How to Use a Free LLC Startup Service

Why Do States Charge a Fee to Start an LLC?

Entrepreneurs with the freedom to move anywhere to start their business naturally wonder what states allow you to do so for free. After all, with all the talk out there about being a business-friendly state, certainly at least one state offers free LLC formation, right?

No, the reality is that LLC state fees are about more than just generating revenue. If someone could form a free LLC with no state fees, there would be little to stop someone from registering an unlimited number of companies. Finding a name for your LLC would quickly resemble the exasperation of finding a domain name for your website. Except since states don’t allow closely related names that are likely to mislead the public, it would actually be much worse.

So How Much Does it Cost to Start an LLC?

Assuming you use a free LLC formation service like Bizee, you’ll pay between $40-$500 with Kentucky and Massachusetts being the cheapest and most expensive states, respectively. Here’s another quick way to know how your state fees compare with the rest of the country:

• About a third of U.S. states have LLC formation fees under $100.

• About a third of U.S. states have LLC formation fees between $100-$149.

• And about a third of U.S. states have LLC formation fees of $150 or more.

That said, nearly all states with low formation fees have higher franchise and income taxes on the back end. Technically the cheapest state, Kentucky imposes both a minimum franchise tax and personal income tax on pass-through income. Many Kentucky LLC owners find their true ownership costs are higher, even in the very first year, than many counterparts in other states.

This is also why Wyoming and South Dakota—with their modest LLC formation fees, zero income tax, and minimal franchise taxes—are known for being the lowest cost LLC states for owners who have true flexibility in choosing their business location.

How Much Time Does it Take to Form an LLC?

We recognize most new business owners are trying to stretch their startup funds as much as possible. Since LLC formation services are free, however, there’s really no compelling reason to take the DIY approach.

Why take a full day to find all the necessary forms and information? See how much time a service like Bizee can save you, while also learning the steps necessary to officially start your new company.

1. Finding a Name for Your Business

There are two different parts of this task. Coming up with a great name that will serve your business well and confirming that the name is available to register with the state. Most states have a publicly available business entity search tool, though some of these tools are only available after creating an account with the state’s online system.

Likewise, business name generator tools have been around since long before AI became a thing. You can probably find and create account logins for both the state’s search tool and a popular AI platform in half an hour or less. But our complementary tools can be especially helpful if you discover your preferred name is already taken. 

• Bizee’s Business Name Generator

• Bizee’s Business Name Validator

Go back and forth as many times as necessary to find a business name that you’re happy with and is available in your state. 

Potential Savings: 30 minutes to one hour

2. Finding an Address

Local consumer businesses typically need to do a good amount of market research to find a location that will drive sales. Home-based business owners that don’t mind “putting themselves out there” may be fine using their home address. But for the private business owner working out of their home, finding an address can be a considerable sticking point.

Many business owners sign up for a virtual address to safeguard their privacy when forming an LLC only to realize how much time and headaches it saves. Do away with opening, sorting, and thumbing through piles of paper mail. Get a permanent digital record of every piece of mail your business receives. New LLCs are eligible for one free month of our Virtual Address solution.

Potential Savings: Ongoing, 1+ hour per week

3. Finding a Registered Agent

Save both time and money on this statutory requirement. A qualified person be available during all business hours to accept a service of process, more commonly known as being served with a lawsuit. Unless you intend to serve as your own registered agent, this type of service typically costs between $100-300 a year and must be in place before the state will approve your new LLC.

With Bizee, you can get one-free year of our Registered Agent service when starting a new LLC. It costs just $129 per year after that. You may be able to find other deals out there, but not all of them provide free LLC formation services. You’ll also need to spend a good amount of time researching services without Bizee’s two-decade track record of 1M+ businesses.  

Potential Savings: Hours of research + $129

4. Filing the Formation Paperwork

Creating an account and using the state’s online system may seem like a reasonable choice, but don’t be surprised if you need to go through multiple rounds of service authorization and account verification. 

Some states allow—or even prefer—you to use a mail-in form or digital file. This may sound like a fine, if slightly slower, option. Should you discover your home printer needs toner or your scanner needs a software update, that’s going to take a good chunk of your time.

Either way, you’re going to save time with a free LLC formation service that’s already plugged into the state’s system. 

Bizee’s user-friendly dashboard is also built to minimize the time and headaches needed to keep your LLC compliant moving forward. 

Potential Savings: 1-4 hours of prep time

State-by-State LLC Costs and Requirements

The basic process for starting an LLC is the same in each state, but there are some important differences. Whether it’s knowing what to expect from the get-go or keeping your new company in good standing, we can help. Learn about the startup costs and requirements in your state. 

The most common requirements are an annual report, employer identification number (EIN), local business license, franchise taxes, payroll reporting, and notifying the state of certain changes to your LLC information or management structure. It’s precisely because of these ongoing LLC costs and requirements that we offer multiple LLC formation packages. 

For those entrepreneurs who are truly on a shoestring budget, you can get the initial paperwork filed and one-free year of registered agent service free of charge. For just a couple hundred dollars, you can opt in to our Standard or Premium formation package and get everything you need to keep your LLC compliant. 

Frequently Asked Questions

Can I use your free service today and upgrade to a paid service package later?

Yes, absolutely. You may have a slow-developing business plan, but that doesn’t mean you should wait to form your LLC. Likewise, you may be comfortable procrastinating on a formal operating agreement as a single-member LLC, but once you add more members to the company, you’ll definitely want to take advantage of our operating agreement template. The one thing that your LLC will need to take advantage of right away is the one free year of registered agent service and the one free month of our virtual address. 

Can I move or transfer an existing LLC for free?

No. While some states allow you to change certain LLC information for free using their annual report, this does not include transfer of ownership, other changes to LLC members, or the business’s principal address. Likewise, if the LLC is moving to a different state, there are a few different ways to accomplish this, but all of them require state filing fees.

Why not save money by being my own registered agent?

Because it’s not as simple as it sounds, even if you’re managing your business from home. There are no exceptions to being available during business hours. Ever get food poisoning? We’ve seen a client get in trouble because their registered agent was on a bathroom break. Maybe if you and a domestic partner are also business partners—and have no plans at all for the next year—it can make sense to be your own registered agent.

How can I save money on my LLC taxes?

There are numerous strategies that LLCs may use to minimize their tax liability, many of which are specific to the state and industries in which they operate. Even LLCs with no income may be able to realize huge tax savings by documenting and deferring their startup expenses to future years. 

Another very common scenario is to save on self-employment taxes by filing as an S-corp as your LLC revenue surges past the value of the services you provide the LLC. Often, these scenarios require incurring minimal additional cost in professional tax assistance for many thousands of dollars in tax savings each year.

Who can own an LLC?

There are very few restrictions on who can own an LLC. They don’t need to be a U.S. citizen or even live in the U.S. They don’t even need to be a person. Other business entities including corporations, other LLCs, and even foreign business entities may own an LLC.