State Fees for LLCs and Corporations

April 13, 2006

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When comparing the relative merits of the limited liability company (LLC) and corporation, simplicity/low cost and tax implications can be determining factors in choosing the organizational form for your business. State formation renewal fees are also an important consideration.

Both the corporation and the LLC are creations of state law. If your company conducts business across state lines, or outside your state of formation, you'll need to go through the process of foreign qualification and the selection of a registered agent. At this point, state fees sometimes become a consideration.

State fees to form an LLC are usually lower than the fees charged to form a corporation.

In Connecticut, the corporate fees are $275 for formation and $75 for annual renewal, while the LLC fees are only $60 and $10, respectively.

The fee structure in Connecticut is consistent with the intent of LLC law, which, in part, is to make the LLC a lower-cost alternative to the corporation.

See our table comparing the fees charged by each state for forming an LLC and a corporation.

However, this is not always the case. Some states charge fees for forming and renewing an LLC that are significantly higher than what is charged for a corporation. These states seem to have completely distorted what is supposed to be a principal advantage of the LLC over the corporation--low cost of formation and operation. Nevertheless, it is the law.

In Massachusetts, the fees for forming and renewing (annually) a corporation are $275 and $125 respectively, while for an LLC, there is a $500 formation fee and a $500 annual renewal fee.

In any event, in most states, the fees charged for the LLC are lower than those charged for a corporation. Further, in Nevada, one of the key states for business formation, the fees charged by the state are the same for the formation of a corporation and an LLC ($75).

If you live in one of the states that charge higher fees for forming and renewing an LLC than a corporation, you may want to consider forming a corporation, rather than an LLC, at least where fees are an important deciding factor. However, the fee savings may be misleading.

The small business owner intending on forming a corporation should usually form it as a statutory close corporation. However, this form is not legally recognized in Massachusetts and some other states that charge high LLC fees. So, the fee for forming the statutory close corporation out of state, plus the fee for registering the corporation in the home state or wherever it will be doing business, will probably be equivalent to the fee charged by the home state for an LLC there.

Special Publication Fees.

LLCs. While the small business owner should consider that other factors may, in fact, be more important than the relative fees charged, nevertheless, special note should be made of publication fees that three specific states charge when an LLC is formed or when a foreign LLC is registered.

New York, Nebraska and Arizona require that an LLC publish the information from its articles of organization in a newspaper. For example, in New York, this information must be published once per week, for a total of six weeks, in two different newspapers. This can cost anywhere from $1,000 to $2,000, and this may make the LLC a cost-prohibitive option in these states.

Similarly, any out-of-state LLC that will be doing business in one of these states must satisfy the same publication requirements, with information from its registration. This cost can be expected to be in the same range, as described above.

Corporations. Note that four states, Arizona, Georgia, Nebraska and Pennsylvania, require that corporations publish the information in the articles of incorporation. Thus, the publication fees are not a factor in Arizona and Nebraska.

Work Smart

When a small business will be formed in one of these states, or will be formed out of state, but will be doing business in one of these states, consideration should be given to forming a statutory close corporation, as opposed to an LLC. At the very least, the small business owner who intends on using an LLC in one of these states should first attempt to gauge the cost of publication, by contacting state officials, before the entity is formed or registered to do business in the state.