The filing fees for forming a LLC or a corporation can vary greatly depending on the state that you file in. It ranges from say $40 to file in Kentucky to a whopping $500 to file in Massachusettes or Illinois for a LLC. To file a corporation or LLC in California, there is a minimum $800 franchise fee per year no matter if you make money or not. Some states have high maintenance fees such as Nevada's Initial List of Managers form that costs $125 per year.
That being said, you shouldn't opt to file in Kentucy because the start up cost is so cheap. You may end up paying more in taxes or other fees to maintain your filing in Kentucky than it would be to open a Illinois or a Massachusettes company. It could potentially be a big mistake to file in a state just because its cheap. We recommend to our clients that you should always know what you're getting into before filing.
The best sources of information on what will be best for you in terms of what type of entity to file and what state to file in will be an accountant or a lawyer. They will be able to give you sound legal and financial advice that most companies can't give you. You may find that the initial start up cost of filing a LLC in MA or IL for $500 will be more than offset by the savings you make from filing in a different state.
One of the advantages of a LLC is that it has pass through taxation. What pass through taxation refers to is the tax structure for LLC's and Scorps. Pass through taxation allows the owners of the LLC's to have the LLC's profits "pass through" the LLC and report the income of the LLC on the individual's taxes. The benefit to this tax structure is that the LLC doesn't have have "double taxation" as with corporations.
In comparison with a C corporation, the corporation pays a tax and any profits distrubuted to the shareholders is taxed again. In essence it is double taxation. However, for corporations, you do have the opportunity to file a Scorp filing with the IRS to change the tax structure of the corporation to mimic the same tax structure of the LLC. However, the penalty of filing the S corp with the IRS is that you limit the growth of the company to a maximum of 75 shareholders. This limit is not an issue as most family run corporations will never have more than 75 shareholders. As the company grows bigger and needs more capital, it may change the tax structure back to a C corp to raise more capital by selling shares to investors.
The LLC is very advantageous for many small business because of the tax structure and liability protection. You can form a LLC today.
A registered agent is an individual that is a resident of the state in which the filing of the LLC or Corporation is to take place. This individual will be the person who will be the service of process agent when the state needs to send legal documents in the event of a lawsuit.
The requirement of the registered agent is that the agent must be over 18 and be a resident of the state. The address in which the service of process will occur must be a physical address. The state will not accept a PO box for the registered agent address.
In most cases, the registered agent is usually one of the members of the LLC or an officer of the corporation. The LLC or the Corporation can always designate another individual to serve as the registered agent. This does not mean that the agent is liable in the event of a lawsuit, it just means that the service of process will be served to this individual. If you do choose to have someone other than the owner of the LLC or Corporation, it is wise to choose someone that is reliable because it is their responsibility to send these documents to you.
There are third party providers who can serve as a registered agent for a fee. The fees are usually around $125 to $150 per year. The advantage of using a registered agent fee is that some states sends out tons of junk mail and therefore shield you from this. Also, using a registered agent may shield you from privacy inquiries. On state websites, information about the registered agent is posted. Therefore, people would only see the third party registered agent information instead of yours. One other use for a registered agent and the most common is if you need to file in another state other than the state you reside in. In most cases, you will not have a physical address that you can provide the state for the registered agent address. This is where a third party registered agent would provide this address for you.
When you form a LLC or form a corporation, you will need to decide whether you will serve as your own registered agent or require a service. A registered agent is mandatory in all states.