Starting a limited liability company (LLC) in Arizona is a smart choice for many new business owners. The state offers a streamlined formation process, affordable filing fees, and clear rules, making it easier for entrepreneurs to get up and running quickly. An LLC provides personal liability protection and flexible tax treatment, and it sets the stage for building a strong financial foundation as your business grows.This AZ LLC formation guide walks you through each step of forming your LLC so you can move forward with clarity and confidence. If you require support from a dedicated accountant at any point in the process, expert <a href="https://1800accountant.com/services/entity-formation" target="_self">LLC formation services</a> from 1-800Accountant, America's leading virtual accounting firm, can help you launch your company with ease.&nbsp;&nbsp;Key Highlights<ul><li>Arizona LLCs are simple to set up and require just a few formation documents.</li><li>Filing Articles of Organization with the Arizona Corporation Commission (ACC) is the core legal step.</li><li>Some counties require LLCs to publish a formation notice in an approved newspaper.</li><li>An Operating Agreement strengthens your business structure even though it is not required by Arizona law.</li><li>You will need an Employer Identification Number (EIN) to hire employees, open a business bank account, and handle federal taxes.</li><li>Arizona LLCs do not file an annual report unless they elect corporate taxation, but they still must keep records and registered agent details current.</li><li>Professional bookkeeping and ongoing tax advisory support can help your business stay compliant long after formation for an affordable, tax-deductible fee.&nbsp;</li></ul><h2>Step 1: Choose a Name for Your Arizona LLC</h2>Selecting the right name is the first <a href="https://www.zenbusiness.com/arizona-llc/" target="_blank">formal step</a> in establishing your business identity. Arizona has specific rules that your LLC name must follow, and taking time to choose one that is both legally compliant and brand-friendly will set your business up for long-term success.<h3>Arizona naming rules</h3>Your LLC name must meet the ACC’s requirements. These include:<ul><li>The name must contain “Limited Liability Company,” “LLC,” or “L.L.C.”</li><li>It must be distinguishable from all existing business names in Arizona.</li><li>The name cannot contain language that implies it is a government agency.</li><li>Terms like “bank,” “association,” or “university” often require additional approval.</li></ul><h3>Perform an Arizona business name search</h3>Before filing your formation documents, run an Arizona LLC name search using the ACC's online database. This helps confirm that your preferred name is available.Aim for a name that is simple, memorable, and scalable as your business grows. Many entrepreneurs also secure a matching domain name once availability is confirmed.<h3>Reserve your LLC name (optional)</h3>If you need more time to prepare your formation documents, you can reserve your name with the state. A small reservation fee holds your name for a set period, ensuring no one else can use it during that time.<h2>Step 2: Appoint a Statutory Agent</h2>Arizona requires every LLC to appoint a statutory agent, sometimes referred to as a registered agent, who receives legal documents on the company’s behalf. Registered agent services are available for a nominal fee.<h3>Arizona statutory agent requirements</h3>Your LLC's statutory agent must:<ul><li>Have a physical street address in Arizona</li><li>Be available during regular business hours</li><li>Consent to serve as the agent</li></ul>A P.O. box does not meet Arizona LLC requirements.<h3>Why a professional statutory agent helps</h3>A professional agent helps ensure you never miss important <a href="https://1800accountant.com/services/audit-defense" target="_self">legal or tax notices</a>. Many LLC owners prefer the added privacy and reliability of working with an expert. If you choose to <a href="https://1800accountant.com/services/entity-formation" target="_self">start your Arizona LLC with help from a professional</a>, 1-800Accountant can guide you through each compliance requirement.&nbsp;<h2>Step 3: File Your Articles of Organization with the Arizona Corporation Commission</h2>This step <a href="https://www.discern.com/resources/arizona-llc-formation" target="_blank">officially forms</a> your LLC in the state of Arizona.<h3>What the Articles must include</h3>Your Arizona <a href="https://www.bizreport.com/articles-of-organization-arizona" target="_blank">Articles of Organization</a> must list:<ul><li>LLC name</li><li>Principal business address</li><li>Statutory agent information and acceptance</li><li>Whether the LLC is member-managed or manager-managed</li><li>Names of managing LLC members or managers</li></ul><h3>Filing methods and costs</h3><a href="https://ecorp.azcc.gov/AzAccount?sessionExpired=False&__ncforminfo=Plffl3sBMJgzyD8as4w_XV3Ts_LzjCI7uCc79-rgjKo3j8EL8LPC8K6XbYBbxoE6FCg8DMcT48o=" target="_blank">You can file online</a> or by mail through the ACC. Arizona’s standard filing fee is $50, according to the ACC’s official <a href="https://azcc.gov/docs/default-source/corps-files/fee-schedules/fee-schedule-llcs646a1cd0d6b24246ab2253aecbc3ab40.pdf?sfvrsn=debb38e6_3" target="_blank">fee schedule</a>, with an optional expedited processing fee of $35. This low filing cost is one reason many entrepreneurs choose to do business in Arizona.For accurate filing and faster processing, you can also rely on 1-800Accountant’s <a href="https://1800accountant.com/services/entity-formation">LLC formation services</a>.<h3>Publication requirement in Arizona (if applicable)</h3>Some Arizona counties still require newly formed LLCs to publish a notice of formation in an approved newspaper for three consecutive weeks. Counties without this requirement allow you to <a href="https://www.legalzoom.com/articles/how-to-start-an-llc-in-arizona" target="_blank">skip the step entirely</a>.Published notices generally list:<ul><li>Your LLC name</li><li>Statutory agent information</li><li>Management structure</li><li>Principal address</li></ul>Check county details through the ACC or consult a professional to confirm whether this requirement applies to your business location.