Understanding the true cost of starting a business in the United States requires looking far beyond the initial filing fee. While the government fee to form an LLC or corporation ranges from as low as $40 in Kentucky to over $500 in Massachusetts, the total first-year cost includes registered agent services, operating agreement preparation, EIN acquisition, business licenses, bank account setup, and in many states, franchise taxes and annual report fees that begin accruing immediately.
The decentralized nature of US business formation means that costs vary dramatically depending on which state you choose, which entity type you form, and whether you handle the process yourself or hire professionals. A single-member LLC in Wyoming can be operational for under $200 in total government fees, while a Delaware C-Corporation with professional formation services, corporate kit, and first-year compliance can easily cost $2,000 to $5,000 before the business earns its first dollar.
This guide provides a comprehensive breakdown of every cost involved in starting a US business in 2026, with state-by-state filing fee comparisons, ongoing annual cost analysis, and practical guidance on where to spend and where to save.
State Filing Fees: The Starting Point
The state filing fee is the most visible cost but often the smallest component of total formation expenses. Here are the filing fees for the most popular formation states and the most populous states.
LLC Formation Fees by State
| State | LLC Filing Fee | Expedited Option | Annual Report Fee | Notes |
|---|---|---|---|---|
| Alabama | $200 | $100 (same day) | $100 (privilege tax min) | Minimum privilege tax applies |
| Arizona | $50 | N/A | $0 | No annual report required |
| California | $70 | $350 (same day) | $20 | $800 franchise tax (first year may be exempt) |
| Colorado | $50 | $50 (same day) | $10 | One of the cheapest overall |
| Delaware | $90 | $50-$1,000+ | $300 flat | $300 annual franchise tax |
| Florida | $125 | $30 (priority) | $138.75 | Includes $25 registered agent fee |
| Georgia | $100 | $100 (same day) | $50 | Annual registration required |
| Illinois | $150 | $100 (24-hour) | $75 | Annual report required |
| Kentucky | $40 | $30 (2-day) | $15 | Cheapest filing fee in the US |
| Massachusetts | $500 | $75 (expedited) | $500 | Most expensive major state |
| Michigan | $50 | $50-$1,000 | $25 | Annual statement required |
| Nevada | $75 + $150 business license | $125-$500 | $150 + license renewal | Total first-year cost is high |
| New York | $200 | $25-$150 | $9 (biennial) | Publication requirement adds $300-$2,000+ |
| North Carolina | $125 | $100 (same day) | $200 | Annual report required |
| Ohio | $99 | N/A | $0 | No annual report required |
| Oregon | $100 | $50-$100 | $100 | Annual report required |
| Pennsylvania | $125 | $100 (same day) | $70 (decennial) | Report only every 10 years |
| Tennessee | $300 per member ($50 min) | $100 | $300 per member ($50 min) | Cost scales with members |
| Texas | $300 | N/A | $0 (under threshold) | Franchise tax applies above $2.47M revenue |
| Virginia | $100 | $200 (same day) | $50 | Annual registration required |
| Washington | $200 | $50 (expedited) | $60 | Annual report required |
| Wyoming | $100 | $50-$500 | $60 (minimum) | Best overall value |
New York has a unique and often surprising requirement: LLCs must publish a notice of formation in two newspapers (one daily, one weekly) in the county where the LLC's office is located for six consecutive weeks. The cost of this publication requirement ranges from approximately $300 in upstate New York to over $2,000 in New York City boroughs. This is in addition to the $200 filing fee and makes New York one of the most expensive states for LLC formation despite its relatively modest government fees.
Corporation Formation Fees
| State | Corp Filing Fee | Expedited Option | Annual Report Fee | Notes |
|---|---|---|---|---|
| California | $100 | $350 (same day) | $25 | $800 minimum franchise tax |
| Delaware | $89 | $50-$7,500 | $175 minimum | Franchise tax based on shares/capital |
| Florida | $70 | $30 (priority) | $150 | Includes mandatory $35.00 fees |
| Illinois | $150 | $100 (24-hour) | $75 | Annual report required |
| Nevada | $75 + $150 license | $125-$500 | $150 + license renewal | Business license required |
| New York | $125 | $25-$150 | $9 (biennial) | No publication requirement for corps |
| Texas | $300 | N/A | $0 (under threshold) | Franchise/margin tax above threshold |
| Wyoming | $100 | $50-$500 | $60 (minimum) | Based on assets in state |
Registered Agent Costs
Every US business entity must maintain a registered agent in its state of formation. This is a non-negotiable, ongoing cost for any business formed in a state where the owner does not reside.
| Service Type | Annual Cost | Pros | Cons |
|---|---|---|---|
| Self (owner as agent) | $0 | Free | Must be available during business hours; home address becomes public |
| Basic registered agent service | $50-$100/year | Affordable; privacy | Limited additional features |
| Mid-range service (Northwest, Incfile) | $100-$175/year | Reliable; document scanning; mail forwarding | Moderate cost |
| Premium service (CSC Global, CT Corp) | $200-$400/year | Full compliance support; multi-state | Higher cost; designed for larger companies |
| Formation service with free first year | $0 first year | Bundled savings | Renewal rates may be higher |
Many formation services (ZenBusiness, Incfile, Northwest) offer the first year of registered agent service free when you use their formation filing service. This can save $100 to $175 in the first year. However, check the renewal rate before signing up -- some services charge significantly more after the promotional period. Northwest Registered Agent is widely regarded as offering the best combination of reliability, price ($125/year), and no-upsell approach.
