Incorporator The Journal of U.S. Formation
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Editorial 6 MIN READ

What a first-year LLC actually costs in 2024

The line items, the state spread, and the one fee that turns a $700 budget into $1,500

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 7 sections
  1. The filing fee is the small line
  2. The recurring fees are where the budget actually lives
  3. BOI is the new line item
  4. The operating agreement question
  5. Sales tax after Wayfair
  6. The year-one number
  7. Sources

first-year LLC budget in 2024 runs $700 to $1,500 in a low-cost state and about $1,500 more than that in California. Everything else is a rounding error around those two numbers.

The question most founders ask is whether they can form an LLC for "a couple hundred bucks." The filing fee alone, yes. The operating cost of an LLC for twelve months, not really, and the gap between the two is where the budget mistakes live.

The filing fee is the small line

Formation fees in 2024 run from $50 at the bottom to $500 at the top. Arizona and Michigan charge $50. Delaware charges $110. New York charges $200, plus a separate publication requirement that can add several hundred more depending on the county. Texas charges $300. Massachusetts charges $500. Most states sit between $100 and $200.

This is the only number that shows up in the marketing copy, which is why founders remember it and nothing else. It is also the number with the least effect on the year-one total, because it happens exactly once and is usually smaller than the recurring fees that follow it.

The federal EIN is free. The IRS issues it through irs.gov in roughly fifteen minutes of form-filling. Any service charging you for an EIN is charging you for a form you could have filed yourself, which is sometimes worth it and sometimes not, but it is not a government cost.

The recurring fees are where the budget actually lives

A registered agent runs $125 to $200 a year at the middle of the market. You can find commodity agents at $50 and full-service agents north of $300. For a first entity, pay toward the higher end; the premium buys same-day forwarding of service of process and a reminder system for annual filings, and the downside of a missed service of process is a default judgment.

Annual state fees vary more than formation fees do. Delaware charges a flat $300 annual LLC tax, due June 1, with no proration and a $200 penalty for missing the deadline. California charges the $800 annual franchise tax under Revenue and Taxation Code section 17941, due the 15th day of the fourth month after formation, plus a $20 Statement of Information fee within 90 days of formation and every two years after. A California LLC formed in September owes the $800 by January 15 of the following year whether it has billed a dollar or not. Most other states sit between a $25 and $150 annual report.

Bookkeeping is the line founders underestimate. Software at the QuickBooks or Wave or Xero tier runs $25 to $50 a month, or $300 to $600 a year, if you do the data entry yourself. A CPA to prepare the federal return and any state returns for a single-member LLC runs $400 to $900 in 2024, and the range widens fast if there are multiple members, multiple states, or an S-corp election. General liability insurance for a small service business runs $500 to $1,200 a year, depending on industry and limits. If you sell a product or advise clients on money, add professional liability on top.

BOI is the new line item

The Corporate Transparency Act's Beneficial Ownership Information report is new in 2024 and catches almost every domestic LLC that is not specifically exempted. Entities formed before January 1, 2024 have until January 1, 2025 to file the initial BOI report. Entities formed during 2024 have 90 days from formation. The filing itself is free on FinCEN's BOI E-Filing system at boiefiling.fincen.gov. If you file it yourself, the cash cost is zero and the time cost is about twenty minutes, assuming you have your driver's license or passport handy for the beneficial owner images.

If you hire a service, expect $99 to $299. That is the going rate at the incorporation-service tier in 2024. Lawyers charge more, sometimes considerably more, because they include an analysis of whether your entity actually qualifies for one of the 23 exemptions and whether your ownership structure creates reporting obligations for intermediate entities. For a straightforward single-member LLC with a U.S.-citizen owner, the self-filed route is fine.

The operating agreement question

No state requires you to file an operating agreement with the Secretary of State. Several states (California, Delaware, Maine, Missouri, New York) require LLCs to have one, filed or not. In practice, every LLC should have one, because the default rules the state imposes when you do not are almost never what you would have chosen.

A template operating agreement is free from any one of a dozen sources, and for a single-member LLC with no outside capital, a template is fine for year one. A lawyer-drafted operating agreement runs $500 to $2,000 for a single-member or simple multi-member LLC, and the premium is worth it the moment there are two members with different contributions, a vesting schedule, a right of first refusal, or anything resembling a buyout provision. Founders who use a template for a two-member LLC and fall out eighteen months later pay the legal bill at a different rate.

Sales tax after Wayfair

If you sell anything taxable across state lines, the post-Wayfair economic nexus regime matters. South Dakota v. Wayfair, 138 S. Ct. 2080 (2018), held that a state may require an out-of-state seller to collect and remit sales tax based on economic activity in the state, without physical presence. Every state that collects sales tax now has some version of an economic-nexus threshold, typically $100,000 in sales or 200 transactions in a calendar year, though the specifics vary.

For a service LLC that never ships a taxable good, this is usually nothing. For an e-commerce LLC, budget for a sales-tax registration in each state where nexus triggers, plus either software (TaxJar, Avalara, roughly $20 to $50 a month at the small-seller tier) or a CPA-hours surcharge to handle filings. This is the single largest variable line item in year one and the one most likely to sneak up on a founder who thought sales tax was a retailer problem.

The year-one number

Pulling it together for a typical single-member service LLC in a low-cost state: $50 to $300 in formation fees, $125 to $200 for a registered agent, zero for the EIN, zero to $299 for BOI depending on whether you self-file, zero to $2,000 for the operating agreement depending on whether you use a template, $25 to $150 in annual state fees, $300 to $600 in bookkeeping software or equivalent, $500 to $1,200 in general liability insurance, and $400 to $900 for a CPA at tax time.

The honest range for a first-year single-member service LLC that self-files BOI, uses a template operating agreement, and runs commodity bookkeeping software is $700 to $1,500. Add the $99 BOI service if you pay for it, and the range becomes $799 to $1,599. Add $820 immediately if you form in California, because the $800 franchise tax and the $20 Statement of Information fee land in month four whether you have revenue or not, and the California year-one floor is closer to $1,600 than $800.

The founders who blow the budget do it in three places: the registered-agent upgrade they skipped and regretted, the operating agreement they templated when they should have paid a lawyer, and the sales-tax registrations they discovered in year two along with the back taxes.

Rule of thumb: budget $1,500 for a low-cost state and $2,500 for California, and if you come in under, bank the difference for the CPA.

Sources

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