Is setting up an LLC more expensive in California?

Find out how the cost of setting up an LLC in California compares to setting up an LLC in other US states. 

The cost of setting up an LLC varies from state to state in the US. The primary costs associated with setting up an LLC is the state filing fees, which ranges between $40 and $500, as well as annual maintenance costs which also vary depending on the state. Additionally, if you were to hire a service provider to assist you in setting up your LLC, you will incur further costs alongside your standard filing fees. 

So let’s compare the costs of setting up an LLC in California to a few other US states. To open your LLC in California you need to file your Articles of Organization form with the California Secretary of State. This state filing fee will cost you $70 (with an additional $15 in person fee) to process your document. In comparison to Georgia, where the state filing fee to process your Articles of Organization form is $100, and in New York where it is $200, opening an LLC in California sounds reasonable, does it not? Alternatively, if we consider the filing fees of Colorado and Arkansas which is $50, and Delaware and Indiana where it is $90 and $95 respectively, I think California’s filing fee of $70 is not expensive in the slightest. You should also consider looking at the fees associated with setting up an LLC in other states, which are not required in California; this will also help oura comparison. One such example is the Publication Fee of New York, Nebraska and Arizona, costing anywhere between $20-$2000 depending on the state and publishing costs of individual news outlets. Alabama also requires a Name Reservation Fee of $10-$28 to reserve your LLC’s name; in other states such as California, reserving a name and incurring those fees is entirely optional. So if we look at the basic costs of setting up an LLC in California, in comparison to the basic as well as additional costs of setting up an LLC in other states, I’d say an LLC in California is definitely less expensive.

Let’s not forget there are additional costs

However, let us not forget there are additional costs associated with opening an LLC in California. If you want to make use of a professional service to ensure the filing of your LLC is done correctly, you will incur additional fees. But according to TRUiC, you do not have to spend hundreds of dollars, using online service instead of a business attorney will only add an additional $39-$79 depending on your service provider. Other add-on services also include purchasing an Operating Agreement, prices ranging from $40-$99, and the registration fee of obtaining an EIN (Employer Identification Number), which also ranges from $60-$70 in California. The costs of business permits and licences must also be taken into account and vary from state to state. These costs are also dependent on the industry and geographical location of your LLC. 

Is it all about the costs?

Setting up an LLC in California also has its minor benefits besides the relatively low start-up costs. Firstly, as a LLC owner, you are afforded personal liability protection, which will, in the event that your LLC is sued or incurs losses, prevent the use of your personal assets to pay off the liabilities your LLC has incurred. This personal liabilities protection is very attractive and even preferred to individuals as well as corporate entities. Secondly, setting up your LLC in California will allow for what is referred to as a ‘pass-through taxation’, so as an LLC owner you would not have to file for a corporate tax return and double taxation is avoided. With such benefits, and the relatively low costs associated with setting up an LLC in California, why not set up an LLC in California?