How much does an LLC cost: actual fees and hidden expenses by state

Forming an LLC in the United States costs between $35 and $500 in state filing fees, depending on the state. That's the one-time charge to file the Articles of Organization (or Certificate of Formation, depending on state terminology) with the Secretary of State or equivalent agency. After formation, ongoing costs include annual reports, franchise taxes, registered agent renewals, and assorted compliance expenses that vary by state and by how your LLC operates.

The average cost to form an LLC in the U.S. for 2026 is $132. The average annual maintenance fee is $91. These averages mask substantial variation. Forming in Montana costs $35 initially with no annual reports. Forming in California costs $70 initially but $800 annually in mandatory franchise tax. Forming in Massachusetts costs $500 initially but has no annual report fee. Picking the right state is the difference between $35 and a multi-year obligation of several thousand dollars in maintenance fees.

This is what each fee category actually pays for, how the math works state by state, where the hidden expenses sit, and how to minimize the total cost legally.

The required fees: what you can't avoid

Every LLC has unavoidable formation and maintenance costs. The amounts vary by state, but the categories are consistent.

State filing fee for Articles of Organization. The one-time fee to file your formation documents. Ranges from $35 (Montana) to $500 (Massachusetts) as of 2026. This fee pays for the state's processing of your formation paperwork and the initial entry in the state business registry.

Annual or biennial report fee. Most states require LLCs to file periodic reports updating ownership information, registered agent details, and business address. Fees range from $0 to $800 depending on the state. Six states (Arizona, Mississippi, Missouri, New Mexico, Ohio, South Carolina) don't require annual reports at all. California sits at the high end with $800 annual franchise tax. Massachusetts has no annual report fee despite its high filing fee.

Franchise or privilege tax. Some states impose annual taxes on LLCs regardless of profitability. California's $800 minimum franchise tax is the most notable; the tax is due even for LLCs that earned no revenue. Tennessee, Rhode Island, Delaware, and several other states have franchise or privilege tax components. Many states have no franchise tax.

Registered agent fee. Every LLC must have a registered agent in the state of formation. If you serve as your own agent (requires a physical address in the state and availability during business hours), the cost is $0. Professional registered agent services range from $39 (Northwest Registered Agent) to $300+ depending on the provider.

Cheapest states to form an LLC

Five states stand out for low total cost when forming and maintaining an LLC, particularly for businesses operated by residents of those states.

Montana: $35 filing fee, $20 annual report. The cheapest initial formation in the country. Annual maintenance is reasonable. Montana is sometimes used by non-residents for vehicle registration tax purposes, but for actual business operations, this only works for Montana residents.

Kentucky: $40 filing fee, $15 annual report. Second cheapest after Montana. Straightforward formation process through the Kentucky Business One Stop Portal.

Arkansas: $45 filing fee, $150 annual franchise tax. Low formation, modest annual franchise tax that effectively serves as the state's main LLC revenue source.

Arizona: $50 filing fee, no annual report. No franchise tax, no annual report. Among the lowest total cost of ownership for LLCs operated by Arizona residents. Note: Arizona has a publication requirement (newspaper publication of LLC formation in Maricopa and Pima counties), which adds approximately $30 to $200 to the formation cost depending on the publication.

Mississippi, Missouri, New Mexico, Ohio, South Carolina: $50 filing fee, no annual report. All five states have low formation fees and no annual reporting requirement. New Mexico is particularly notable as a privacy-friendly state where LLC ownership is not publicly disclosed.

Most expensive states

Four states stand out for high LLC costs, generally due to a combination of high filing fees and aggressive annual taxation.

Massachusetts: $500 filing fee, $500 annual report. The most expensive initial filing in the country and a substantial annual obligation. Massachusetts justifies the fees through the business environment but offers no functional advantage that compensates for the cost difference compared to neighboring states.

Nevada: $425 total formation cost (including business license fee), $350 annual fees. Often marketed as a tax-friendly state, but the formation and maintenance costs are substantial. Nevada also requires an annual State Business License separate from the LLC filings.

Tennessee: $300 filing fee, $300 minimum annual franchise tax. Tennessee's franchise tax is based on net worth or capital, with a $300 minimum. Operating businesses with substantial assets pay more.