EIN: Free from the IRS
The Employer Identification Number is one of the few components of business formation that is completely free. The IRS does not charge any fee for issuing an EIN. The application can be completed online at irs.gov in approximately 10 minutes, and the EIN is issued immediately upon completion.
Be cautious of third-party websites that charge $50 to $200+ to "obtain your EIN." These services simply fill out the same IRS form on your behalf. Unless you have a specific reason (such as being a foreign national who cannot use the online system), there is no reason to pay for EIN services.
Foreign applicants who do not have a US Social Security Number or ITIN cannot use the online application. They must submit Form SS-4 by fax to the IRS and typically receive the EIN within 4 to 6 weeks. Some formation services and attorneys offer to act as the third-party designee, which can expedite this process.
Operating Agreement and Bylaws
DIY (Free Templates): Numerous free operating agreement and bylaws templates are available online. These are adequate for simple single-member LLCs with straightforward operations. Quality varies significantly.
Online Legal Services: Services like LegalZoom, Rocket Lawyer, and Northwest offer operating agreement preparation for $50 to $200. These are template-based but customized with your specific information.
Attorney-Drafted: A business attorney will charge $500 to $3,000+ for a custom operating agreement, depending on complexity. This is recommended for multi-member LLCs, companies with complex ownership structures, or businesses with significant assets.
For corporations, bylaws serve a similar function. Attorney-drafted bylaws typically cost $500 to $2,000. Many formation services include basic bylaws with their corporate formation packages.
Business Licenses and Permits
Business license costs vary enormously depending on your location and industry:
| License Type | Typical Cost | Renewal |
|---|---|---|
| General business license (city/county) | $50-$500 | Annual |
| Home occupation permit | $0-$150 | Annual |
| Professional license (varies by profession) | $100-$1,000+ | Annual or biennial |
| Seller's permit / Sales tax license | $0-$100 | Varies |
| Health department permit (food businesses) | $100-$1,000 | Annual |
| Building/zoning permit | $100-$5,000+ | One-time |
| Federal licenses (FCC, ATF, DOT, etc.) | $0-$10,000+ | Varies |
Most online businesses, consultants, and service providers need only a general business license from their city or county, which typically costs $50 to $200.
Ongoing Annual Costs
The initial formation cost is just the beginning. Every business has recurring annual costs that must be budgeted for:
Minimum Annual Costs by State (Simple LLC)
| State | Annual Report | Franchise Tax | Registered Agent | Total Annual Minimum |
|---|---|---|---|---|
| Arizona | $0 | $0 | $125 | $125 |
| Colorado | $10 | $0 | $125 | $135 |
| Wyoming | $60 | $0 | $125 | $185 |
| Ohio | $0 | $0 | $125 | $125 |
| Delaware | $0 (report) | $300 | $125 | $425 |
| Florida | $138.75 | $0 | $125 | $263.75 |
| California | $20 | $800 | $125 | $945 |
| New York | $9 | $0 | $125 | $134 |
| Texas | $0 | $0 (under threshold) | $125 | $125 |
| Massachusetts | $500 | $0 | $125 | $625 |
California's $800 minimum franchise tax is one of the most significant ongoing costs for small businesses. This tax applies even if the LLC earns no revenue. Combined with the annual report fee and registered agent service, a dormant California LLC costs nearly $1,000 per year just to maintain. This is a primary reason many California-based entrepreneurs consider forming in Wyoming or Nevada, although foreign qualification in California typically triggers the franchise tax anyway for businesses operating there.
