When you decide to incorporate a business in the US, one of your first questions might be how much it will cost. The answer depends on your location, what legal services you use, and any additional filing requirements. You should also consider ongoing expenses, such as compliance costs.

Knowing what to anticipate when incorporating helps you plan better and avoid surprises. Below, we break down the main costs of incorporation, what can impact costs, and what to expect during the process.

What’s in this article?

• What are the main costs of incorporating?
  
• How much does it cost to incorporate in different states?
  
• How legal and professional services impact incorporation costs
  
• How to incorporate on a budget
  
• Hidden costs of incorporation
  
• Which tax benefits offset incorporation costs?
  

What are the main costs of incorporating?

The main costs of incorporating in the US typically fall into these categories:

• State filing fees: Every state has its own filing fee for incorporation.

• Legal or incorporation service fees: If you work with an attorney or third-party service to handle incorporation, you need to factor in their fees. If you use a lawyer to draft corporate bylaws, factor in fees for this service as well.

• Registered agent fees: Most states require you to designate a registered agent responsible for receiving legal documents on behalf of your business. You can act as your own, but many businesses choose a registered agent service, which has its own fees.

• Ongoing compliance costs: Beyond the initial incorporation fees, you must budget for annual report fees, franchise taxes, or other state-mandated filings to keep your business compliant. These differ by state but are often required yearly.

How much does it cost to incorporate in different states?

Each state in the US sets its own filing fees and ongoing requirements, so the cost to incorporate can vary considerably by location.

Here are the typical incorporation costs in several popular states:

• California: Incorporating in California comes with a $100 filing fee. California also charges an annual minimum franchise tax of $800 for corporations, which makes it one of the more expensive states for ongoing compliance.

• Delaware: Incorporating in Delaware includes a $109 filing fee. Corporations in Delaware also pay an annual franchise tax, which starts at $175 but increases based on the company’s size and structure.

• New York: New York charges a $125 filing fee and has a corporate franchise tax starting at $25.

• Texas: Incorporating in Texas includes a $300 filing fee. Texas doesn’t charge an annual franchise tax unless the business earns over $2.47 million.

• Florida: Florida has a $35 filing fee and a $35 registered agent designation fee. Florida’s franchise tax acts as a corporate income tax at 5.5%.

Here’s a rundown of the incorporation filing fees in every state as of 2024:

State

• Alabama
  
• Alaska
  
• Arizona
  
• Arkansas
  
• California
  
• Colorado
  
• Connecticut
  
• Delaware
  
• Florida
  
• Georgia
  
• Hawaii
  
• Idaho
  
• Illinois
  
• Indiana
  
• Iowa
  
• Kansas
  
• Kentucky
  
• Louisiana
  
• Maine
  
• Maryland
  
• Massachusetts
  
• Michigan
  
• Minnesota
  
• Mississippi
  
• Missouri
  
• Montana
  
• Nebraska
  
• Nevada
  
• New Hampshire
  
• New Jersey
  
• New Mexico
  
• New York
  
• North Carolina
  
• North Dakota
  
• Ohio
  
• Oklahoma
  
• Oregon
  
• Pennsylvania
  
• Rhode Island
  
• South Carolina
  
• South Dakota
  
• Tennessee
  
• Texas
  
• Utah
  
• Vermont
  
• Virginia
  
• Washington
  
• West Virginia
  
• Wisconsin
  
• Wyoming
  

How legal and professional services impact incorporation costs

Legal and professional services can substantially affect how much you spend when incorporating. The costs vary according to how much help you need. While some people handle the process themselves, many others prefer to use legal or professional services to ensure compliance from the start.

Here’s what these costs might include:

Legal services

You can pay for an attorney to handle your incorporation. Lawyers can draft important documents—such as corporate bylaws—and ensure your business complies with the necessary laws. The complexity of your business determines the cost. This might feel like a big expense up front, but it often helps you avoid legal issues later.

Incorporation services

For a more affordable option, many people use online incorporation services, such as LegalZoom and Bizee. These companies handle the filing and paperwork for you, often at a much lower cost than a lawyer. Basic packages start around $50, but the price rises if you add extras, such as expedited filing, registered agent services, and an Employer Identification Number (EIN).

How to incorporate on a budget

It’s possible to reduce your incorporating costs. Here are some suggestions to do so:

• File the paperwork yourself: Most US states make it easy to access the forms you need online, and filing fees are often the largest cost. If your business isn’t too complex, filing the paperwork yourself can save you from paying for legal or professional services. Remember to read everything carefully to avoid mistakes.

• Stick to basic incorporation services: If you do need help, skip the premium packages and add only what’s necessary. Many services have cheap, entry-level packages that handle the important filing requirements.

• Choose a cheaper state: By choosing a state with lower ongoing fees, you can keep more of your money in your business.

Hidden costs of incorporation

When incorporating, you might have to pay several hidden costs on top of the up-front fees. Here are a few to keep in mind:

• Legal and accounting fees: As your business grows, you might need legal advice or accounting help to address more complex tax filings and compliance requirements for corporations. The cost of these services can accumulate over time, especially if you’re expanding quickly.

• Registered agent fees: If you use a registered agent service to handle legal documents for your business, you need to budget for that cost.

• Ongoing compliance fees: Once you’ve incorporated your business, most US states require annual or biennial reports, franchise taxes, or other filings to keep your business in good standing. These all have different fees attached.

• Business licenses and permits: Depending on the nature of your business and where it operates, you might need specific licenses or permits beyond just incorporation, especially if you’re in a highly regulated industry. These can increase your startup costs.

• Taxes: Incorporating can change the way your business is taxed, which can lead to additional costs. For example, corporations are subject to double taxation (once at the corporate level and again on shareholder dividends).

Which tax benefits offset incorporation costs?

Certain tax benefits can help offset some of the up-front and ongoing costs of incorporation. Consult a tax professional to see which benefits apply to your situation.

Here are some ways incorporating can help you save money on taxes:

• Corporate tax rates: Depending on your profits, you might benefit from lower corporate tax rates compared to personal income tax rates. This can be especially helpful if you plan to reinvest profits back into the business rather than take them as income.

• Deductions for business expenses: Corporations can deduct a wide range of business expenses, including salaries, benefits, and office supplies. These deductions can reduce your overall taxable income and help offset the costs of running your business.

• Self-employment tax savings: If you are a solo entrepreneur, you might be able to reduce self-employment taxes by paying yourself a reasonable salary and then taking the rest of your profits as dividends, which aren’t subject to self-employment tax.

• Health insurance deductions: If you incorporate as an S corporation (S corp), you might be able to deduct health insurance premiums for yourself and your family and further reduce your taxable income.