Texas: $300 filing fee, no annual report but franchise tax applies. Texas has no annual report requirement but imposes a franchise tax on businesses with revenue over $1,230,000 (2026 threshold). Below-threshold LLCs file a "No Tax Due" report but pay no tax. Above-threshold businesses pay franchise tax calculated on revenue, cost of goods sold, or compensation depending on the calculation method elected.

California: $70 filing fee, $800 minimum annual franchise tax. Lowest filing fee in the high-cost group, but California's $800 annual minimum franchise tax is the largest mandatory ongoing cost for any LLC in the country. The franchise tax applies whether or not the LLC earned revenue. California waives the first-year franchise tax for new LLCs, but year two and beyond require the full $800 regardless of profitability.

Why forming in another state usually backfires

A common piece of bad advice circulating online: form your LLC in Wyoming, Delaware, or New Mexico to avoid your home state's higher fees. This advice almost never works for small businesses actually operating in their home state.

The mechanics that defeat the strategy:

Foreign LLC registration in your home state. If your LLC is formed in Wyoming but you operate the business from California, California's laws require you to register your Wyoming LLC as a "foreign LLC" in California. This means paying California's foreign LLC registration fee ($70), California's annual franchise tax ($800), and any other California compliance costs. You end up paying both states' fees rather than avoiding California's.

Double registered agent fees. A foreign LLC operation requires a registered agent in both the formation state and every state where you operate. Forming in Wyoming and operating in California means two registered agent costs: roughly $39 in Wyoming and another $39 to $300 in California.

Two sets of annual filings. Annual report in Wyoming, annual filings in California, franchise tax in California. Compliance complexity doubles.

State enforcement. California specifically pursues businesses operated in California but registered elsewhere. Penalties for failure to register as a foreign LLC include retroactive franchise tax, interest, penalties up to $250 per day, and inability to maintain lawsuits in California courts.

The forming-in-another-state strategy works in three narrow situations:

No physical operations in any state. Pure online businesses with no employees, no offices, and no physical presence anywhere can sometimes legitimately form in Wyoming or similar privacy-friendly states without triggering foreign LLC registration in another state. The "doing business" tests vary by state and the analysis requires care.

Real estate investing in another state. Forming an LLC in Wyoming to hold a Wyoming rental property can make sense for asset protection and management purposes, with the LLC paying Wyoming fees rather than the owner's home state fees.

Asset-protection-focused holding company structures. Multi-entity structures with operating entities in one state and holding entities in another can make sense for businesses large enough to justify the complexity. Most small businesses don't fit this profile.

For typical small businesses, forming in your home state is the correct answer despite higher fees, because forming elsewhere produces more costs than it saves.

Other unavoidable costs

Several additional cost categories often surprise new LLC owners.

Employer Identification Number (EIN). Required for any LLC with employees, multiple members, or that elects corporate taxation. Also required to open most business bank accounts. Free directly from the IRS at IRS.gov, though many formation services charge $50 to $100 to obtain it for you. There's no functional difference between a free EIN from the IRS and one obtained through a paid service. Pay the IRS directly.

Operating agreement. Required by law in some states (California, Delaware, Maine, Missouri, New York, others). Not required by law in many states but strongly recommended for any LLC. DIY using free templates: $0. Attorney-drafted: $300 to $1,500 depending on complexity.

Business licenses and permits. Federal, state, county, and city license requirements vary by business type and location. Costs range from $0 to several thousand dollars. Check the SBA's license and permit tool and your city/county clerk's office for specific requirements.

Doing business as (DBA) registration. If your LLC operates under a name different from its legal name, most states require DBA registration. Costs range from $10 to $100.

State publication requirements. Three states require LLCs to publish formation notices in local newspapers: Arizona (limited counties), Nebraska, and New York. New York is the most expensive, requiring publication in two newspapers for six consecutive weeks; costs in Manhattan can run $1,500 to $2,000 depending on the publications selected.

Banking and accounting setup. Most business bank accounts have no setup fees but require maintenance balances or monthly fees ($0 to $25/month typical). QuickBooks Online or similar accounting software runs $30 to $200/month depending on the tier.

Federal Corporate Transparency Act compliance. Following FinCEN's March 26, 2025 interim final rule, U.S.-formed LLCs are exempt from BOI reporting. No filing required and no fee. Foreign-formed entities registered in U.S. states are still subject to BOI requirements but the filing itself is free at FinCEN; third-party services charging for BOI assistance are no longer relevant for domestic LLCs.