Professional Services Costs
Beyond mandatory government fees, most businesses incur professional service costs:
| Service | Annual Cost Range | Notes |
|---|---|---|
| Bookkeeping | $200-$500/month | Essential for tax compliance |
| Tax preparation (simple LLC) | $500-$1,500 | More for multi-member or complex returns |
| Tax preparation (Corporation) | $1,000-$3,000 | Corporate returns are more complex |
| Payroll service (if employees) | $40-$150/month | Required for S-Corp owner salary |
| Business insurance | $500-$5,000/year | Varies by industry and coverage |
| Legal retainer | $0-$5,000/year | As needed |
| Accounting software | $0-$600/year | QuickBooks, Xero, Wave (free) |
Total First-Year Cost Scenarios
Scenario 1: Minimal Single-Member LLC (Wyoming)
| Item | Cost |
|---|---|
| Wyoming LLC filing fee | $100 |
| Registered agent (first year free with formation service) | $0 |
| EIN (IRS, free) | $0 |
| Operating agreement (free template) | $0 |
| Business bank account (Mercury, free) | $0 |
| Total | $100 |
Scenario 2: Standard Small Business LLC (Florida)
| Item | Cost |
|---|---|
| Florida LLC filing fee | $125 |
| Registered agent service | $125 |
| EIN | $0 |
| Operating agreement (online service) | $100 |
| Business license (local) | $150 |
| Bookkeeping software (QuickBooks) | $360 |
| Tax preparation | $800 |
| Total | $1,660 |
Scenario 3: Delaware C-Corp (Startup)
| Item | Cost |
|---|---|
| Delaware incorporation fee | $89 |
| Registered agent (Delaware) | $175 |
| Foreign qualification (home state) | $100-$500 |
| EIN | $0 |
| Bylaws and organizational documents (attorney) | $2,000 |
| Stock certificates and corporate kit | $100 |
| Franchise tax (first year) | $175-$400 |
| Business bank account | $0 |
| Accounting and tax prep | $2,000 |
| Total | $2,639 - $3,464 |
Hidden Costs and Surprises
Several costs catch new business owners off guard:
Delaware Franchise Tax Calculation: Delaware corporations are subject to franchise tax calculated using either the authorized shares method or the assumed par value capital method. Startups that authorize millions of shares (standard for venture-backed companies) may receive shocking franchise tax bills if they use the default authorized shares method. Always calculate using the assumed par value method -- it almost always results in a lower tax.
California Franchise Tax on Foreign LLCs: If you form a Wyoming LLC but operate in California, you must foreign-qualify in California and pay the $800 minimum franchise tax. This eliminates most of the cost savings from out-of-state formation.
New York Publication Requirement: As noted above, this can add $300 to $2,000+ to the cost of forming a New York LLC. Failure to publish within 120 days of formation results in the LLC's authority to conduct business being suspended.
Registered Agent Renewal Rates: Some formation services offer $1 or free first-year registered agent service but charge $200+ per year thereafter. Read the renewal terms before signing up.
State Tax Nexus: If your business creates nexus (physical presence, employees, or economic activity) in multiple states, you may need to register and file tax returns in each state, multiplying compliance costs. For more on sales tax nexus, see our sales tax guide.
Cost-Saving Strategies
Form in your home state unless you have a specific reason for out-of-state formation. Avoiding foreign qualification saves $100 to $500+ in filing fees plus ongoing compliance costs.
Use formation services for routine filings. ZenBusiness, Northwest, and Incfile charge $0 to $100 for basic formation filing (plus state fees), which is significantly less than an attorney for straightforward formations.
Take advantage of free first-year registered agent offers but set a reminder to evaluate renewal costs before the promotional period ends.
Get your EIN directly from the IRS rather than paying a third-party service.
Start with a simple operating agreement template and upgrade to attorney-drafted documents when your business grows or takes on partners.
Use free accounting software (Wave) or low-cost options (QuickBooks Simple Start) until your transaction volume justifies more expensive solutions.
Consider the total cost of ownership over 5 years, not just the initial filing fee. A state with a low filing fee but high annual costs may be more expensive than a state with a moderate filing fee and no ongoing franchise tax.
For information on grants and funding that can offset startup costs, see our guide to SBA loans and small business grants. Additionally, many startup costs are tax-deductible -- review our tax deductions guide to maximize your first-year deductions.
For entrepreneurs comparing US formation costs with other jurisdictions, our guides cover the costs of starting a business in the United Kingdom, Singapore, UAE/Dubai, and Estonia.
Frequently Asked Questions
What is the cheapest state to form an LLC?
Kentucky has the lowest LLC filing fee at \(40. Other affordable states include Colorado (\)50), Iowa (\(50), Mississippi (\)50), and Arizona (\(50). However, filing fees alone do not tell the full story. Annual report fees, franchise taxes, and state income taxes can significantly change the total ongoing cost. Wyoming at \)100 filing and $60 annual report with no state income tax is often the best overall value.
Is an EIN free?
Yes. The IRS issues Employer Identification Numbers (EINs) at no cost. You can apply online at irs.gov and receive your EIN immediately. Be cautious of third-party websites that charge fees to obtain an EIN on your behalf -- the IRS process is straightforward and completely free.
What is Delaware's franchise tax?
Delaware charges an annual franchise tax that varies by entity type. LLCs pay a flat \(300 per year. Corporations pay based on either the authorized shares method or the assumed par value capital method, with a minimum of \)175 and maximum of $200,000. Many startups with large authorized share counts are shocked by high franchise tax bills if they use the default calculation method.
What are the ongoing annual costs of a US business?
Typical annual costs include: state annual report fee (\(0 to \)500 depending on state), registered agent service (\(50 to \)300), franchise tax (if applicable, \(0 to \)300+), business license renewals (\(50 to \)500), accounting and tax preparation (\(500 to \)3,000+), and state income tax filings. A simple single-member LLC in Wyoming might cost as little as $160 per year in mandatory fees.