How to minimize costs when setting up an LLC?

Are you thinking about creating a Limited Liability Company (LLC) in the United States of America but are afraid of the associated costs? Or maybe you’ve already gone ahead and set one an entity, but only have a vague idea of what to expect with regards to expenses? And if the answer is yes, you’re not alone. Many entrepreneurs and small businessmen fear the legal costs involved with setting up an LLC. This leads them to delay or avoid setting up an entity, not realizing that there are ways to legally minimize these costs.

What exactly is a Limited Liability Company (LLC)?

A Limited Liability Company (LLC) is a form of business structure that is similar to a limited partnership or sole proprietorship. It allows you to combine the advantages of being self-employed with the benefits and the protections of incorporation. Owners of an LLC are known as its members. The LLC protects its members from any financial liability that may result from the business operations or contracts. This means that if the business incurs any debt or fails to pay a creditor, the member will not be legally responsible for paying off these debts personally.

The LLC offers legal and tax benefits, as well as protection against any personal liability, which is why it is becoming increasingly popular among individuals and businesses alike across the country.

What is the cost to set up an LLC?

Many small business owners choose to form an LLC instead of a partnership or a corporation for tax and liability reasons. The cost of an LLC depends on the state in which you decide to form your business entity. However, in general it will cost less than the general $500-$900 startup costs of forming a corporation. The main things or pointers that affect the cost if setup are the state in which you choose to form your LLC and whether you choose to hire an attorney/professional services or file all the paperwork yourself.

When you decide to outsource some of the process, the average cost of forming an LLC is $300–$800, but if you file everything yourself, the startup costs could be as low as $100–$300.

How much does it cost to maintain an LLC?

A short and crisp answer to this is more than a sole proprietorship or partnership, but less than a corporation. An LLC provides some added benefits over the other two business types, but it is important to understand that you will be responsible for your business’ taxes, whether or not you have an accountant.

Taxes are the most significant cost in maintaining an LLC. You’ll pay the same taxes as a sole proprietor, but with an annual fee. This annual fee is a regular fee paid to the State to keep the entity compliant and running. Depending on the state you have formed your LLC in, the fees and the due dates will vary and depend on the state you have formed your LLC in.

The annual fee that you have to pay to the state for an LLC generally ranges from $50–$500, depending on the state in which you register your business. Thus, if you factor in professional services, an average cost of running an LLC in the country is around $150–$650 per year.

How to save money while setting up an LLC?

Tackling the requirements for starting and maintaining a limited liability company (LLC) on your own can be daunting. The good news is that you don’t have to hire an attorney or look for professional services to set up an LLC.

The best way to save money while setting up a Limited Liability Company (LLC) is to setup or form the LLC on your own. You can do it yourself with the help of state-specific forms and instructions for an average of $100-$250 depending on which state you’re filing the papers in.

Cutting down on costs of formation of the LLC might come with its own downside. Using attorney services might cost you hundreds of dollars, but their involvement ensures the process goes through the legal and compliances route smoothly. When you are on your own, there’s always a scope of error and the legal requirements might turn out to be a headache for an aspiring businessman or an entrepreneur.

Thus, as an alternative, it is recommended that you do your research and find a cheap and reliable LLC Filing service provider. These service providers not only take care of the formation of the LLC, but also play a part in the formation of the Operating Agreement – An internal agreement which describes how an LLC will be run, responsibilities of the members and other information to avoid any future conflict. It is the complicated nature of this agreement that generally requires a professional service provider to handle it. The fees for an LLC Filing service provider generally starts from $50 plus the state taxes.

An additional cost that an LLC owner might incur while setting up the entity is publication cost. 3 states in the United States of America require LLCs to publish a notice of formation in running newspapers. These include Arizona, Nebraska and New York. The cost of publication will vary as per the specific guidelines issued by the states with the New York guidelines being the most notorious.


Hopefully, you’ve learned some valuable information from this guide on how to set up and maintain a Limited Liability Company (LLC).

By following the tips and ideas presented above, you should be able to minimize your costs while setting up an LLC. How much it will cost you to set up an LLC will depend largely on which state you form the entity in, the Operating Agreement, additional state compliances and the professional service providers you opt for. In most cases, it won’t be difficult to maintain an LLC because you don’t need a lot of money or a dedicated staff member to do so.

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