<h2>Step 4: Create an LLC Operating Agreement</h2>While the state does not legally require an Arizona LLC Operating Agreement, it is an essential internal document for outlining how your LLC will function.<h3>Why Arizona LLCs need an Operating Agreement</h3>A well-written Operating Agreement helps:<ul><li>Prevent disputes</li><li>Clarifies ownership rules</li><li>Sets expectations for members</li></ul>It also supports conflict prevention and long-term stability. Lenders and banks often request a copy before opening an account.When combined with reliable <a href="https://1800accountant.com/services/bookkeeping">year-round bookkeeping support</a> from 1-800Accountant, this document helps maintain accurate records and long-term financial organization.<h3>What to include</h3>Your Operating Agreement should cover:<ul><li>Ownership percentages</li><li>Member contributions</li><li>Voting procedures</li><li>Management structure</li><li>Meeting rules</li><li>Profit distribution</li><li>Dissolution processes</li></ul><h2>Step 5: Get an EIN from the IRS</h2>Most LLCs need an <a href="https://www.irs.gov/businesses/employer-identification-number" target="_blank">EIN</a> from the Internal Revenue Service (IRS) to operate smoothly.<h3>Why you need an EIN</h3>An EIN is needed for:<ul><li>Hiring employees</li><li>Opening a business bank account</li><li>Filing federal taxes</li><li>Obtaining licenses</li><li>Running payroll</li></ul><h3>How to apply</h3>The Arizona EIN application is free on the IRS website. Most applications are approved instantly. While an EIN can be obtained for a single-member LLC, it is particularly important for multi-member LLCs and LLCs electing S corporation taxation.<h3>EIN and bookkeeping reminders</h3>Once your EIN is issued, it becomes the cornerstone of your tax and payroll systems. New LLC owners should stay aware of federal tax deadlines, including estimated payments due:<ul><li>September 15</li><li>January 15</li><li>April 15</li><li>June 15</li></ul>You can keep your business organized throughout the year with 1-800Accountant’s <a href="https://1800accountant.com/services/business-tax-advisory">year-round tax advisory</a> and <a href="https://1800accountant.com/services/small-business-taxes/online-filing">small business tax preparation</a>.<h2>Step 6: Maintain Your Arizona LLC</h2>After formation, keeping your LLC compliant is an ongoing responsibility.<h3>Arizona annual compliance requirements</h3>Unlike many states, Arizona LLC annual reports are not required unless corporate tax treatment is elected. Still, you must maintain accurate statutory agent information and respond to any ACC notices promptly.<h3>Tax considerations for Arizona LLCs</h3>Most Arizona LLCs are taxed as pass-through business entities, which protects your personal assets. Some LLCs require an Arizona business license. Members may owe the 15.3% self-employment tax that funds Social Security and Medicare, and must stay current on estimated tax payments.Key dates include:<ul><li>September 15 quarterly estimated tax payment</li><li>January 15 final estimated payment for the prior year</li><li>April 15 is Tax Day and the first installment for the new tax year</li></ul>Employers must also file IRS Form 941, Employer's Quarterly Federal Tax Return, quarterly and issue IRS Form W-2, Wage and Tax Statements, and 1099s by January 31 each year.<h3>Ongoing bookkeeping and recordkeeping</h3>Accurate monthly bookkeeping helps support compliance and tax efficiency. Tools like 1-800Accountant’s ClientBooks platform streamline tasks such as account reconciliation and transaction categorization, helping ensure clean books.If you require hands-off financial management, you can rely on full-service <a href="https://1800accountant.com/services/bookkeeping" target="_self">professional bookkeeping</a>.<h3>When to consider a tax election</h3>Growing LLCs may benefit from electing S corporation taxation to reduce self-employment tax. This decision is best made with guidance from an accountant who understands your financials. 1-800Accountant’s <a href="https://1800accountant.com/services/business-tax-advisory">expert tax planning for small businesses</a> can help you evaluate whether the election is right for you.<h2>Additional Arizona LLC Costs to Expect</h2>Common formation and maintenance <a href="https://www.tailorbrands.com/llc-formation/arizona-llc/llc-costs" target="_blank">expenses include</a>:<ul><li>$50 Articles of Organization filing fee</li><li>Statutory agent fees</li><li>Name reservation fees</li><li>Operating Agreement drafting assistance (if drafted by a professional)</li><li>Publication fees (where required)</li><li>Ongoing compliance or licensing costs</li></ul><h2>Arizona LLC Tax Overview</h2><h3>How LLCs are taxed by default</h3>Arizona LLC taxes: By default, Arizona LLCs enjoy pass-through taxation. Members report income on their personal tax returns, IRS Form 1040, U.S. Individual Income Tax Return, and pay taxes based on their share of profits.<h3>Other potential tax obligations</h3>Depending on your business, you may also need to register for:<ul><li>Transaction privilege tax (TPT)</li><li>Employer payroll taxes</li><li>W-2 and 1099 reporting</li></ul><h3>Federal compliance dates to note</h3>Important upcoming deadlines include:<ul><li>Quarterly Form 941 filings</li><li>Estimated payments on September 15, January 15, April 15, and June 15</li><li>W-2 and 1099 filings due January 31</li></ul>Strong bookkeeping habits make these tasks significantly easier and more efficient.<h2>Starting an LLC in Arizona: Expert Help for a Stress-Free Launch</h2><h3>How 1-800Accountant supports Arizona LLC owners</h3>When you partner with 1-800Accountant, you gain access to real accountants and bookkeeping professionals who offer personalized guidance for every phase of your business. From formation and EIN registration to ongoing bookkeeping, payroll, and tax advice and planning, your accountant helps you stay organized and compliant through every stage of growth.<h3>Schedule your free consultation today</h3>Schedule your free 30-minute consultation with a small business expert today to learn how our suite of professional services can help your Arizona business grow.&nbsp;&nbsp;

