The decision to form an LLC or incorporate can help you protect your personal assets from the debts and liabilities of your business. Unfortunately, many small business owners avoid taking this step because they find it too expensive. For a few hundred dollars, these small business owners can form an LLC and get valuable protection that could someday protect them in the event of a lawsuit.
Incorporating or forming a limited liability company is not always expensive. There are many entities to choose from, as well as states, each with their own costs. You can also choose to work with an attorney to incorporate your business, which is usually the most expensive option. If you want to save money, you can do the merge yourself, but this can be tricky because even a simple document error can cost you more later. For many small business owners, the best option is to use a corporate services company, which is an affordable option to make sure your paperwork is correct and filed with the state promptly.
The following are the expected costs if you are ready to enter.
Submission Fee
A filing fee is required to create an LLC or corporation. The exact fee will depend on the state you are in, but usually ranges between $50 and $350. The cheapest option is to form a Delaware LLC, as the state has the lowest filing fees in the United States. Keep in mind that cost is not your only consideration, and incorporating Delaware may not be in your best interest.
Publication Fee
If you are joining in Pennsylvania, Arizona, Georgia or Nebraska, you will have to pay a publication fee of $150 to $300.
Annual Report Fee
These fees usually range from $25 to $200 and depend on the circumstances of your establishment.
Franchise Tax
This fee will continue and be paid annually. Most small businesses pay between $800 and $1,000, and there is usually a minimum and maximum tax amount you will pay depending on the type of entity you choose and the number of shares you issue. For example, franchise taxes in Delaware are at least $350 but may be as high as $180,000 for a large corporation. Delaware has the lowest franchise taxes in the country.
Other Fees
You should also factor in other costs depending on the type of business you operate. For example, you may be charged a fee to obtain the necessary business licenses or create a business bank account.
If you are interested in incorporating or forming an LLC for as little cost as possible, start by considering the state in which you will be incorporating. You don’t need to operate in the state you choose, but it may be more affordable to choose your home state if it is the only state you operate in. If you’re thinking about other states, take a look at their tax rates and compare them to your own.
It can also be helpful to discuss your options with a corporate services firm or attorney to choose the right business structure. This decision must be made taking into account not only the costs of establishment but also the tax advantages, ongoing maintenance, formalities and ownership structure.