Forming a Limited Liability Company
Forming a limited liability company involves several steps, not all of which are required in every state. Some steps cost nothing if you do the work yourself. These steps have obligatory costs in most states:
• Choosing a name for your LLC.
• Filing the necessary LLC "articles of organization" with your state's agency.
• Creating an LLC operating agreement.
• Publishing a notice of intent to form your LLC in a widely distributed newspaper, usually your city or county business journal.
• Obtaining permits and licenses required to conduct a business in your state.
Costs Associated With Each Step
Choosing a Name
It costs nothing to choose an available name in a form approved by your state's department of corporations or business oversight. You register the name with your articles of organization filing, which does have a cost. First determine the name's availability by running a search through the secretary of state's office. In some states, for a small fee you can reserve your LLC name until you file the articles of organization that give you the exclusive right to its use.
Filing Your LLC's Articles of Organization
Each state requires that you file your LLC's articles of organization (sometimes called a "certificate of organization" or a "certificate of formation"). Filing costs run from as little as $90 in Delaware to $220 in the District of Columbia. Some states with relatively low fees have related requirements that increase the overall cost substantially. In California, for instance, although the filing fee is only $70, every LLC must also pay an annual franchise tax that costs a minimum of $800 and for larger LLCs can cost much more.
The particular requirements of your state's LLC articles of organization and its schedule of filing and related fees are listed in the Nolo article "How to Form an LLC."
Creating the LLC operating agreement
You have no obligation to file an LLC operating agreement with the state. Some states do not even require that you have one. Nevertheless, creating an LLC operating agreement is highly recommended: It serves the same function for an LLC as the partnership agreement or articles of incorporation serve for those business entities. Most people who are not lawyers will need some assistance in creating this agreement. This can cost as little as $100 for an online form from a recognized firm that you fill out yourself to $1,000 or more for an operating agreement prepared by your attorney.
Publishing the notice of intent
Some states require that you publish a notice in a local newspaper announcing the formation of the LLC. Your city's business journal is familiar with the requirements; often the notice must be repeated several times. Costs vary. The Los Angeles Times, for example, charges about $300 for each instance of the notice.
Licenses and Permits
Requirements for business licenses and permits vary widely from state to state and from one city to another. Many cities (or sometimes county governments) require that you obtain a business license that may run from a few hundred dollars to more than $1,000 each year. Depending on the nature of your LLC's business, you may also need a seller's permit.