You’re ready to form your business.
You’ve researched the filing fee. You think you know what it costs.
Then the surprises hit.
Publication fees. Registered agent fees. Annual report fees. Franchise taxes. Business licenses. Expedited processing.
Suddenly, your $50 formation costs $500. Or more.
This doesn’t have to happen.
This guide shows you the true cost of formation. Every fee. Every hidden cost. Every ongoing expense. Broken down by state and entity type.
No surprises. No hidden fees. Just honest numbers.
Read this. Understand the real costs. Budget accurately.
Key Takeaways
- Formation costs include more than just filing fees—publication, registered agent, business licenses, and expedited processing all add to the total
- Ongoing costs like annual reports, franchise taxes, and registered agent services can cost hundreds per year depending on your state
- Some states have unique requirements like New York's publication requirement that can add $1,000+ to initial formation costs
- Hidden costs often include business licenses, EIN application (free), operating agreement preparation, and compliance tracking systems
- The true first-year cost of formation can range from $100-$2,000+ depending on state, entity type, and service choices
Table of Contents
Why Costs Surprise Founders
Most founders only research the filing fee. They see “$50 to form an LLC” and think that’s the total cost.
It’s not.
Formation involves multiple costs:
- State filing fees
- Publication requirements (some states)
- Registered agent fees
- Business licenses
- Expedited processing (optional)
- Operating agreement or bylaws
- EIN application (free, but takes time)
Then there are ongoing costs:
- Annual reports
- Franchise taxes
- Registered agent service (ongoing)
- Business license renewals
- Compliance tracking
The result: Founders budget for $50 and end up paying $500+. Or they skip necessary steps to save money and face penalties later.
This guide fixes that. You’ll know every cost before you start.
Initial Formation Costs
Here’s what you’ll pay upfront to form your business:
State Filing Fees
What it is: The fee to file your Articles of Organization (LLC) or Articles of Incorporation (Corporation) with your state.
Cost range: $40-$500 depending on state
- Lowest: Kentucky, Arkansas ($40-$50)
- Highest: Massachusetts, California ($500+)
- Average: $100-$150
When you pay: At the time of filing
Pro tip: Filing fees are non-negotiable. Every state charges them. Check your state’s current fee using our state-by-state checklist.
Publication Requirements
What it is: Some states require you to publish a notice of formation in local newspapers.
States that require it:
- New York (LLCs in some counties)
- Arizona (LLCs)
- Nebraska (LLCs)
- Georgia (Corporations in some counties)
Cost range: $200-$1,500 depending on state and location
- New York: Can cost $1,000+ in some counties
- Arizona: Typically $200-$400
- Nebraska: Typically $100-$300
When you pay: Within 30-120 days after formation (varies by state)
Pro tip: Publication costs vary significantly by location. Urban areas cost more than rural areas. Check your specific county requirements.
Registered Agent Fees
What it is: The cost of a registered agent service (or your time if you serve as your own).
Cost range:
- Professional service: $50-$300 per year
- Yourself: Free (but exposes your address and requires availability)
When you pay: Annually for professional services
Pro tip: Professional registered agent service provides privacy and reliability. See our registered agent guide for details.
Business Licenses
What it is: Licenses required to operate your business legally.
Cost range: $0-$500+ depending on industry and location
- Some businesses: No licenses required
- Professional services: $100-$500
- Regulated industries: $500+
When you pay: Before starting operations
Pro tip: License requirements vary by industry, state, and locality. Research your specific requirements. See our state-by-state checklist for guidance.
Expedited Processing
What it is: Optional faster processing of your formation documents.
Cost range: $25-$200 depending on state
- Standard processing: 5-10 business days (included in filing fee)
- Expedited processing: 1-3 business days (additional fee)
When you pay: At the time of filing (optional)
Pro tip: Expedited processing is worth it if you have time-sensitive needs. See our timing guide for when it makes sense.
Operating Agreement or Bylaws
What it is: Legal documents that govern how your business operates.
Cost range:
- DIY templates: $0-$50
- Professional preparation: $200-$1,000
- Attorney-drafted: $500-$2,000+
When you pay: After formation (but should be done immediately)
Pro tip: Even single-member LLCs should have operating agreements. They protect your liability shield. See our compliance mistakes guide for why this matters.
