How much does a lawyer charge for an LLC?
An LLC or Limited Liability Company protects its owners from personal liability in the event that the company gets sued.
The personal protection offered by an LLC makes it the perfect option for individuals and freelancers.
Or, individuals who are looking to protect their new venture and assets.
The LLC business structure is useful for individuals that are planning to launch startups.
Since budgets for startups are mostly limited, one common question people ask is how much does a lawyer charge for setting up an LLC?
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What Is A LLC?
Before we break down the costs associated with an LLC, including the lawyers’ fees, it is important to know what an LLC is.
LLCs are legal entities that are formed for the sole purpose of running a business.
The reason LLCs are so popular among startups is that they are less costly to run and easy to start.
And most importantly protect the owners from liability.
In its essence, an LLC is a separate legal entity from the owner.
So, in case any liability arises against the LLC, the owner’s assets remain safe, and they can’t be affected by any lawsuits.
However, asset protection is just the tip of the iceberg when it comes to the benefits of forming an LLC.
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There are several additional benefits including:
- Reduced taxes: In the case of an LLC, the profits generated by the business go to the owner. The owner simply reports their share of the profits and when filling their individual tax returns. So the LLC owner has to pay lower taxes compared to a regular company that suffers from double taxation.
- Ease of formation: Establishing an LLC is easier as you need very little paperwork to get started.
- Higher credibility: LLCs are a more formal business structure compared to sole proprietorship and partnerships. So, by registering your business as an LLC, you can increase your business’s credibility in the eyes of your customers and business partners.
- Qualifying for business loans: Another major advantage of forming an LLC is that your business can start building a credit history. Credit history gives your business access to business loans to grow your business.
- Simpler decision-making: If you want to keep the authority of decision-making on behalf of your business for yourself, you can set up a single-member LLC.
Why is that important?
By doing so, you can become the sole decision-maker for your company.
And you won’t have to consult with anyone about how you can run your business.
Even if you are in a multi-member LLC, a lawyer can help you create an Operating Agreement.
This document helps specify the roles of different members in the company, including decision-making.
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What is the cost of forming an LLC with a lawyer?
Having an attorney by your side when you are about to register your business as an LLC can help eliminate the guesswork from the process.
By hiring a lawyer at the time of registering an LLC, you can save yourself a lot of time and money that may result from following the wrong process.
Or leaving out important provisions which can protect you.
Business lawyers specialize in the registration of various forms of legal entities, including LLCs.
You can hire their services online, or you can schedule a meeting at their office to discuss your requirements.
Of course, each lawyer is going to have their fee for their legal services.
However, you can expect to pay around $425.00 on average to a lawyer in exchange for their help in registering your LLC correctly.
This can still vary widely on your jurisdiction, additional services, how complex your company is, and how qualified that attorney is.
So, take the time to understand how much does a lawyer charge for an LLC.
Additional costs related to LLC registration
While the lawyer’s fee for legal help during your LLC filing process might be the biggest cost associated with the process, there are additional costs related to LLC registration.
The costs of an LLC can be divided into the costs you incur at the time of filling and the ongoing costs to maintain your status as an LLC.
These costs include:
LLC filing costs as the name suggests are due at the time of registering your LLC in its respective state.
Filing costs are unique to each state therefore you can expect to pay anywhere between $40 all the way up to $500 when filing for an LLC.
If you are filing a brand new business, you may also have to get a business license, which can cost between $50 and $100.
Similar to the filing fee, the licensing fee also differs from state to state, and even locally.
For most companies, the filing costs stop after licensing their business to make it legal.
However, you also have the option to trademark your name, so it can’t be used by another entity.
This is an optional cost, however, say you think that it is important for you to have the legal right to your business’s name.
Then, you can spend as low as $10 or as high as $50 to trademark it.
LLC ongoing costs
Once your LLC is registered, you also have to keep in mind that there are ongoing costs to maintain your LLC status.
Maintenance costs for an LLC have to be paid in the form of annual fees that vary from state to state.
You will also have to submit an annual report along with the annual fee to keep the LLC running.
In addition to LLC-related costs, you may also have to pay your business license renewal fee to keep your license valid.
You may also choose to pay a third-party representative (Registered Agent) to act as the official contact and recipient of mail and other notices.
Knowing how much does a lawyer charge for an LLC could be a great first step.
What is the Operating Agreement Cost?
As mentioned in the previous section, an Operating Agreement is something a business attorney can assist you with as well.
