I formed an LLC last year for a small side gig and now I'm trying to budget for the annual costs. I know there's a state filing fee, but what else am I missing? Registered agent, annual report, taxes? I'm in Tennessee if that matters. Just want a realistic ballpark so I don't get blindsided.
LLC Costs
How much does it really cost to keep an LLC active each year?
Depends heavily on the state. In TN, the annual report is $300 minimum, and that's due by the first day of your anniversary month. That's the big one. Registered agent can be free if you do it yourself.
Wait, $300? I thought it was $50 in most places. Glad I don't live there lol.
It varies a lot. Some states have $0 annual fees (like Ohio, I think), others hit you with franchise taxes. You also need to factor in your county/city business license if required. In TN, the minimum annual report is $300, but it can be higher based on your gross receipts. So if your side gig made decent money, expect more.
Dont forget the registered agent. If you use a service it's usually $50-$150/year. You can be your own agent but then your address is public. I pay for privacy.
Yeah, the privacy thing is real. I used to be my own agent until I got some weird mail. Now I use a cheap service. Also, remember federal taxes: LLCs are pass-through by default, so you don't pay corporate tax, but you do pay self-employment tax. That's a whole other beast.
Filing fee is one-time, not annual. But some states have a franchise tax that's separate from the annual report. TN doesn't have a separate franchise tax for LLCs, I believe. Just the annual report. But double-check, I'm not an accountant.
This is why I just use a sole prop. No fees, no reports. Just my name and a dream
Sole prop means no liability protection though. One lawsuit and you're personally on the hook. LLC is worth the $300 if you're actually doing business.
Also, if you have employees or hold ohysical inventory, there might be other licenses. But for a simple side gig, the main annual costs are: state annual report ($300 min in TN), registered agent ($0-$150), and maybe a local business license ($50ish). Plus your time.
And don't forget the IRS. You'll owe self-employment tax (15.3%) on your net profit. That's not an LLC fee per se, but it's part of the cost of doing business. A lot of people forget that and get surprised at tax time.
Actually, TN does have a franchise and excise tax, but it's for corporations and some LLCs. If you're taxed as a partnership or sole prop, you might be exempt. Again, check with a pro. I'm just a guy on the internet.
My head is spinning. I'll stick to my lemonade stand.
Honestly, the best move is to call your state's business division and ask. They're usually helpful. And hire a CPA for an hour if you're unsure. Worth the $200.