An LLC provides personal liability protection and flexible tax treatment, and it sets the stage for building a strong financial foundation as your business grows. The state offers a streamlined formation process, affordable filing fees, and clear rules, making it easier for entrepreneurs to get up and running quickly.

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How to Start an LLC in Arizona in 6 Steps

Schedule a free 30-minute consultation to talk to an entity specialist and get started.

If you want to know how to start a small business in Texas, A DBA may be useful. A DBA can allow you to use a different business name without its legal name, which may be beneficial. While it isn’t difficult to figure out how to start a DBA in Texas, there are essential things [&hellip;]

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How to Set Up a DBA in Texas

How to Set Up a DBA in Texas: 5 Steps

When you think about establishing your small business, you might picture addressing federal requirements to get your operations up and running. While meeting those requirements is an important aspect of starting your business, don't forget about your responsibilities to your state. Begin fulfilling your state obligations by obtaining your state tax identification number.Your business's state tax ID is necessary to perform many of your core duties, such as applying for state-level permits or paying state income tax. Failing to obtain this ID can endanger ongoing compliance with state and local regulations that govern your industry. When compliance obligations slow you down, turn to 1-800Accountant, America's leading virtual accounting firm, for expert support. When you do, your designated 1-800Accoutant team helps you address both federal and state compliance from the outset, so you can focus on maximizing the success of your launch.For entrepreneurs addressing state-level requirements on their own, use this guide to learn everything you need to know about state-level tax IDs. You'll come away understanding what a state tax ID is, its purpose, and broad steps you can take to obtain yours.&nbsp;<h2>What is a State Tax ID Number?</h2>A state tax ID number is the unique identifier assigned by the state to a business entity or organization. The state tax ID is associated with the state in which the business operates, and is also known as a:&nbsp;<ul><li>State <a href="https://1800accountant.com/blog/ein" target="_self">employer identification number (EIN)</a></li><li>Employer’s state ID</li><li>State tax registration</li></ul>State tax ID numbers are similar to federal EINs in that they are assigned to businesses by a government entity, which allows these entities to employ workers.&nbsp;However, federal EINs are used by the Internal Revenue Service (IRS). At the same time, state tax ID numbers are utilized by that specific state for tax administration purposes, typically by that state’s Department of Revenue or a similar agency.&nbsp;<h2>What is the purpose of a State Tax ID?</h2><a href="https://www.sba.gov/business-guide/launch-your-business/get-federal-state-tax-id-numbers" target="_blank">State tax IDs</a> serve several purposes, primarily related to filing taxes (payroll and excise taxes), collecting sales tax, obtaining licenses and permits, and hiring employees. State tax ID numbers are used by the state and local tax authorities to identify tax reporting entities and to facilitate accurate tax administration.&nbsp;State tax ID numbers also allow businesses to apply for Resale Certificates (also referred to as Sales Tax Permits or Seller’s Permits), which allow for tax-exempt status. This tax exemption enables a business entity to purchase goods and products for resale at retail. When those goods and products are sold to the final customer, the retailer collects the sales tax.State tax ID numbers can also be useful for sole proprietors who wish to protect themselves against identity theft.<h2>Who Needs a State Tax ID?</h2>You'll need to obtain a state tax ID if your business will:&nbsp;<ul><li>Hire employees</li><li>Collect sales tax (retail/e-commerce)</li><li>Owe excise taxes (alcohol, tobacco, fuel, cannabis)</li></ul>You must understand your state’s rules and requirements to ensure ongoing compliance with your local and state tax laws.&nbsp;Sole proprietors and single-member LLCs that do not have any employees can use their Social Security Numbers (they can choose to obtain an EIN if they want, but it is not required) instead of a state tax ID. There are also special considerations for non-profits and multi-state operators. In these scenarios, it's best to check with your state's rules before proceeding.&nbsp;<h2>How Do You Apply for a State Tax ID?