Starting a corporation is a big step for entrepreneurs who want to grow their businesses and protect their personal assets. While the idea sounds exciting, one of the first questions most business owners ask is: How much does it cost to start a corporation?
The answer depends on where you live, the type of corporation you form, and the services you choose. This article breaks down the costs in detail, from state filing fees to ongoing expenses, so you can decide if a corporation is the right move for your business.
Why Entrepreneurs Choose Corporations
Before diving into the costs, it helps to understand why corporations remain a popular choice. Corporations offer strong liability protection, credibility with investors, and the ability to issue stock. They are also designed to continue even if the original owner steps away.
Still, incorporating comes with higher costs and more paperwork compared to other business structures, like an LLC or sole proprietorship. Knowing the expenses upfront helps you avoid surprises and plan your budget effectively.
Initial Costs to Start a Corporation
When you form a corporation, there are several upfront costs to expect. These costs vary by state and the services you use.
- State Filing Fees
Every state requires you to file Articles of Incorporation (sometimes called a Certificate of Incorporation). The filing fee ranges from about $50 to $500, with most states averaging around $100 to $150.
For example:
- Delaware: $89 minimum
- California: $100 filing fee + $20 initial statement of information
- Texas: $300
- Florida: $70
Your state’s filing fee is a non-negotiable cost.
- Registered Agent Fees
Most states require corporations to have a registered agent—a person or company that accepts legal documents on behalf of your business. You can serve as your own registered agent in some states, but many business owners hire a professional service for privacy and reliability.
- Typical cost: $100 to $300 per year
- Name Reservation and Business Licenses
If you want to reserve your business name before filing, some states charge a small fee, usually around $10 to $50. Additionally, depending on your industry, you may need local or state business licenses, which can range from $50 to $400.
- Legal or Incorporation Service Fees
You can file paperwork on your own, but many entrepreneurs use online incorporation services or attorneys for convenience.
- Online services (like LegalZoom or Incfile): $0 to $300 + state fees
- Business attorneys: $500 to $2,000+
While this is optional, professional help ensures your paperwork is filed correctly.
Ongoing Costs of Running a Corporation
Once your corporation is formed, the expenses don’t stop. Maintaining a corporation requires annual costs that help you stay in compliance with state and federal regulations.
- Annual Report or Franchise Taxes
Most states require corporations to file an annual report or pay a franchise tax. These fees vary widely by state.
- Delaware: $225 minimum franchise tax
- California: $25 statement of information + $800 annual franchise tax
- New York: Franchise tax based on income, minimum $25
- Texas: No franchise tax if under a certain revenue threshold
Expect to pay anywhere from $50 to $800+ each year.
- Ongoing Registered Agent Fees
If you hired a registered agent service, remember this is a yearly expense of about $100 to $300.
- Corporate Records and Compliance Costs
Corporations must maintain records such as bylaws, stock ledgers, and meeting minutes. If you hire someone to help with corporate compliance, expect to pay $100 to $500 annually.
- Accounting and Tax Preparation
Corporations often have more complex tax filings than LLCs or sole proprietorships. Hiring a CPA or tax professional is common.
- Small corporations: $500 to $2,500+ per year for tax prep
- Larger corporations: much higher, depending on complexity
- Additional Business Licenses and Insurance
Depending on your industry, you may need professional licenses, local permits, or insurance policies such as general liability or workers’ compensation. These costs can vary widely, but $500 to $2,000+ annually is common for small corporations.
Total Estimated Costs
The cost to start and run a corporation depends on your state and business needs. Here’s a general breakdown:
Startup Costs:
- State filing fee: $50–$500
- Registered agent: $100–$300 (optional if you do it yourself)
- Business licenses: $50–$400
- Professional services: $0–$2,000+
Ongoing Annual Costs:
- Annual reports/franchise taxes: $50–$800+
- Registered agent (if hired): $100–$300
- Accounting/tax preparation: $500–$2,500+
- Compliance records: $100–$500
👉 On average, you can expect to pay $500 to $3,000 upfront to start a corporation and $800 to $5,000+ annually to maintain it.
Factors That Influence the Cost
Not all corporations cost the same. Several factors affect your expenses:
- State of Incorporation: Delaware and Nevada are popular for corporations, but they may have higher annual fees than your home state.
- Type of Corporation: C-Corps and S-Corps have different tax requirements.
- Size of Business: More employees and revenue mean more complex tax filings and possible higher franchise taxes.
- Professional Help: Doing paperwork yourself saves money, but hiring attorneys or CPAs increases costs.
How to Save Money When Starting a Corporation
While corporations can be costly, there are ways to save money without cutting corners.
- File paperwork yourself if you’re comfortable with legal documents.
- Compare registered agent services—some are much cheaper than others.
- Incorporate in your home state to avoid paying extra foreign qualification fees.
- Use a small-business-friendly CPA to handle your taxes.
- Start with the minimum licenses required and scale as your business grows.
Comparing Costs: Corporation vs Other Business Structures
To see if a corporation makes sense, it’s helpful to compare costs with other structures.
- Sole Proprietorship: Little to no startup cost, but no liability protection.
- Partnership: Minimal filing costs, but partners are personally liable for debts.
- LLC: Lower annual fees than a corporation in most states, with liability protection, but sometimes higher self-employment taxes.
While the cost to start a corporation is higher, the trade-off is stronger protection, easier access to investors, and long-term stability. This is where considering the pros and cons of a corporation becomes important.
Is a Corporation Worth the Cost?
The value of forming a corporation depends on your business goals. If you plan to raise money from investors, hire employees, or build a company that lasts beyond your personal involvement, the costs are often worth it.
However, if you’re running a small local business or side hustle, the annual fees and tax complexities may outweigh the benefits. In that case, an LLC or sole proprietorship may be more cost-effective.
Final Thoughts
Starting a corporation is a smart move for many entrepreneurs, but it comes at a price. From state filing fees to annual franchise taxes and accounting costs, expenses can add up quickly.
Understanding the cost to start a corporation gives you a clear picture of what to budget for. If you’re serious about growing your business, protecting your assets, and attracting investors, a corporation may be worth the investment. Just be sure to weigh your options carefully and consider whether the long-term benefits justify the ongoing costs.