LLC vs Sole Proprietorship: the Cost Difference

Operating as a sole proprietorship carries no state formation cost. A person who begins conducting business under their own name — or under a trade name registered at the county level — typically pays nothing to the state to establish that structure. There are also no mandatory state-level annual or biennial reports required of sole proprietors, which means no recurring state fees tied to maintaining the business's legal status. The trade-off, from a purely cost perspective, is that this zero-fee baseline comes without the formal liability separation that a separate legal entity would create on paper.

Forming a limited liability company requires paying a one-time state filing fee at formation. As of Q2 2026, those fees range from $35 in some states to $500 in others, with a median filing fee of approximately $100 across all U.S. states. These figures reflect what the state charges to process and approve the Articles of Organization; third-party service fees, if any are used, are separate and additional.

Beyond the formation fee, most states require LLCs to file periodic reports — annually or biennially — to keep the entity in good standing, and the majority of states charge a fee for those filings. As of Q2 2026, roughly ten states impose no fee on recurring LLC reports, while the remaining states charge varying amounts. Some states also assess franchise taxes or minimum business taxes on LLCs each year, which are distinct from and in addition to any report filing fee.

Fee amounts are subject to change when state legislatures adjust them, often on fiscal-year boundaries, so any figure cited here may no longer reflect current law. Readers should confirm all current formation, report, and tax fees directly with the relevant state's Secretary of State office before making any financial calculations. This content is general information only and does not constitute legal or tax advice.

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Fee facts as of Q2 2026. How we compile and verify this data. Informational only — not legal or tax advice.