</h2>Check with your state government’s Department of Revenue for more information on how to obtain a state tax identification number. Applications and processes typically vary by state, but should be a relatively simple process.Follow these general steps to obtain your state tax ID:&nbsp;<ol><li>Visit your state’s Department of Revenue (or equivalent).</li><li>Provide entity details (EIN, formation documents).</li><li>Pay the required filing fee.</li></ol>Processing times are typically instant for online applications, whereas other methods may take several weeks to complete. Note that if you are relocating to another state, you will need to reapply.If you’re seeking guidance and support in <a href="https://1800accountant.com/services/entity-formation">establishing your small business</a>, consider 1-800Accountant’s entity formation services. We efficiently form small businesses, so entrepreneurs can focus on what matters—running and growing their latest venture.<h2>State Tax IDs and 2025–26 Compliance Updates</h2>There are numerous state tax ID compliance updates for 2025 and 2026 that you should know about, including:&nbsp;<ul><li>New York LLC Transparency Act (effective January 1, 2026):&nbsp;This act requires additional corporate transparency in the form of the disclosure of beneficial owner information for businesses that operate in New York. This makes ongoing compliance more complex for businesses in New York.</li><li>Payroll/Reporting Deadlines:&nbsp;2025 quarterly IRS Form 941, Employer's Quarterly Federal Tax Return deadlines include April 30, July 31, October 31, and January 31, 2026. Federal Unemployment Tax Act (FUTA) deposits follow the same schedule.</li><li>Information Return Changes:&nbsp;1099 thresholds increase to $2,000 beginning in 2026. While the New York LLC Transparency Act increases the obligations of eligible businesses, this increased 1099 threshold likely reduces the responsibilities of small business owners, particularly for those who rarely use nonemployee workers. &nbsp;</li></ul>It's essential to understand these changes and implement protocols to ensure ongoing compliance.&nbsp;<h2>Common Mistakes to Avoid With State Tax IDs</h2>Steer clear of these common mistakes small business owners make when securing a state tax ID:<ul><li>Avoid penalties and fines by registering when you're required to do so.</li><li>Don't assume a federal EIN is sufficient to begin operating your business legally. Check with state authorities for a better understanding of your business obligations.</li><li>Forgetting to update your state tax ID when expanding into another state can cause compliance issues.</li><li>Stay away from potential privacy and security risks by using your state tax ID instead of your personal Social Security Number.</li></ul><h2>FAQs About State Tax IDs</h2><h4>Is a state tax ID free?</h4>If you obtain your state tax ID directly from your state's Department of Revenue, it is typically provided free of charge. Filing online is generally the fastest and easiest way of obtaining your state tax ID. &nbsp;<h4>Can I use my EIN instead of a state tax ID?</h4>Generally, you are not permitted to use a federal EIN in place of a state tax ID. They are issued by different authorities and apply to other aspects of your small business.&nbsp;<h4>Do online-only businesses need one?</h4>Businesses that exclusively operate online, such as an e-commerce business, typically need to obtain a state tax ID, especially if they collect sales tax or have employees.<h4>How long does approval take?</h4>State tax ID processing times are usually instant for online applications. Expect to wait weeks if you submit your materials via a different method.<h4>What happens if I operate without one?</h4>Operating your business without a state ID can lead to severe penalties, challenges, and potentially the suspension or closure of your business. However, there are exceptions. For example, sole proprietors and single-member LLCs without employees can use their Social Security Numbers instead of a state tax ID without issue.&nbsp;<h2>Obtain your state tax ID number with 1-800Accountant</h2>Obtaining a state tax ID is a crucial step in establishing your business, ensuring compliance, facilitating payroll, and supporting growth. While applying for your state tax ID and EIN is a relatively straightforward task, it's one that many small business owners miss, resulting in potential penalties and ongoing distractions.Need help registering your state tax ID? Schedule your free 30-minute consultation with 1-800Accountant — our experts will accurately and efficiently handle the paperwork, allowing you to focus on running your business.

