How Much Does Small Business Filing Cost?

The adage “it takes money to make money” couldn’t be more accurate regarding starting a small business. Before officially opening your doors (or digital doors), it’s a good idea to incorporate your company. 

There are several reasons for ensuring your company is official. By incorporating, you protect your assets from creditors. There are also many tax benefits to forming an LLC. Since the corporation is considered its own entity, the owner only pays taxes on profits paid via salary, bonuses, or dividends. The corporation itself pays taxes on profits at a corporate rate.

When you incorporate, you create a business entity with its own tax identification number. This makes it easier to build credit and raise capital for the business. Most investors prefer to invest in an LLC rather than a sole proprietorship. Also, you can’t transfer sole proprietorships to third parties, but you can with a corporation. That makes it possible to sell your business if you choose to do so.

Incorporation costs depend on the initial fees to start or form an LLC in your state and any ongoing costs to keep the company in compliance. These fees vary across the country by state and are subject to change. 

Filing Company Name

To file your small business, you require a unique company name that isn’t already in use in your state. Every state has requirements for company names. If you’re planning on going nationwide, choosing a name that’s not in use even outside your state is best.

Additionally, suppose you will provide services under your LLC with a name other than the one listed on your articles of incorporation. In that case, you also need to file for a fictitious business name. Depending on your state, this may also be called a DBA (Doing Business As).

Publication of Statement of Formation

Some states, such as New York, Arizona, and Nebraska, require that you publish a statement of formation. Fees can range from $50 to more than $100, depending on the state and county. Generally, you need to file proof of publication with the state once the statement is published.

Filing Articles of Incorporation

To become official, you must complete and file articles of incorporation with your Secretary of State’s office. Depending on the state and company type you’re forming, this document may also be called a Certificate of Incorporation or Articles of Organization. Filing fees can get set based on the number of authorized shares. Payments for articles of incorporation generally range from $50 to $300.

Trademark Registration

Registering a trademark will protect your company name, slogan, and logo from use by any other company. It’s possible to file for either state or federal trademark registration. To register your product with the federal government, you would do so at the United States Trademark and Patent office. Filing for a trademark ranges from $500 to $2,000 or more.

Foreign Corporation Registration

If you’re doing business in other states besides where you have filed, you may need to register your business as a foreign corporation in those other states. The fees range from $50 to $750, depending on the state.

Franchise Tax Prepayment

Depending on your state, you may owe a franchise tax fee when you first incorporate. Such fees range from $150 to $800. Not all states charge this tax, but some do.

Other Government Filing Fees

You may owe regional or local governmental filing fees. How much you must pay varies by state and the type of business that you’re incorporating. Business licenses and permits are such expenses. Depending on your location, you may need a business license or permit to operate in your county or city. Fees are generally required when you get a business license. You will also likely have to renew your license by paying an annual fee and refiling each year.

Bylaw Creation

When you incorporate, you are required to draw up bylaws that include the internal rules of your corporation. These outline policies and procedures of the board of directors and the responsibilities and rights of directors and shareholders. 

While you don’t file these bylaws with your Secretary of State, you still need them on file. You may need to pay an attorney to draft up the document for your company or pay a document service.

Ongoing Costs of Maintaining Your LLC

In addition to considering the initial costs of forming an LLC, it’s also a good idea to add recurring fees. These vary from state to state. Factor into your budgeting the following necessary annual expenses.

Annual Franchise Tax

States with franchise tax fees generally require that you pay yearly. The most expensive annual franchise tax fee currently is $800 in California. In Delaware, the annual franchise tax fee is $300.

Annual Reporting Fees

Most states require that you file an annual report for your LLC. With those reports often come fees. This ranges from $6.75 biennially in Nebraska to $300 per year in Washington DC. Some states, such as Minnesota and Idaho, don’t have annual reporting fees.

While the fees to start a business can add up, the financial investment is well worth it. You protect your company and yourself by paying the necessary costs from the start and keeping your business up-to-date and compliant. This helps ensure your venture’s long-term success.

What’s the Best State to Incorporate In?

Once you have researched all the varying costs and requirements per state, it’s essential to weigh the pros and cons of where you’d like to incorporate your business. 

One factor to consider, along with each state’s fees, is the current growth of new businesses in the area. It’s beneficial to understand a state’s volume of business formations, which industries are prevalent there, and if their number of incorporations is rising or declining yearly before deciding where you’d like to form your business.

Finding the sweet spot for your business financially and situationally will set you up for success in a state that meets your needs.

At Swyft Filings, we make starting your own company a breeze. We’ll help you sort through the many tasks and filing fees so that you can focus on what you do best, which is running your company. Check out how quick and easy it is to start an LLC with Swyft Filings.