The cost of establishing an entity focuses on paying an attorney and an accountant to help get you set up, to maintain and to prepare the accounting and tax returns for the entity.
When you establish an entity you really want to make sure you are hiring a real attorney to file documents with the State and to draw up the legal documents. You don’t want to use an online service because, and they will tell you this, they are not attorneys and they do not offer legal advice. You are establishing this entity for legal and asset protection. You want a real, qualified, knowledgeable attorney to create the documents and to help defend them if they are ever attacked. For an LLC the documents consist of Articles of Organization and, generally speaking, can run from about $1,000 to $2,500 based on the number of members and the complexity level. The S-corporation has Articles of Incorporation; the associated legal cost should run around $1,000 to $1,500.
These entities may also need to have Buy/Sell Agreements, Operating Agreements, Employment Agreements, etc. These documents set the rules of the game and are very important when more than one owner exist; if there is a single owner they are much easier and less expensive to establish.
There is also added accounting cost because you are creating a new entity, possibly a new tax return, and a higher-level of accounting is required. Costs vary greatly based on the business size, complexity level and accounting needs.
It is important to make sure you work with a professional and choose your entity wisely. Find an entity that fits your particular needs. There is no rule of thumb with choosing an entity; it is specific to your particular needs and goals.
Finally, keep in mind that if you have multiple activities in one entity then all of those entities are exposed to lawsuits associated with the other activities in that entity. If you have multiple businesses you need to consider having multiple entities so that you minimize your exposure and risk.
If you have any questions or want to explore which entity is best for you, feel free to reach out to us.