Your business's state tax ID is necessary to perform many of your core duties, such as applying for state-level permits or paying state income tax. Failing to obtain this ID can endanger ongoing compliance with state and local regulations that govern your industry.&nbsp;

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Everything You Need to Know About State Tax ID Numbers

Converting your California small business entity to an S corporation is a great decision that provides numerous advantages, but it requires more formalities than you may be accustomed to. Professional guidance can streamline this complex and time-consuming process while ensuring compliance. Many California small businesses ready to make the switch trust 1-800Accountant, America’s leading virtual accounting firm, to handle the process on their behalf.&nbsp;

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How to Start an S Corporation in California [2025]

Both offer liability protection and unique tax advantages, but they diverge significantly in terms of ownership structure, management complexity, and growth potential. Understanding these differences is crucial for ensuring your company is not only compliant but also strategically positioned for the future.

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C Corp vs. LLC: How to Make the Right Business Choice in 2025

Forming a multi-member LLC is a popular choice among entrepreneurs due to its flexibility, favorable corporate tax considerations, and liability protections, among other benefits. But before you make the leap, you should know what you're jumping into.&nbsp;

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Complete Guide to Multi-Member LLCs in 2025

Many entrepreneurs reach a point where self-employment taxes cut too deeply into profits, which is when the S corp election becomes a smarter financial model. But this decision also introduces new responsibilities. Making the right decision requires a clear understanding of the tax benefits, drawbacks, and procedural requirements.