EIN Application
What it is: Employer Identification Number from the IRS.
Cost: Free
When you pay: After formation (same day recommended)
Pro tip: EIN is free and takes minutes online. Don’t pay for EIN services—do it yourself at IRS.gov.
Hidden Costs Breakdown
These costs surprise founders because they’re not obvious upfront:
Name Reservation Fees
What it is: Optional fee to reserve your business name before filing.
Cost range: $10-$50 depending on state
When needed: If you want to reserve a name before you’re ready to file
Pro tip: Most founders don’t need name reservations. Just check availability and file immediately.
Amendment Fees
What it is: Fees to correct errors or update information after formation.
Cost range: $25-$150 depending on state
When needed: If you make mistakes on your formation documents
Pro tip: File correctly the first time to avoid amendment fees. See our formation paperwork guide to understand every field.
Reinstatement Fees
What it is: Fees to restore good standing if you lose it.
Cost range: $50-$500+ depending on state and circumstances
When needed: If you miss annual reports or lose good standing
Pro tip: Stay compliant to avoid reinstatement fees. See our compliance mistakes guide for common errors.
Business Bank Account Setup
What it is: Costs associated with opening a business bank account.
Cost range: $0-$200 depending on bank
- Some banks: Free
- Others: Monthly fees or minimum balances
- Initial deposit: Varies
When needed: Immediately after formation
Pro tip: Shop around for business bank accounts. Many banks offer free accounts for new businesses.
Accounting Software
What it is: Software to track business finances and maintain records.
Cost range: $0-$50+ per month
- Free options: Available
- Paid options: $10-$50+ per month
When needed: From day one
Pro tip: Good record-keeping protects your liability shield. Start from day one. See our compliance mistakes guide for why this matters.
Ongoing Costs
Formation isn’t a one-time cost. You’ll have ongoing expenses:
Annual Reports
What it is: Reports you must file annually to maintain good standing.
Cost range: $0-$400+ depending on state
- Some states: Free
- Others: $10-$400+
- Frequency: Annual or biennial
When you pay: Annually (or biennially in some states)
Pro tip: Annual report deadlines vary by state. Track them carefully. See our state-by-state checklist for deadlines.
Franchise Taxes
What it is: Taxes some states charge for the privilege of operating as a business entity.
Cost range: $0-$800+ depending on state and business size
- Some states: No franchise tax
- Others: Flat fees ($50-$800)
- Some: Based on revenue or capital
When you pay: Annually or biennially
Pro tip: Franchise tax requirements vary significantly by state. Check your state’s requirements. See our state-by-state checklist for details.
Registered Agent Service (Ongoing)
What it is: Annual cost of professional registered agent service.
Cost range: $50-$300 per year
When you pay: Annually
Pro tip: Professional registered agent service provides privacy and compliance tracking. See our registered agent guide for details.
Business License Renewals
What it is: Annual renewal of business licenses and permits.
Cost range: $0-$500+ depending on licenses
When you pay: Annually (varies by license type)
Pro tip: Track all license renewal dates. Missing renewals can result in penalties.
Compliance Tracking
What it is: Systems or services to track compliance deadlines.
Cost range:
- DIY (calendar): Free
- Compliance software: $10-$50+ per month
- Professional service: Included with registered agent service
When you pay: Monthly or annually
Pro tip: Professional registered agent services often include compliance tracking. See our registered agent guide for details.
State-by-State Cost Overview
Formation costs vary significantly by state. Here’s a general overview:
Low-Cost States
States with lower formation costs:
- Kentucky: $40 filing fee
- Arkansas: $50 filing fee
- Oklahoma: $50 filing fee
- Mississippi: $50 filing fee
Total first-year cost: $100-$300 typically
High-Cost States
States with higher formation costs:
- Massachusetts: $500 filing fee
- California: $70 filing fee + $800 annual franchise tax
- New York: $200 filing fee + $1,000+ publication (some counties)
- Texas: $300 filing fee
Total first-year cost: $500-$2,000+ typically
Moderate-Cost States
States with moderate formation costs:
- Most states: $100-$150 filing fee
- Average ongoing costs: $100-$300 per year
Total first-year cost: $200-$500 typically
Pro tip: Check your specific state’s current fees. See our state-by-state checklist and Secretary of State directory for current information.
