Is an LLC worth it for a side business making $10,000 a year?

It depends on liability, not revenue. If the work could plausibly injure someone or breach a contract — trades, food, anything on client premises — the separation is worth $100 a year in a cheap state. If you are a freelance writer with no employees and no premises, the practical exposure is small and business insurance may serve you better for less. In California, where the floor is $800 a year, a $10,000 side business is paying 8% of revenue for the structure, which is hard to justify without a specific risk to manage.

Which state is genuinely cheapest?

For a business that operates in that state: Arizona, New Mexico, Missouri, Ohio, Mississippi and Minnesota charge a modest filing fee and nothing ongoing. But this only helps if you actually live and work there. The cheapest state for you is almost always your own.

Do I need a registered agent service, or can I be my own?

You can be your own in every state, provided you have a physical street address there (not a PO box) and are available during business hours. The trade-offs are that your address becomes public record and that being served with a lawsuit at your kitchen table in front of a client is a genuinely bad afternoon. At $100–$300 a year, most people conclude the service is worth it once the business has customers.

What happens if I stop paying the annual fee?

The state administratively dissolves the LLC, typically after a grace period and penalties. Reinstatement is possible in most states but costs more than the fee you avoided, and during the lapse the liability protection may not hold. If you are winding the business down, formally dissolve it rather than letting it expire — otherwise fees can keep accruing against you.

Does an LLC lower my taxes?

By default, no. A single-member LLC is disregarded for federal tax purposes and its income flows to your Schedule C exactly as a sole proprietorship would. The saving people have in mind comes from electing S-corporation status, which lets you split income between salary and distributions and reduce self-employment tax — worthwhile above roughly $60,000–$80,000 of net profit, and a net loss below that once payroll and filing costs are counted.

LLC Formation Cost Calculator by State (2026)

Estimate the total cost to form and maintain an LLC in any US state, including state filing fees, registered agent costs, and annual report fees.

State

Popular for corporations; $300 annual franchise tax

Use Registered Agent Service?

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Plan for (years)

LLC Cost in Delaware

$569

First year total cost

$90

State Filing Fee (one-off)

$400

Annual Recurring Cost

$1,369

3-Year Total

$456

Average Per Year

Forming an LLC in Delaware costs $569 in year one — the $90 filing fee plus the state's ongoing charge, which starts immediately rather than in year two. After that it is about $400 a year to keep in good standing, so 3 years comes to roughly $1,369.

Analysis & insights

Your total is $1,369, based on the inputs above. Understanding the numbers behind a decision is the foundation of every good outcome.

Calculation summary

Result derived from 4 inputs. Adjust any one to test sensitivity.

Risk & benchmark gauge

Current band

Low

Total: $1,369

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Industry benchmarks

First Year569
Recurring Annual$400
Total$1,369

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What is LLC Formation Cost?

Forming an LLC has two costs, and people almost always look only at the first one. The filing fee is what you pay the state once to bring the company into existence. The ongoing fee is what you pay every year, or every other year, to keep it alive. Over any realistic horizon the second number is the one that matters.

The gap between them can be extreme. Arizona charges $50 to form an LLC and nothing at all to maintain it. California charges $70 to form one and then $800 every single year in minimum franchise tax whether or not the business earns a cent. After ten years the Arizona LLC has cost $50 and the California one has cost roughly $8,070. Same legal structure, same paperwork, a 160-fold difference in cost.

That is why the honest first-year figure has to include the state's ongoing charge rather than deferring it to year two. The obligation begins when the company does.

The formula — how to calculate LLC Formation Cost

Year one = State filing fee + registered agent + formation service + first-period state fee Year two on = State ongoing fee (per year) + registered agent n-year total = Year one + (Year two on × (n − 1))

State filing fee: = one-off charge to file articles of organization — $35 in Montana to $500 in Massachusetts
State ongoing fee: = annual report, franchise tax or both; several states file biennially instead
Registered agent: = roughly $100–$300 a year for a service, or free if you use your own address
Formation service: = optional — around $79 to have a company file for you

Where a state files biennially or decennially, the fee is spread across the years it covers so the per-year figure is comparable across states.

Step-by-step example

01You form a single-member LLC in California, use a registered agent service at $100 a year, and file through an online service for $79. You plan to run it for five years.
02Year one: $70 filing + $79 service + $100 agent + $800 franchise tax = $1,049.
03Years two to five: $800 franchise tax + $100 agent = $900 each.
04Five-year total: $1,049 + ($900 × 4) = $4,649. Average cost $930 a year.
05Now run the same business in Wyoming: $100 filing + $79 + $100 agent + $60 annual report = $339 in year one, then $160 a year. Five-year total $979.
06The difference is $3,670 over five years, and none of it buys different legal protection. It is worth knowing before you pick a state — though as the next section explains, picking Wyoming while living in California does not actually work.