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How to Change LLC to S Corp: A Step-by-Step Guide

For many successful small business owners,&nbsp;<a href="https://www.ftb.ca.gov/file/business/types/corporations/s-corporations.html" target="_blank">operating as an S corporation</a>&nbsp;is a smart strategic move. This entity offers a powerful way to save on self-employment taxes while still being shielded by limited liability protection. But before you dive in, you’re probably asking a crucial question: "How much is this actually going to cost?"An S corp is a tax election that you apply to an underlying limited liability company (LLC) or C corporation. This means your total startup cost is a combination of:<ul><li>State formation fees</li><li>Operational setup costs</li><li>Ongoing compliance expenses</li></ul>This guide will break down every potential cost, from one-time S corp filing fees by state to recurring annual taxes, so you can build a realistic budget as you pursue S corp status. Or you can have experts handle the process on your behalf. 1-800Accountant, America's leading virtual accounting firm, offers transparent, flat-rate pricing to help you manage these costs. We can handle the entire process—from <a href="https://1800accountant.com/services/entity-formation" target="_self">LLC &amp; corporation formation</a> to payroll and tax filing—so you can stay compliant and focus on growing your new S corp.<h2>S Corp Costs at a Glance</h2>An S corp is a tax status, not a business entity. This means the total cost is the sum of forming a legal entity and then maintaining S corp compliance. The formula looks like this:S Corp Costs = State Formation + IRS Election + Payroll Setup + Annual State Taxes/FilingsHere’s a breakdown of typical outlays:<ul><li>Typical one-time outlays: Your initial costs will be the&nbsp;<a href="https://stripe.com/resources/more/business-formation-fees-in-the-us-a-guide-costs-in-each-state" target="_blank">state filing fees</a>&nbsp;(often $50–$520), a fee for a registered agent if you choose to use one, business licenses, and potentially some optional legal help to get set up.</li><li>Typical ongoing costs: After you launch, you must budget for annual state reports or franchise taxes (like <a href="https://www.ftb.ca.gov/file/business/types/corporations/index.html" target="_blank">California's $800 minimum tax</a>, <a href="https://dos.myflorida.com/sunbiz/manage-business/efile/annual-report/" target="_blank">Florida's annual report fee</a>, or the Texas franchise tax threshold 2025), a payroll service, bookkeeping, and tax preparation for your annual IRS Form 1120-S, U.S. Income Tax Return for an S Corporation. In states like Texas, most small businesses will owe no franchise tax due to the high <a href="https://comptroller.texas.gov/taxes/franchise/" target="_blank">$2.47M threshold</a>, but a report must still be filed.</li><li>Your final budget will depend on your state, industry, and payroll headcount.</li></ul><h2>S Corp 101 — What You're Actually Paying For</h2>It’s crucial to understand that you don't "form" an S corp. You first form a standard business entity—either an LLC or a C corporation—with your state. After that, you file a form with the IRS to have that entity&nbsp;taxed&nbsp;as an S corp.The cost to file <a href="https://www.irs.gov/forms-pubs/about-form-2553" target="_blank">IRS Form 2553</a>, Election by a Small Business Corporation, is $0. The IRS does not charge a fee for this election, and your Employer Identification Number (EIN), which acts like your business's Social Security Number, is also free.The only exception is a rare case where a business requests a non-calendar fiscal year, which can trigger aletter-ruling user fee of several thousand dollars. However, the vast majority of startups will never encounter this and can elect S corp status for free.<h2>One-Time Startup Costs (What to Budget Before Day 1)</h2>These are the initial fees to get your business legally formed and operational.<h3>State Formation Filing Fees</h3>This is your first and most unavoidable cost. Each state charges a fee to officially register your LLC or corporation. These <a href="https://1800accountant.com/blog/llc-costs-breakdown" target="_self">state filing fees</a> typically range from about $50 to $520. It’s important to check your specific state’s fees, as they can differ for LLCs and corporations.For example, here are the <a href="https://dos.fl.gov/sunbiz/forms/fees/" target="_blank">Florida filing &amp; annual report fees</a>:<ul><li>Florida Corporation:&nbsp;$87.50 initial filing fee.</li><li>Florida LLC:&nbsp;$125 initial filing fee.