Since LLCs are required to have an Operating Agreement in some states, it pays to know the costs associated with it.
An Opening Agreement can only be effective if it is drafted correctly. And a business attorney possesses the expertise needed to get it right.
Lawyers usually charge for drafting an Operating Agreement in two ways. Either an hourly or flat fee basis.
Here is how both billing methods differ:
Hourly rate is the preferred method of lawyers for charging businesses.
When charging an hourly rate, the lawyer will note the time they spent on drafting your LLC’s Operating Agreement. And charge you based on the time they spend on the project.
The reason lawyers use an hourly rate more often is because they can make sure that they aren’t underpaid.
That is, in a case where the drafting process takes longer than they anticipated.
On average, you can expect to pay an hourly rate in the range of $250 and $350 per hour.
Though some startup lawyers can charge $1,000 or more per hour.
If the hourly rate protects the lawyers from getting underpaid for their work, a flat fee is more favorable to businesses.
When a lawyer is charging a flat fee, they will give a business a total cost that they have to pay.
A flat fee eliminates the uncertainty associated with hiring the services of a lawyer.
Business owners will know exactly how much they will be paying for drafting the Operating Agreement.
With that said, you must ask the lawyer about what is included in the flat fee to avoid any inconveniences or surprise charges.
Flat fees charged by business lawyers for drafting an Operating Agreement average around $676.25.
Having an estimate of how much does a lawyer charge for an LLC helps you figure out the next steps.
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Why should you work with a lawyer when filing an LLC?
You aren’t legally required by law to hire an attorney to assist you with the legal matters associated with LLC registration.
So one has to wonder why should they work with a lawyer in the first place?
Unless you have sound knowledge about business law, there are many legal aspects that you can miss when filing an LLC that can come back and bite you later on.
With that said, here are some legal technicalities an attorney can help you with:
- Forming your company’s LLC operating agreement, which is required by some states when filing for LLC. This agreement is also going to serve as a reference when you are establishing company policies, member rights, and other rules.
- Creating articles of organization that specify the registered agent, management of the LLC, and formation dates.
- Serving as your company’s registered agent and keeping track of any legal documents, and tax forms related to your company. This service frees you from keeping track of all the legal and tax-related documents, and all you have to do is focus on running your business.
- Maintaining legal records so that they can be easily provided in case of a lawsuit or an audit.
- Filing fees and documents on your behalf.
- Register your business name and make sure if the name you have chosen is available.
When you consider the time and effort you save by hiring a business attorney for an LLC, the fee charged by them often seems worth it.
However, if you are setting up a simple LLC with a few people, you may be able to do all the above-mentioned steps on your own.
Then enroll professional legal help later on.
An attorney comes in handy when your LLC consists of multiple individuals, extensive assets, and other complications. They may
make it difficult to keep track of all the legal requirements.
But, make sure you have an estimate of how much does a lawyer charge for an LLC.
Types of LLCs a business lawyer can help you form
LLCs are subdivided into different types that work well for certain types of businesses.
If you are having trouble choosing the right type of LLC, then these are the types you need to know about:
If you plan on conducting business solely in the state where you have formed your LLC, then Domestic LLC is a good option for you.
The majority of LLCs are domestic and when you hear the words Limited Liability Company it usually means a domestic LLC.
However, a Foreign LLC simply means a Limited Liability Company that expands or opens offices in a state different from where it was registered.
Foreign LLC provides businesses that want to expand to different states an option to register in new states as a foreign Limited Liability Company.
This may also apply to overseas and international businesses.
A professional LLC can be beneficial for individuals that are trying to offer a professional service.
However, to form this type of Limited Liability Company, you must have professionals that are licensed by the state as members of your company.
Series LLC is a less common form of Limited Liability Company.
It involves a parent company covering the liability for a certain number of child businesses.
The great part about Series LLC is that all child businesses are safe from the liability of other businesses.
So if one of the child businesses is sued, the other businesses in the “Series” will not be affected by the claim.
With that being said, this form of LLC can only be formed in the following states:
- Washington D.C.
- North Dakota
LLCs are often the cheapest and easiest option for individuals to form a company.
In some cases, you don’t even need the help of a lawyer to register your LLC with the state.
However, as you would have probably guessed by reading this article, there are some aspects of registering an LLC that are best handled by a business lawyer.
Not to mention, even after hiring a business lawyer, the overall cost and ease of forming and maintaining an LLC can be more attractive than forming a C corporation.
For this reason, you might want to get an estimate of how much does a lawyer charge for an LLC.
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