Cost of Starting an LLC in California Compared to Nevada

While it is much cheaper to form a Limited Liability Company in California than in Nevada, there are other fees an LLC faces that may tip the cost balance in favor of Nevada. When considering costs for starting an LLC in either state, look beyond the simple filing fee needed for the company's legal formation.

Nevada Filing Fee

Nevada charges a $75 fee for filing an LLC's articles of organization, as of January 2011. Nevada's Secretary of State's office offers an optional expedited filing of $125 for 24-hour service of the form's approval. The standard filing fee is on the low end of the range of fees states charge for LLC filings.

Members List

Within the first month of filing articles of organization with Nevada, an LLC must also submit an initial list of managers or managing members and an application for a business license. Owners of an LLC are called members, and those owners who are involved in the day-to-day running of the company are called managing members. Nevada requires filing the names of all managing members, or if no members are involved in its regular operations, a hired manager. The fee for filing this list is $125. Nevada levies a late fee of $75 if the list is not filed by the end of the month in which the LLC submitted its articles of organization.

Business License

All for-profit businesses in Nevada, except home-based businesses and movie companies, must apply for a business license, for a fee of $200. The application is on the same form as that used for listing managers or managing members, but as of 2010, Nevada also levies a $100 late fee, meaning an LLC could face total late fees of $200. The total on-time filing fees come to $400.

California Filing Fee

California levies a filing fee of $70 for an LLC's Articles of Organization, as of January 2011, and a $15 handling fee if you drop off the form in person. The major expense for the LLC comes later.

Franchise Tax

An LLC treated by the Internal Revenue Service as a sole proprietorship or partnership does not pay any company tax, but instead divides all income and expenses on members' individual tax returns. California doesn't let an LLC get off that easy. An LLC not taxed as a corporation will face an annual minimum franchise tax of $800 and a fee based on the annual total income of the company levied by the Franchise Tax Board.

References

• Nevada Secretary of State: Articles of Organization
• Nevada Secretary of State: Initial list of Managers or Managing Members
• California Secretary of State: Limited Liability Companies Tax Information
• California Franchise Tax Board: Limited Liability Company
• California Secretary of State: Forms, Samples and Fees