</li></ul><h3>Registered Agent (If Required/Desired)</h3>Every corporation and LLC is required to have a registered agent—a person or service designated to receive official legal and government correspondence. Many owners hire a professional service for privacy and compliance, and the typical <a href="https://www.forbes.com/advisor/business/what-is-a-registered-agent/" target="_blank">registered agent cost</a> is <a href="https://www.legalzoom.com/articles/how-much-does-it-cost-to-have-a-registered-agent" target="_blank">$100-$300 per year</a>.1-800Accountant can act as your registered agent in every state where your business operates.&nbsp;<h3>IRS Essentials: EIN and S Election</h3>Your EIN is your business's tax ID. You can <a href="https://www.irs.gov/businesses/small-businesses-self-employed/get-an-employer-identification-number" target="_blank">apply for a free EIN</a> directly from the IRS. As noted, the S corp election Form 2553 cost is also free.<h3>Licenses &amp; Permits</h3>Depending on your industry and location, you will likely need to obtain one or more <a href="https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits" target="_blank">business licenses &amp; permits</a> to operate legally. Costs can vary dramatically, from a simple $50 local business license to thousands for specialized permits.&nbsp;Check with your city and county for local requirements.<h3>State-Specific Extras to Watch</h3>Some states have unique, and sometimes costly, requirements.&nbsp;For example, if you form an LLC in New York and elect S corp status, you must comply with the state's publication requirement. This involves publishing a notice of your LLC's formation in two newspapers, which can add <a href="https://dos.ny.gov/certificate-publication-domestic-limited-liability-company-0" target="_blank">$600 to over $2,000</a> to your S corp startup costs, depending on where you'll operate in the state.&nbsp;<h2>Ongoing Costs After You Launch (Year 1 and Beyond)</h2>Unlike other entities that are simpler to manage, an S corp is not a "set it and forget it" structure. You must budget for these recurring annual costs to maintain compliance.<h3>State Annual Reports &amp; Franchise/Gross-Receipts Taxes</h3><a href="https://1800accountant.com/blog/s-corporation" target="_self">Nearly every state requires S corps</a>&nbsp;to file an annual report and pay a fee to remain in good standing. In some states, this is a flat fee, while others levy a franchise tax. Review these examples from across the country.&nbsp;<ul><li>California: Imposes a <a href="https://www.ftb.ca.gov/file/business/types/corporations/index.html" target="_blank">$800 minimum franchise tax</a>, plus a 1.5% tax on net income. The $800 minimum is waived for the first year.</li><li>Texas:&nbsp;Most small S corps will owe no franchise tax due to the high&nbsp;<a href="https://comptroller.texas.gov/taxes/franchise/" target="_blank">$2.47M threshold</a>, but a report must still be filed.</li><li>Florida:&nbsp;Requires an annual report with a $150 fee for corporations and a $138.75 fee for LLCs. Missing the May 1 deadline results in a steep $400 late fee.</li></ul><h3>Payroll Setup &amp; Processing (Because of “Reasonable Salary”)</h3>The S corp payroll setup cost is a non-negotiable expense for owners who work in the business. The IRS requires that shareholder-employees be paid a&nbsp;<a href="https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues" target="_blank">reasonable salary</a>&nbsp;before&nbsp;taking&nbsp;<a href="https://1800accountant.com/blog/s-corp-distributions-guide" target="_self">any other profits out of the business</a>. This salary must be processed through a formal payroll system and comparable to similar positions in other businesses in your state and industry.&nbsp;A full-service payroll provider like 1-800Accountant typically charges a one-time setup fee and a recurring monthly fee. Our&nbsp;<a href="https://1800accountant.com/services/payroll" target="_self">payroll pricing</a>&nbsp;starts with a competitive $200 one-time setup fee, then $89/month for the first employee plus $39/month for each additional employee. Fees for all of our full-service accounting solutions are tax-deductible.&nbsp;<h3>Bookkeeping &amp; the Form 1120-S Return</h3>To maintain your S corp status and file your taxes correctly, you need accurate financial records.Annually, your S corp must file an information return with the IRS called Form 1120-S. This form reports the company's:<ul><li>Income</li><li>Deductions</li><li>Profits</li><li>Losses</li></ul>From there, you issue a Schedule K-1 to each shareholder so that they can prepare and file their personal income tax returns. There is usually a cost to file 1120-S.<h3>Licenses, Permits, and Renewals</h3>Many of the&nbsp;<a href="https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits" target="_blank">business licenses &amp; permits</a>&nbsp;you obtained at startup will require annual renewal. These fees vary by location and activity, so be sure to track your renewal dates and budget accordingly.