Year-one total cost: realistic estimates

For a typical small business LLC formed in a moderate-cost state and operated by the owner from their home state, year-one costs sit in the $200 to $1,000 range depending on choices.

Minimum-cost approach: $35 to $100 year one. Form in your home state directly through the Secretary of State (avoiding formation services that add fees). Be your own registered agent. Use a free operating agreement template. Get your EIN free from the IRS. Skip optional services.

Mid-range approach: $200 to $400 year one. Use a formation service like Northwest Registered Agent ($39 base) or ZenBusiness ($0 plus state fees), pay for first-year registered agent service ($39 to $99), draft your own operating agreement, get free EIN. State fees vary $35 to $500.

Higher-end approach: $1,000 to $2,500 year one. Use a formation service plus add-ons (premium registered agent, attorney-drafted operating agreement, expedited processing), or work directly with a business attorney for formation. May include first-year registered agent service, additional compliance services, and document templates.

Year-two-and-beyond costs depend on the state:

Low-maintenance states (Arizona, Missouri, New Mexico, Ohio, South Carolina): $39 to $99/year for registered agent service if hired, plus minimal compliance fees.

Moderate-maintenance states (most states): $100 to $250/year for annual reports, plus registered agent service.

High-maintenance states (California, Massachusetts, Nevada, Tennessee): $500 to $1,200/year minimum for franchise taxes, annual reports, and registered agent services combined.

How to minimize total LLC cost

Several practical approaches reduce LLC costs without compromising the business structure.

Form in your home state directly. Skip formation services. File the Articles of Organization yourself through the Secretary of State's website. The process is typically 15 to 30 minutes and saves the $50 to $300 service fee.

Be your own registered agent if you qualify. Save $39 to $300 per year if you have a physical address in the state and consistent business hours. The function is simple for most small businesses.

Get your EIN free from the IRS. Apply at IRS.gov in approximately 5 minutes. Never pay a third-party service for an EIN.

Use a free operating agreement template. Free templates are widely available from LLC.org, LLC University, Northwest Registered Agent, and similar sources. For single-member LLCs, basic templates are usually sufficient. Reserve attorney-drafted agreements for multi-member LLCs with complex ownership structures.

Skip premium formation packages. Most formation services upsell add-ons that provide little real value: "EIN service" (free elsewhere), "operating agreement templates" (free elsewhere), "business address" (often unnecessary if you have a physical location), "compliance monitoring" (a calendar reminder accomplishes the same thing for most LLCs).

Choose your formation state carefully. Form in your home state unless you have a specific, legitimate reason to form elsewhere. The "tax savings" of forming in Wyoming or Nevada generally don't materialize for businesses actually operating in another state.

Track annual deadlines. Late annual report filings often trigger penalties ($50 to $500 per year). Missing annual reports can trigger administrative dissolution of the LLC. A simple calendar reminder system prevents this entire cost category.

File California's first-year franchise tax waiver if applicable. California LLCs formed during the calendar year are exempt from the $800 first-year franchise tax. The exemption requires correct filing of Form 568 with the appropriate election.

What to do next

If you're considering forming an LLC, the first questions to answer:

What state are you actually operating from? Form there unless you have a specific reason to form elsewhere.

What's the state's specific fee structure? Use the Secretary of State website to confirm current filing fees, annual report requirements, and franchise tax obligations. Online guides (including this one) can lag behind current state fee schedules.

Can you serve as your own registered agent? If you have a physical address in the state and consistent business hours, yes. If not, budget $39 to $99 annually for professional service.

Do you need an EIN? If you'll have employees, multiple members, or want to open a business bank account: yes. Get it free from the IRS.

Do you need an attorney? For single-member LLCs in straightforward situations, generally no. For multi-member LLCs with operating agreement complexity, yes. For LLCs operating in regulated industries (medical, legal, financial services), often yes. Standard business attorney rates run $250 to $500/hour; LLC formation typically takes 2 to 5 hours of attorney time depending on complexity.

The total cost of an LLC over its first three years, done minimally and correctly, sits in the $100 to $500 range in most states. The total cost done expensively, with full-service formation, premium registered agent, attorney-drafted documents, and high-cost-state operations, can run $3,000 to $8,000 over the same period. Most of the difference reflects choices about services and state, not unavoidable costs. Understanding which fees are required and which are optional is the practical work of forming an LLC efficiently.