filing Fee Is the Cheap Part

Let’s say you live in Colorado and want to start an LLC. The state filing fee is $50. Done online, takes about fifteen minutes. You’d be forgiven for thinking that’s it. Then you learn you need a registered agent — someone designated to receive legal documents on behalf of your business. You can name yourself, which is free, or hire a service, which runs $100 to $300 a year. Then Colorado’s periodic report comes around, which costs $10 annually. Manageable. Now imagine you’re in California instead. Same basic LLC, same simple business. But California charges an $800 minimum franchise tax every single year, regardless of whether your business made a dime. That’s not a fine. That’s a standing cost of existing. A photographer who forms a California LLC to do weekend shoots is paying $800 a year to the state before earning their first dollar. Then there’s New York, which requires LLCs to publish a formation notice in two newspapers — one daily, one weekly — for six consecutive weeks. Depending on the county, that publication requirement can cost anywhere from a few hundred dollars to over $1,200. It is, by most accounts, an outdated rule that exists because nobody has gotten around to repealing it. But it’s law, and skipping it means your LLC can’t sue to enforce contracts.

The Delaware Question

Almost everyone who researches LLC formation stumbles onto the same advice: form in Delaware. It’s where the big companies incorporate. The Chancery Court is business-friendly. The state is “entrepreneur-friendly.” For a startup planning to raise venture capital, that advice might make sense. For a freelance graphic designer in Texas? It’s probably the most expensive mistake they’ll make all year. Here’s why. Delaware’s filing fee is $90. Fine. But if you live and work in Texas, you still need to register as a foreign LLC in your home state — that’s $750 in Texas. Now you’re paying franchise taxes in Delaware, foreign registration fees in Texas, and maintaining a registered agent in a state you’ve never set foot in. For a solo founder running a simple business, that’s close to $1,000 per year in unnecessary fees. All because a blog post said Delaware was “the best state for LLCs.” The general rule, and one that most accountants and small business attorneys will echo: form your LLC in the state where you live and operate. The exceptions to this are real, but they apply to a narrow set of businesses, and the people they apply to usually already have lawyers telling them so.

Annual Costs Nobody Budgets For

Most states require LLCs to file an annual or biennial report. The report itself is usually simple — confirming your business name, address, and registered agent. The fee ranges from nothing in states like Ohio and Missouri to $300 in Massachusetts. But the penalty for missing it can be severe. In Illinois, your LLC can be administratively dissolved — meaning it legally ceases to exist until you reinstate it, which involves penalties, back fees, and a gap in your liability protection. Michigan can dissolve your LLC if you skip filings for two consecutive years. The problem isn’t that these deadlines are hard to meet. It’s that nobody tells first-time founders to put them on their calendar. There’s this assumption that once you’ve filed your Articles of Organization, the hard part is done. Actually, that was the easy part. The hard part is remembering, eighteen months from now, that your biennial report is due next Tuesday.

The Operating Agreement That Nobody Writes

Operating agreements are technically free. You draft one, your members sign it, and you keep it with your business records. Most states don’t even require one. Which is exactly why most solo founders and small partnerships don’t bother. This is a mistake. Without an operating agreement, your LLC defaults to your state’s rules — rules that were written for generic situations and probably don’t match what you and your partners actually agreed to. Profit splits, decision-making authority, what happens if someone wants out — all of this reverts to whatever the state legislature decided years ago. A two-person LLC where one partner contributed $40,000 and the other contributed an idea is treated identically under default rules in most states: 50/50 everything. That works fine until it doesn’t, and by then you’re spending $10,000 on a lawyer to sort it out.

The Real Cost of an LLC, Year One

For a typical solo founder forming in their home state, first-year costs tend to break down roughly like this: a state filing fee ($50 to $500), a registered agent if you hire a service ($100 to $300), potentially an annual report fee ($0 to $300), and whatever your state charges in franchise or business license taxes. Add a few hundred for a business bank account setup and a basic bookkeeping tool, and most founders are looking at somewhere between $200 and $1,500 for the first year in states without unusual requirements. In states with quirks — California’s franchise tax, New York’s publication requirement, Massachusetts’ high filing fee — that number can jump to $1,500 to $2,500 before you’ve spent a cent on an attorney or accountant. What formation services won’t tell you, because it’s not in their interest to, is that most of this can be done yourself. The state filing is a form. The EIN application is free on the IRS website. An operating agreement template from a reputable source gets you 80 percent of the way there. If you do decide you want a service to handle the filing, at least compare what you’re getting — LLCBuddy’s breakdown of LLC formation services lays out what each one actually charges versus what you can do for free. The gaps where professional help genuinely matters — multi-member equity structures, S-Corp tax elections, industry-specific licensing — are specific enough that you’ll know when you’re in over your head.

The Veil Problem

There’s one cost of getting it wrong that doesn’t show up on any fee schedule. An LLC’s entire value proposition — the reason the “limited liability” part matters — depends on the business being treated as a separate legal entity. If a founder runs personal expenses through the business account, doesn’t keep minutes, doesn’t maintain separate records, a court can “pierce the corporate veil.” That’s the legal term for deciding your LLC is a fiction and you’re personally on the hook. It happens more than people think. And the fix is free — just keep things separate. Separate bank account. Don’t pay your personal rent from the business account. File your reports. Maintain your records. The liability protection an LLC offers is real, but it’s conditional on actually behaving like a business.

What 5 Million New Founders Need to Hear

Starting an LLC isn’t expensive. Maintaining one doesn’t have to be either. But the actual cost is almost never what the first Google result tells you it is, because the first Google result is usually trying to sell you something. The founders who get through the first year cleanly are the ones who spent an afternoon — not a week, not a month, an afternoon — understanding what their state specifically requires, what it costs, and when things are due. That’s it. The bar is that low. Most people just don’t clear it because nobody told them the bar existed. Five million new businesses filed last year. A lot of them are going to get tripped up by a compliance deadline or a fee they didn’t budget for. Not because the information isn’t out there, but because it’s buried under a pile of formation service marketing and generic advice that doesn’t distinguish between Montana and Massachusetts. The difference between an LLC that protects you and one that doesn’t usually isn’t money. It’s about thirty minutes of reading the right guide.