Entity Type Cost Differences
LLCs and Corporations have similar costs, but some differences:
LLC Costs
Typical costs:
- Filing fee: $40-$500
- Publication (if required): $200-$1,500
- Registered agent: $50-$300/year
- Annual reports: $0-$400/year
- Franchise taxes: Varies by state
Total first-year: $100-$2,000+ depending on state
Corporation Costs
Typical costs:
- Filing fee: $50-$500
- Publication (if required): $200-$1,500
- Registered agent: $50-$300/year
- Annual reports: $0-$400/year
- Franchise taxes: Varies by state
- Bylaws preparation: $200-$1,000
Total first-year: $150-$2,500+ depending on state
Difference: Corporations typically cost slightly more due to more complex governance requirements (bylaws, corporate records, etc.).
Pro tip: See our LLC vs Corporation decision tree to choose the right structure for your situation.
Budgeting Your Formation
Here’s how to budget accurately:
Step 1: Research Your State’s Costs
What to find:
- Filing fee
- Publication requirements (if any)
- Annual report fees
- Franchise tax requirements
- Business license requirements
Resources:
Step 2: Add Initial Costs
Initial costs to include:
- State filing fee
- Publication (if required)
- Registered agent (first year)
- Business licenses
- Operating agreement or bylaws
- Expedited processing (if needed)
Step 3: Add Ongoing Costs
Ongoing costs to include:
- Annual reports
- Franchise taxes
- Registered agent service (annual)
- Business license renewals
- Compliance tracking (if needed)
Step 4: Add Buffer
Add 10-20% buffer for:
- Unexpected fees
- Price increases
- Mistakes that require amendments
Step 5: Create Your Budget
Example budget (moderate-cost state, LLC):
- Filing fee: $150
- Publication: $0 (not required)
- Registered agent: $150/year
- Business licenses: $100
- Operating agreement: $100
- Total first-year: $500
- Ongoing annual: $250
Pro tip: Budget for the full first year, not just formation. Ongoing costs add up quickly.
Cost-Saving Strategies
Here are ways to reduce formation costs:
Strategy 1: Form in a Low-Cost State
If you have flexibility: Form in a state with lower fees.
Considerations:
- You still need to foreign-qualify in states where you operate
- Ongoing costs matter more than initial costs
- Choose based on where you actually operate
Pro tip: For most businesses, forming in your home state is simplest and most cost-effective.
Strategy 2: Skip Expedited Processing
If you have time: Use standard processing instead of expedited.
Savings: $25-$200
Trade-off: Longer wait time (5-10 days vs 1-3 days)
Pro tip: Only use expedited if you have time-sensitive needs. See our timing guide for when it makes sense.
Strategy 3: DIY Operating Agreement
If you have simple needs: Use a template instead of professional preparation.
Savings: $200-$1,000
Trade-off: Less customization, potential legal gaps
Pro tip: Even DIY operating agreements are better than none. They protect your liability shield.
Strategy 4: Be Your Own Registered Agent
If you have a physical address: Serve as your own registered agent.
Savings: $50-$300/year
Trade-off: Exposes your address, requires availability during business hours
Pro tip: Professional registered agent service provides privacy and reliability. The cost is often worth it.
Strategy 5: Avoid Mistakes
File correctly the first time: Avoid amendment and reinstatement fees.
Savings: $25-$500+
How: Understand forms before filing. See our formation paperwork guide and compliance mistakes guide.
Pro tip: Prevention is cheaper than correction. Invest time upfront to avoid costly mistakes.
Your Next Steps
Don’t let hidden costs surprise you. Plan accurately.
This Week:
- Research your state’s specific costs
- Create a detailed formation budget
- Identify all required licenses and permits
Before Filing:
- Budget for initial costs
- Budget for first-year ongoing costs
- Add 10-20% buffer for surprises
After Formation:
- Track all ongoing costs
- Set reminders for annual reports and renewals
- Review costs annually and adjust budget
Need help? Check out our state-by-state checklist, our Secretary of State directory, and our formation guide to understand all requirements and costs.
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FAQs - Frequently Asked Questions About The True Cost of Formation: An Honest Breakdown by State and Entity Type
Why does a '$50 LLC' often end up costing $500 or more?
