Entrepreneurs Battle High LLC Fees

Date: May 15, 2014

Small business owners are shelling out hundreds of dollars to become incorporated.

After launching Zanade Enterprises LLC, a professional development firm in Staten Island, N.Y., Zanade Mann waited three years before she became incorporated. Her reason: the stiff cost.

The fee to form an LLC in New York is $200. On top of that, the state requires that businesses announce LLC formations in local publications. Depending on the county, the total cost can reach as high as $1,500, says Nellie Akalp, CEO of business document filing provider CorpNet.com in Westlake Village, Calif.

Mann’s county required her to announce the formation of her LLC once a week for six successive weeks in two newspapers, which cost her nearly $900. “It was a big blow to my pocketbook,” she says.

State Fees Vary

Akalp, who has formed more than 100,000 corporations and LLCs throughout the United States, says that most of her clients who want to form LLCs in New York opt for an S Corp instead after learning about the state’s mandate. But New York isn’t the only state whose fees are attracting attention. Illinois’ and Massachusetts’ fees both start at $500.

Generally, LLC filing fees range from $70 to $125, but they tend to be higher in more populous states. Mississippi, Michigan and Colorado are at the other end of the spectrum, each charging a mere $50, Akalp says.

Possible Alternatives

New York and Illinois are both considering changing their requirements to address complaints, an encouraging sign for entrepreneurs.

In the meantime, review your state’s filling options to save money. Online and paper filing costs may differ, and time could also be a factor. California, for instance, charges less if you’re willing to wait six months for your documents. Careful, though: California also has a minimum franchise tax of $800 if you hold an LLC there.

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