How much does it cost to form an LLC?

State filing fees range from $50 (Kentucky, Colorado) to $500 (Massachusetts). Most states are $100-$200. Beyond the filing fee, budget for: registered agent ($0-$125/year), operating agreement ($0-$200 for template), EIN (free from IRS), annual report/franchise tax ($0-$800/year depending on state). Total first-year cost is typically $100-$1,000 — you don't need a service like LegalZoom, but they simplify the process for $79-$300+.

Should I form my LLC in a different state like Wyoming or Delaware?

Probably not. If your business operates in your home state, forming in Wyoming or Delaware means you'll need to register as a foreign LLC in your home state anyway — paying fees in BOTH states. The Wyoming/Delaware advantage is mainly for large businesses, venture-backed startups, or businesses with complex ownership structures. For most small businesses, form in the state where you operate.

Do I need an operating agreement?

Yes, even for single-member LLCs. An operating agreement is an internal document that outlines ownership, management structure, profit distribution, and what happens if a member leaves. Some states require it, but even where it's not required, it strengthens your liability protection by demonstrating the LLC is a separate entity from you personally.

Things to Do Before Forming an LLC

Before you file LLC paperwork, make the right decisions about state, structure, registered agent, and operating agreement. Getting these wrong can cost you unnecessary fees, weak liability protection, or tax headaches down the road.

Pre-LLC Checklist

#	Task	Details
1	Choose your business name	Check availability in your state (Secretary of State website)
2	Decide formation state	Almost always your home state
3	Choose management structure	Member-managed vs. manager-managed
4	Designate a registered agent	Required in every state — can be yourself or a service
5	Draft an operating agreement	Even for single-member LLCs
6	Get an EIN from the IRS	Free, needed for bank accounts and taxes
7	Open a business bank account	Keep business and personal finances separate
8	Choose your tax election	Default (sole prop/partnership), S-Corp, or C-Corp
9	Check local licenses and permits	City/county business license, zoning, industry permits
10	Set up accounting from day one	Track every business expense

LLC Formation Costs by State (Selected)

State	Filing Fee	Annual Report	Franchise Tax
California	$70	$20/2 years	$800/year (minimum)
Texas	$300	None	Franchise tax (if revenue > $2.47M)
Florida	$125	$138.75/year	None
New York	$200	None	$25/year
Colorado	$50	$10/year	None
Wyoming	$100	$60/year	None
Delaware	$90	$300/year	None
Georgia	$100	$50/year	None
Illinois	$150	$75/year	None
Ohio	$99	None	None

Where to Form: Home State vs. Wyoming/Delaware

Factor	Home State	Wyoming/Delaware
Filing fee	One state fee	Filing fee in WY/DE + foreign registration in home state
Annual costs	One state’s reports/fees	Fees in both states
Registered agent needed	One state	Both states
Legal protection	Standard (varies by state)	Stronger privacy (WY) or case law (DE)
Complexity	Simple	More complex
Best for	Nearly all small businesses	Multi-state, VC-funded, privacy-focused

LLC Tax Options

Tax Election	How It Works	Best For
Default (sole prop — single member)	Income on personal return, Schedule C	Starting out, simple
Default (partnership — multi-member)	K-1 to each member	Multiple owners, early stage
S-Corp election (Form 2553)	Owner takes salary + distributions (saves SE tax)	Net income over $50K-$60K
C-Corp election (Form 8832)	Corporate tax rate (21%); dividends taxed again	Reinvesting profits, seeking investors

Registered Agent Options

Option	Cost	Pros	Cons
You (yourself)	$0	Free	Address is public record; must be available during business hours
Northwest Registered Agent	$125/year	Trusted, privacy, mail forwarding	Ongoing cost
Inc Authority	$0 first year	Free first year	Upsells; $149/year after
Your attorney	Varies	Professional representation	Can be expensive

Common Mistakes to Avoid

Mistake	How to Avoid It
No operating agreement	Draft one — even a simple template
Mixing personal and business finances	Separate bank account from day one
Forming in WY/DE when you operate locally	Form in your home state
Forgetting annual report	Set a calendar reminder; missed reports can dissolve your LLC
Not keeping corporate formalities	Maintain separation — sign as “Member of [LLC Name]”
Using a formation service you don’t need	You can file directly with Secretary of State
Skipping the EIN	Need it for bank accounts, taxes, hiring

The Bottom Line

For most small businesses, forming an LLC is straightforward: file in your home state, get an EIN, draft an operating agreement, open a business bank account, and maintain the separation between business and personal finances. Skip the out-of-state formation gimmicks unless you have a specific legal reason. Total cost: typically $100-$500 to get started.