Incorporating or forming an LLC is an excellent way to shield your personal assets like your home and retirement savings from the debts of your business, or any business-related lawsuits. Unfortunately, many small business owners think that incorporating is just too expensive and too big a step for them to take and miss out on this very important benefit.
The decision to form an LLC or incorporate your business does not need to be expensive, however! There are multiple ways to incorporate, some more expensive than others. Using an attorney to incorporate is usually the most expensive option and best reserved for large companies. You can also choose to incorporate on your own and do all of the paperwork. This may work for you, but it can cost you more in the long-run if you make mistakes.
If you are a small business owner, another option is using a corporate service company, which is more affordable than using a lawyer and ensures the paperwork is done properly. Many companies will charge less between $80 and $200 to handle the paperwork and file it with the state on your behalf.
Regardless of which option you choose, the following are costs you should consider if you are planning to incorporate or form an LLC.
The Filing Fee
You will need to pay a filing fee, whether you create a corporation or LLC. This fee varies by state but it is usually between $50 and $350. The cheapest way to go is forming a Delaware LLC, which has the lowest filing fee, but this may not be the best move for you. You will pay the filing fee when you file your Certificate of Formation or Articles of Incorporation with the Secretary of State. Check your state's Secretary of State website to find the filing fee in your area.
Annual Report Fees
Depending on your state, you can expect to pay an annual report fee of $25 to $200.
Publication Fee
This fee only applies if you incorporate in Nebraska, Georgia, Arizona, or Pennsylvania, all of which require a publication fee of $150 to $300 due when you incorporate.
Franchise Taxes
This is a fee that you will need to pay on an annual basis. It varies by state but it is usually between $800 and $1,000. If you want to minimize the franchise tax, you may want to look into forming a Delaware LLC, which has one of the lowest franchise taxes in the country. You can do this even if you do not do business or live in Delaware.
Other Fees
There may be other fees you need to pay, depending on your business. This includes obtaining business licenses, for example, or setting up a business bank account.
Minimizing Your Costs
If you want to minimize the cost of incorporation, the first thing to do is consider your state of incorporation. You do not need to incorporate in the state in which you do business, although it may be cheaper in the long-run if you only operate in one state. If you choose to incorporate out-of-state, consider that state's tax rate and compare it to the cost of incorporating in your state.
You should also discuss your options with a lawyer or corporate service company like http://www.usa-corporate.com/ to determine the best type of entity for your business. Depending on the size of your business, your goals, and other factors, it may be cheaper to form an LLC rather than a corporation.
The decision to form an LLC or incorporate your business does not need to be expensive, however! There are multiple ways to incorporate, some more expensive than others. Using an attorney to incorporate is usually the most expensive option and best reserved for large companies. You can also choose to incorporate on your own and do all of the paperwork. This may work for you, but it can cost you more in the long-run if you make mistakes.
If you are a small business owner, another option is using a corporate service company, which is more affordable than using a lawyer and ensures the paperwork is done properly. Many companies will charge less between $80 and $200 to handle the paperwork and file it with the state on your behalf.
Regardless of which option you choose, the following are costs you should consider if you are planning to incorporate or form an LLC.
The Filing Fee
You will need to pay a filing fee, whether you create a corporation or LLC. This fee varies by state but it is usually between $50 and $350. The cheapest way to go is forming a Delaware LLC, which has the lowest filing fee, but this may not be the best move for you. You will pay the filing fee when you file your Certificate of Formation or Articles of Incorporation with the Secretary of State. Check your state's Secretary of State website to find the filing fee in your area.
Annual Report Fees
Depending on your state, you can expect to pay an annual report fee of $25 to $200.
Publication Fee
This fee only applies if you incorporate in Nebraska, Georgia, Arizona, or Pennsylvania, all of which require a publication fee of $150 to $300 due when you incorporate.
Franchise Taxes
This is a fee that you will need to pay on an annual basis. It varies by state but it is usually between $800 and $1,000. If you want to minimize the franchise tax, you may want to look into forming a Delaware LLC, which has one of the lowest franchise taxes in the country. You can do this even if you do not do business or live in Delaware.
Other Fees
There may be other fees you need to pay, depending on your business. This includes obtaining business licenses, for example, or setting up a business bank account.
Minimizing Your Costs
If you want to minimize the cost of incorporation, the first thing to do is consider your state of incorporation. You do not need to incorporate in the state in which you do business, although it may be cheaper in the long-run if you only operate in one state. If you choose to incorporate out-of-state, consider that state's tax rate and compare it to the cost of incorporating in your state.
You should also discuss your options with a lawyer or corporate service company like http://www.usa-corporate.com/ to determine the best type of entity for your business. Depending on the size of your business, your goals, and other factors, it may be cheaper to form an LLC rather than a corporation.