How to Start an LLC: What It Costs, What You File, and What Most Guides Leave Out

More than 5.1 million business applications were filed in the first eleven months of 2025, according to U.S. Census Bureau data—the fifth consecutive year above five million. A large share of those applicants filed to form a limited liability company, the most popular business structure in the country for new ventures. And yet the process of actually starting one remains surprisingly opaque. State requirements vary wildly. Fees range from $40 to over $500. Some states demand newspaper publication notices; others don’t even require annual reports.

The basics are simpler than most people expect. LLCBuddy, which maintains a free database of LLC formation requirements for all 50 states, breaks the process into five core steps: choose a state, pick a name, file your Articles of Organization, designate a registered agent, and draft an operating agreement. The details inside each step—the fees, the forms, the deadlines—are where things get state-specific and where most first-time founders get tripped up.

Choose Your State (and Why It Should Probably Be Yours)

There’s a persistent myth that everyone should form in Delaware or Wyoming. The logic sounds reasonable—Delaware has business-friendly courts, Wyoming has no state income tax—but for most small businesses, forming outside your home state creates more problems than it solves.

If you live in Ohio and operate a landscaping business in Ohio, forming a Wyoming LLC means you’ll need to also register as a foreign LLC in Ohio, pay filing fees in both states, maintain a registered agent in both states, and file annual reports in both states. You’ve doubled your costs and paperwork for a tax benefit that doesn’t apply because Ohio is where you’re actually earning income.

For the vast majority of SCORE clients—people running local service businesses, consulting practices, e-commerce shops—the right state is the one you’re standing in. Save the multi-state strategy for when you actually have operations in multiple states.

What You’ll Pay to File

The first hard cost is the state filing fee—the amount you pay to submit your Articles of Organization (some states call it a Certificate of Formation or Certificate of Organization). This is a one-time charge.

The cheapest states are Kentucky ($40), Montana ($35 for online filing), and a cluster of states—Arizona, Colorado, Michigan, Mississippi, Missouri, New Mexico—that charge $50. At the other end, Massachusetts charges $500 and Nevada’s total initial filing costs can exceed $400 once you include the mandatory business license and initial list of managers.

The national average is roughly $132. But the filing fee is only the door. What sits behind it are the ongoing costs that catch people off guard.

The Ongoing Costs Nobody Warns You About

Annual or biennial reports are the first surprise. Most states require your LLC to file a periodic report confirming your registered agent, business address, and member information. Fees range from nothing in Arizona, Missouri, New Mexico, and Ohio to $300 in Maryland. Miss the deadline and your state can administratively dissolve your LLC—at which point your liability protection evaporates.

Then there’s California. The filing fee is only $70, which looks attractive until you discover the $800 annual franchise tax, due every year regardless of whether your LLC earns a single dollar. This applies to LLCs with zero revenue. A graphic designer in San Francisco who forms an LLC in January and doesn’t land her first client until June still owes California $800 for the privilege of existing.

New York has its own surprise: a publication requirement mandating that new LLCs publish a formation notice in two newspapers for six consecutive weeks. In New York City, where newspaper ad rates are steep, this can cost $1,200 to $1,500 on top of everything else. Albany and smaller counties are cheaper, but it’s still hundreds of dollars that don’t exist in 47 other states.

Registered agent fees run $100 to $300 per year if you use a commercial service. You can act as your own registered agent for free in most states, but that means your home address goes into a public database that anyone can search. For many business owners, the privacy alone is worth paying for.

What You’re Actually Filing

The core document is the Articles of Organization. In most states, it’s a one- or two-page form asking for your LLC’s name, its principal address, the registered agent’s name and address, and whether the LLC will be managed by its members or by designated managers. That’s it. Some states ask for additional information—the LLC’s purpose, its duration, the names of initial members—but the form itself is usually less intimidating than a tax return.

Filing can be done online in almost every state. Processing times vary from same-day in states like Colorado and Virginia to several weeks in states with larger backlogs. Expedited processing is available in most states for an additional $25 to $150.

After the state approves your Articles, you’ll need an Employer Identification Number from the IRS—even if you have no employees. An EIN is free, takes five minutes on the IRS website, and you’ll need it to open a business bank account, file taxes, and sign contracts.

The Document the State Doesn’t Require but You Still Need

Only a handful of states legally require an operating agreement. But skipping it is one of the most common mistakes new LLC owners make. An operating agreement is an internal document—you don’t file it with anyone—that defines how your LLC is governed. For single-member LLCs, it establishes that the business is a separate entity from you personally, which is critical if you ever need to defend your liability protection in court.

For multi-member LLCs, it’s even more important. Without an operating agreement, disagreements about profit distribution, decision-making authority, and how a member exits the company get resolved by your state’s default LLC statute. Those defaults were written by legislators, not by you, and they rarely match what the members actually intended.

You don’t necessarily need a lawyer for this. Templates exist and many are free. But if your LLC has multiple members or complex arrangements, spending $500 to $1,500 on an attorney-drafted agreement is cheap compared to the cost of a partnership dispute.

Taxes: Simpler Than You Think (at First)

A single-member LLC is what the IRS calls a “disregarded entity.” That sounds ominous but it just means your LLC’s income flows through to your personal tax return. You file Schedule C on your Form 1040, same as a sole proprietor. The IRS pretends the LLC doesn’t exist for income tax purposes.

You will, however, owe self-employment tax—15.3% on net earnings covering both the employer and employee shares of Social Security and Medicare. The Social Security portion applies on the first $176,100 of net earnings in 2025. This is the same rate sole proprietors pay, so forming an LLC by itself doesn’t change your tax bill.

What can change it is an S corporation election. By filing Form 2553 with the IRS, your LLC gets taxed as an S corp: you pay yourself a “reasonable salary” (subject to payroll tax) and take remaining profits as distributions (not subject to self-employment tax). On $100,000 in net income with a $60,000 salary, that’s roughly $6,100 in annual savings. But it adds payroll filing obligations and the IRS scrutinizes “reasonable salary” closely, so this strategy generally only makes sense once your profits are consistently in the mid-five-figure range.

Do It Yourself or Hire a Service?

Formation services—companies that file your paperwork for you—charge anywhere from $0 (plus state fees) to $300 or more depending on the package. What you’re paying for is convenience and hand-holding, not legal advice. They fill out the same forms you’d fill out yourself.

For someone comfortable filling out a government form online, DIY formation is entirely doable. The state websites aren’t always intuitive, but the actual information required is basic: your name, address, LLC name, registered agent. A comparison of best LLC services and what they include can help you weigh whether paying for convenience makes sense in your situation.

Where professional help becomes genuinely valuable is on the legal and tax side. An attorney can draft an operating agreement tailored to your business. An accountant can tell you whether the S corp election is worth it at your income level. The formation filing itself is the easy part.

Start with the Basics, Then Build

The single biggest risk for new LLC owners isn’t choosing the wrong state or paying too much in filing fees. It’s forming the LLC and then not treating it like a separate entity. Commingle your personal and business finances, skip the operating agreement, miss an annual report deadline, and the legal protection an LLC provides can be stripped away in a lawsuit.

Do the basics right: separate bank account, operating agreement on file, annual compliance on the calendar. The filing itself takes less than an afternoon. What matters is what you do after.

If you want help thinking through the decision, SCORE mentors work with first-time founders on exactly these questions—for free, in all 50 states. It’s the kind of conversation that saves people from expensive mistakes, and it costs nothing but your time.

Note to readers: This article is part of Mint’s paid consumer connect Initiative. Mint assumes no editorial involvement or responsibility for errors, omissions, or content accuracy.

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