Starting a business is an exciting endeavor, but one that requires careful financial planning—especially when it comes to registering your company. The process of company registration involves more than just filing paperwork with the government; there are various fees and additional expenses that entrepreneurs need to consider to ensure they’re fully prepared.
To help you navigate the financial aspects of starting your business, here’s a breakdown of the typical costs involved in company registration and what entrepreneurs should budget for.
1. State Filing Fees
The first and most immediate cost when registering your company is the state filing fee. This fee varies depending on your business location and the type of entity you choose (LLC, corporation, etc.). For example, filing fees for forming an LLC can range from as low as $50 in states like Kentucky to as high as $500 in states like Massachusetts. Some states also require annual renewal fees or franchise taxes, which can add to your long-term costs.
Examples of filing fees:
LLC Filing Fees: $50 to $500 (varies by state)
Corporation Filing Fees: $100 to $500
Non-Profit Filing Fees: $0 to $300 (depending on state requirements)
Make sure to check your state’s specific requirements to get an accurate estimate of your filing costs.
2. Business Name Registration
If you choose to operate under a name other than your personal name (also known as a “Doing Business As” or DBA), you may need to register this name with the state or local authorities. The cost of registering a DBA can range between $10 and $100, depending on your location. Registering a DBA is typically less expensive than forming an LLC or corporation, but it’s an important step if you want to ensure legal protection for your business name.
3. Legal and Professional Fees
While it is possible to handle the registration process yourself, many entrepreneurs choose to hire a lawyer or use professional services to ensure all legal aspects are handled correctly. Legal professionals can help you draft important documents such as operating agreements for LLCs or corporate bylaws for corporations, ensuring that you’re compliant with state and federal laws.
Hiring an attorney or professional service can cost anywhere from a few hundred to several thousand dollars, depending on the complexity of your business and the level of assistance you require. If you need ongoing legal support, factor in monthly retainers or service fees.
Approximate legal fees:
DIY Filing Services: $50 to $300
Basic Legal Assistance: $500 to $1,500
Comprehensive Legal Support: $2,000+
4. Operating Agreements and Corporate Bylaws
Some business structures, like LLCs and corporations, are required to have operating agreements or corporate bylaws in place to outline ownership, management, and operational procedures. While these documents may not be required in every state, they are crucial for ensuring smooth business operations and avoiding disputes between partners or shareholders.
If you choose to work with an attorney to draft these agreements, you should budget for additional legal fees, typically ranging from $200 to $1,500 depending on complexity.
5. Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a tax ID number that your business will need for tax purposes, hiring employees, and opening a business bank account. Fortunately, the IRS issues EINs for free, and you can easily apply for one online. While there’s no cost directly associated with obtaining an EIN, it’s an essential step in the registration process.
6. Business Licenses and Permits
Depending on your industry and location, you may need specific licenses or permits to legally operate your business. These costs vary greatly depending on the type of business and jurisdiction. For instance, a foreign company carrying on business in australia may have different licensing requirements compared to starting a restaurant, where health permits, food service permits, and liquor licenses can significantly add to your startup costs.
Some licenses are a one-time cost, while others need to be renewed annually. On average, business license fees range from $50 to $400, but can be significantly higher for certain industries.
Example permit fees:
General Business License: $50 to $150
Health Permits: $100 to $1,000 (depending on state and industry)
Specialized Licenses (e.g., Liquor): $300 to $10,000 (varies by jurisdiction)
7. Registered Agent Fees
If you’re forming an LLC or corporation, most states require you to designate a registered agent—a person or entity that will receive legal and tax documents on behalf of your company. While you can serve as your own registered agent, many businesses choose to hire a third-party service to fulfill this role.
Registered agent fees typically range from $100 to $300 per year, depending on the service provider.
8. Franchise Taxes and Annual Report Fees
Some states impose an annual franchise tax on LLCs and corporations. These taxes are typically based on the company’s income or net worth, but some states charge a flat fee. Additionally, many states require businesses to file annual reports and pay renewal fees to stay in good standing.
Franchise taxes can range from as low as $100 per year to several thousand dollars, depending on the state and business size. Make sure to include these ongoing expenses in your budget when planning for your company registration.
9. Publication Requirements
In some states, businesses are required to publicly announce their formation in local newspapers as part of the registration process. This requirement is more common for LLCs and corporations, particularly in states like New York. The cost of meeting the publication requirement can range from $50 to over $1,000, depending on the publication and location.
10. Insurance
While not always part of the registration process, business insurance is an essential cost that you should account for early in your budgeting. Business insurance protects your company from potential liabilities, such as lawsuits, property damage, and employee injuries.
Depending on the nature of your business, you may need general liability insurance, workers’ compensation, or industry-specific coverage. Navigating workers’ compensation claims can be complex, so partnering with a Milwaukee workers compensation lawyer ensures you understand your responsibilities and are prepared to address any legal challenges. Insurance premiums can range from a few hundred to several thousand dollars annually, depending on the coverage needed and the size of your business.