Because the filing fee is just one of many costs—publication fees, registered agent service, business licenses, operating agreements, and ongoing annual fees quickly add up.
Learn More...
The $50 advertised price is usually just the state filing fee, but formation involves publication requirements (some states), registered agent fees ($50-$300/year), business licenses ($0-$500+), and operating agreement preparation ($0-$2,000).
Then there are ongoing costs like annual reports ($0-$400+/year), franchise taxes ($0-$800+/year), registered agent renewals, and compliance tracking.
The true first-year cost of formation ranges from $100 in low-cost states to $2,000+ in high-cost states like New York or California, depending on entity type and service choices.
Which states have the highest and lowest business formation costs?
Low-cost states include Kentucky ($40 filing fee) and Arkansas ($50), while high-cost states include California ($70 fee + $800 annual franchise tax) and New York ($200 + $1,000+ publication costs).
Learn More...
Low-cost states like Kentucky, Arkansas, Oklahoma, and Mississippi have filing fees of $40-$50 with typical first-year total costs of $100-$300.
High-cost states create surprises: California charges a $70 filing fee but adds an $800 annual franchise tax, New York's publication requirement can add $1,000+ in some counties, and Massachusetts charges a $500 filing fee.
Most states fall in the moderate range with $100-$150 filing fees and first-year total costs of $200-$500.
What hidden formation costs surprise new business owners the most?
Publication requirements, amendment fees for filing mistakes, reinstatement fees for missed compliance, and ongoing costs like franchise taxes and annual reports catch owners off guard.
Learn More...
New York's publication requirement alone can add $1,000+ to formation costs—many founders in affected states don't budget for this.
Amendment fees ($25-$150) hit if you make mistakes on formation documents, and reinstatement fees ($50-$500+) apply if you lose good standing by missing annual reports.
Business bank account fees, accounting software ($10-$50/month), and name reservation fees ($10-$50) are additional costs that aren't obvious upfront.
The EIN application is actually free through the IRS—don't pay a service to do it for you.
What ongoing annual costs should you budget for after forming your business?
Annual reports ($0-$400+), franchise taxes ($0-$800+), registered agent service ($50-$300), business license renewals, and compliance tracking are recurring costs.
Learn More...
Annual reports are required in most states to maintain good standing, with fees ranging from free to $400+ depending on the state.
Franchise taxes are charged by some states for the privilege of operating as a business entity—California's $800 minimum is the most notable example.
Registered agent service runs $50-$300 per year for professional service, which provides privacy, reliability, and often compliance tracking.
Budget for the full first year and ongoing annual costs, adding a 10-20% buffer for unexpected fees, price increases, or corrections.
How do LLC formation costs compare to Corporation formation costs?
Costs are similar for filing and basic requirements, but corporations typically cost more due to additional governance requirements like bylaws and corporate records.
Learn More...
Both LLCs and corporations share similar costs for filing fees ($40-$500), publication if required ($200-$1,500), registered agent ($50-$300/year), and annual reports.
Corporations add costs for bylaws preparation ($200-$1,000), more complex corporate record-keeping, and potentially higher ongoing compliance requirements.
Typical first-year costs: LLCs run $100-$2,000+ depending on state, while corporations run $150-$2,500+ due to the additional governance structure.
What are the best strategies to reduce business formation costs?
Form in your home state, skip expedited processing if you have time, use DIY operating agreement templates, and file correctly the first time to avoid amendment fees.
Learn More...
Forming in your home state is usually cheapest because you avoid foreign qualification fees in states where you actually operate.
Standard processing saves $25-$200 over expedited—only pay for speed when you have genuinely time-sensitive deadlines.
DIY operating agreement templates save $200-$1,000 over attorney-drafted versions, though simpler businesses benefit most from this approach.
Filing correctly the first time prevents $25-$500+ in amendment fees—invest time upfront understanding every form field rather than paying to fix mistakes later.
The EIN application is free on IRS.gov, so never pay a third-party service for this.
Sources & Additional Information
This guide provides general cost information. Specific fees vary by state and change over time. Always check your state's current fees before filing.
For state-specific fee information, see our State-by-State Checklist.
For Secretary of State contact information, see our Secretary of State Directory.
For help understanding formation requirements, see our Formation Paperwork Guide.
