Do LLCs pay taxes?
Technically, no, LLCs don’t pay taxes to the state or federal government. This is because LLCs have what’s called “passthrough taxation”.
Pass-through taxation means that the tax-paying responsibility passes through the business structure (the LLC) to the business owner(s).
Then the business owner(s) then pay taxes on any business income generated by the LLC on their individual income taxes (Form 1040).
The only exception is for LLC owners who choose to have their LLC taxed as a C-Corporation. However, this is rare.
Do I have to pay LLC fees every year?
That depends. A few states don’t require LLCs to pay annual LLC fees in order to keep your business entity in good standing.
However, most do. And if your state does require LLCs to pay fees each year, you must pay the annual fees. Otherwise the state can shut down your LLC – and you can lose your liability protection.
You may also have to pay fees at the state or local level, like business license renewal fees.
No, it isn’t possible to set up an LLC entirely for free. Every Limited Liability Company must pay the state filing fees and any associated ongoing costs (like an annual filing fee, franchise tax, or business license filing fees).
That said, you can learn how to form an LLC yourself with our free, step-by-step guides.
How do you avoid LLC fees?
Unfortunately, you can’t avoid most LLC fees. While state fees vary widely, all states require a filing fee to form an LLC. And most states require LLC owners to pay ongoing fees – like an annual fee to keep their LLC in good standing.
Additionally, many state and local laws require LLC owners to get a business license.
Which state is the cheapest to open an LLC?
The cheapest state to open an LLC is Montana.
That said, you should only open an LLC in Montana if you live in that state, or do business there.
While Montana may seem like a business friendly state due to their tax laws, those tax advantages only apply if you live there or do business there. Otherwise, you’ll have to register your LLC twice: once as a domestic LLC in Montana, and again as a foreign LLC where you live/do business.
That means you will also have to pay annual fees in both states. And you may have to pay for 2 Registered Agent Services. You may also need to pay for a business license at the state and local levels in both states.
The costs add up quickly and you end up spending more money on your business instead of saving money.
What’s the cheapest way to start an LLC?
You can get an LLC cheaply by filing your formation documents yourself.
You’ll also save money by being your own Registered Agent, and using our free LLC Operating Agreement template.
By forming your LLC yourself with LLC Banks, by their own Registered Agent, and using our Operating Agreement template, you can save over $400.
