How Much Does It Cost to Open an LLC?
The limited liability company is beneficial to business owners who want to save money. In addition to protecting your income from double taxation, the LLC business structure protects your assets in the event of a lawsuit. Despite these benefits, the specific details of your business will determine whether it's cost-effective for you to open an LLC.
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Organization
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To form an LLC, you must file an article of formation with the secretary of state. The article of formation is a form that requests the name of the LLC (which must include some form of the the term "limited liability company," such as "LLC"), its members and their contact information. The secretary of state requires a fee to file the article of formation, which ranges between $30 and $200 depending on the state in which you live.
Assumed Names
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For various reasons, you may wish to operate your LLC using a name other than the one you file with the secretary of state. An assumed name, also called a DBA for "doing business as," or a fictitious name, allows you to work around such problems without having to form a new LLC. The laws in your area may or may not require you to file a DBA, so check with the secretary of state and the county clerk to be sure. Filing fees range between $10 and $100. In addition to this fee, the law may also require you to announce your LLC's assumed name in the local newspaper.
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Opening a Bank Account
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Opening a separate bank account for your LLC is one way to ensure you reap the full tax benefits of an LLC. You will be better able to keep clear accounting records and less likely to mix your money with the company's, which could result in tax penalties. To avoid commingling, open your business account with enough money to operate your LLC for at least six months. This amount will vary depending on your business, but it must be enough to sustain your costs until your business brings in enough money to support itself. Request a free employer identification number, which is similar to a social security number for businesses, from the Internal Revenue Service to open a business bank account.
Annual Costs
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Some states require annual taxes and fees to maintain your LLC. Such fees may include a tax on the LLC's income or a tax for owning an LLC in general. These fees can range between a few hundred dollars and tens of thousands of dollars, so take them into account when designing a budget for your LLC.
Other Costs
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If your LLC is based in certain fields, such as food preparation, consulting, health or engineering, you may need certification to operate in your area. The cost of certification varies depending on your field and the area in which you operate. Certification, along with business insurance, lowers the risk of your business facing a lawsuit from disgruntled customers. Contact your bank to find out what insurance you need to protect your LLC.
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