<h2>Sample Budgets (Illustrative)</h2><ul><li>Lower-cost state scenario (e.g., FL LLC electing S):<ul><li>One-time:&nbsp;~$125-$160 (LLC filing) + optional registered agent + licenses.</li><li>Ongoing:&nbsp;~$138.75 annual report + payroll service + tax prep.</li></ul></li><li>Higher-cost state scenario (e.g., CA corp electing S):<ul><li>One-time:&nbsp;State filing fee.</li><li>Ongoing:&nbsp;$800 minimum tax (year 2+) + 1.5% of income + payroll service + tax prep.</li></ul></li><li>If NY LLC elects S:&nbsp;Add a one-time publication cost of $600-$2,000+ in Year 1.</li></ul><h2>Ways to Reduce Costs and Avoid Penalties</h2><ul><li>File EIN and S election directly with the IRS (free).</li><li>In CA, there's a first-year minimum tax waiver for new S corps. Plan your cash flow for Year 2.</li><li>Use a&nbsp;<a href="https://www.forbes.com/advisor/business/what-is-a-registered-agent/" target="_blank">registered agent</a>&nbsp;strategically to ensure privacy and ongoing compliance for a modest annual fee.</li><li>Keep payroll compliant from day one to avoid back taxes and penalties; consider a full-service payroll provider to handle these complexities.</li></ul><h2>How 1-800Accountant Helps You Budget &amp; Stay Compliant (CTA)</h2>Trying to keep everything you need organized for your S corp formation can be overwhelming for busy business owners. During your launch window, focus on successfully introducing your business, rather than navigating state websites and searching for numerous IRS forms.At 1-800Accountant, we offer&nbsp;<a href="https://www.1800accountant.com/pricing" target="_self">flat-rate, never-hourly pricing</a>&nbsp;designed to support S corp business owners. Our affordable, tax-deductible centralized financial solutions handle every aspect of your S corp compliance:<ul><li>Formation:&nbsp;We'll form your LLC or corporation, starting at&nbsp;$0 + state fees.</li><li>Payroll:&nbsp;We set up and run your payroll each pay period to keep you compliant with reasonable compensation rules.</li><li>Bookkeeping &amp; Tax:&nbsp;We manage your books and prepare your annual Form 1120-S and personal tax returns.</li></ul>With a dedicated team of experts familiar with your state and industry, you get peace of mind knowing your S corp is set up correctly and all your compliance needs are handled under one roof for maximum insights and efficiency.Ready to get started?&nbsp;<a href="https://www.1800accountant.com/" target="_self">Schedule a free 30-minute consultation</a>&nbsp;with one of our small business experts today.<h2>FAQs</h2><h3>Do I Have to Form a Corporation to Be an S Corp?</h3>No, you do not have to form a corporation before operating as an S corp. You can form an LLC or a corporation and then&nbsp;<a href="https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations" target="_blank">elect S status</a>&nbsp;with&nbsp;<a href="https://1800accountant.com/blog/form-2553-s-corporation-election" target="_self">Form 2553</a>, if eligibility requirements are met.<h3>Is There a Fee to File Form 2553?</h3>Typically, there is&nbsp;<a href="https://www.irs.gov/forms-pubs/about-form-2553" target="_blank">no fee</a>&nbsp;for the S corp election. However, a fee will apply only if you request a non-calendar fiscal year via letter ruling.<h3>What Ongoing State Costs Should I Expect?</h3>Your costs will be determined by your state and industry, among other factors. While you may be subject to unique costs depending on your line of work, expect to budget for annual reports/franchise, or gross receipts taxes.<h3>What is “Reasonable Compensation”?</h3>Reasonable compensation is connected to one of S corp's most popular features: the ability to minimize the 15.3% self-employment tax. This compensation is the W-2 wages paid to a shareholder-employee that reflect fair market pay for their role. It is&nbsp;<a href="https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues" target="_blank">required before distributions</a>&nbsp;are taken.&nbsp;

This entity offers a powerful way to save on self-employment taxes while still being shielded by limited liability protection. But before you dive in, you’re probably asking a crucial question: "How much is this actually going to cost?"

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How Much Does it Cost to Start an S Corp Business?

At a high level, the main distinction between a partnership and a corporation lies in legal separation. A corporation is a distinct legal entity separate from its owners (shareholders), while a partnership is legally synonymous with its owners. This fundamental difference impacts liability, taxation, and administrative requirements.

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Partnership vs. Corporation: Taxes, Liability & Perks

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