The most expensive mistake: forming out of state

Search "cheapest state for an LLC" and you will be told Wyoming, Delaware or Nevada. For most small businesses this advice is actively harmful.

An LLC is governed by the state that chartered it, but it must register as a foreign LLC in every state where it actually does business. If you live in California and run your business from California, California considers that doing business in California, regardless of where the paperwork was filed.

So the Wyoming LLC that was going to save you money now needs: the Wyoming filing fee, the Wyoming annual report, a Wyoming registered agent, a California foreign qualification, a California registered agent, and the California $800 franchise tax. You have paid twice and simplified nothing.

Delaware is genuinely superior for companies that will raise venture capital, because investors know its corporate law and its Court of Chancery. That is a real reason. Saving on fees is not.

Form your LLC in the state where you live and work unless you have a specific, articulable reason not to — outside investors, real property in another state, or a genuinely multi-state operation. If the only reason is fees, the out-of-state structure costs more, not less.

What the fee tiers actually look like

States fall into rough bands. Knowing which band you are in tells you more than any single number.

Ongoing cost bands

Band	Ongoing cost	Examples
No ongoing state fee	$0	Arizona, Idaho, Minnesota, Mississippi, Missouri, New Mexico, Ohio, South Carolina
Nominal	Under $50/yr	Colorado, Hawaii, Kentucky, Michigan, Montana, New York, Utah
Moderate	$50 – $150/yr	Georgia, Illinois, Florida, Oregon, Wyoming, Washington
Heavy	$200 – $500/yr	Delaware, Maryland, Nevada, North Carolina, Tennessee, Massachusetts
Franchise tax states	$800/yr floor	California

Fees are set by statute and change. Confirm the current figure with your Secretary of State before filing — this page is a planning estimate, not a fee schedule.

The costs the fee tables leave out

New York publication requirement —: New York requires a newly formed LLC to publish notice in two newspapers for six consecutive weeks. In the downstate counties this routinely costs $1,000–$2,000 — far more than the $200 filing fee — and is not optional.
Registered agent —: every LLC needs one with a physical in-state address available during business hours. You can be your own, but your home address then appears in a public database and you must be there to accept service of process.
Operating agreement —: not required in most states, and free from a template, but it is what proves the LLC is a separate entity if anyone ever challenges your liability shield. A single-member LLC without one is weaker than its owner thinks.
EIN —: free directly from the IRS in about ten minutes. Services that charge for it are charging for a form you can file yourself.
Business licences —: city and county licences are separate from state formation and often missed. A home-based consultancy may still need a municipal business licence.
BOI reporting —: beneficial ownership reporting obligations have shifted repeatedly since 2024. Check the current FinCEN position before assuming you do or do not have to file.

What the LLC actually buys you

The point of an LLC is separation. If the business is sued or cannot pay a debt, creditors reach the company's assets and not your house. That is the whole product.

The protection is not automatic and it is not unconditional. It holds when the company genuinely operates as a separate entity: its own bank account, its own records, no personal spending from company funds. Mix them and a court can disregard the entity — piercing the corporate veil — and the protection you paid for evaporates precisely when you need it.

An LLC also does not protect you from your own negligence or from debts you personally guarantee. Most small business bank loans require a personal guarantee, which puts you back on the hook by contract. Professional malpractice remains yours regardless of the entity.

Nor is an LLC a tax structure by default. A single-member LLC is a disregarded entity: the income lands on your personal return exactly as it would without the LLC. The tax savings people associate with LLCs come from electing S-corporation treatment, which is a separate decision with its own threshold.

Doing it yourself versus paying someone

Filing articles of organization is a short online form in most states. Name, address, registered agent, members. Twenty minutes. A formation service charging $79 is charging for that form plus a reminder calendar.

That is a reasonable purchase if you value not thinking about it, and a poor one if you believe you are buying legal advice — most services explicitly are not law firms and say so in their terms.

An estate or business attorney is worth the several hundred dollars when there are multiple members with unequal contributions, when real property is going into the entity, or when the operating agreement needs to handle what happens if one member leaves. Those are the cases where a template fails quietly and expensively years later.

Common mistakes to avoid

Treating the filing fee as the cost. The recurring fee dominates over any horizon longer than a year.
Forming in Wyoming or Delaware while operating somewhere else, then paying both states.
Assuming California's $800 starts in year two. It applies to the first taxable year.
Skipping the operating agreement because the state does not require one.
Paying a service for an EIN, which the IRS issues free.
Letting the annual report lapse. Administrative dissolution is cheap to avoid and expensive to reverse, and your liability shield is gone in the gap.

Frequently asked questions

Sources & references

Written and fact-checked by the CalcProLabs Editorial Team. Read our calculation methodology and editorial policy.

Last updated August 7, 2026