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The rip-off with exaggerated costs for LLC formations

The rip-off with exaggerated costs for LLC formations

Rip-off artists say: It's a very complex issue

The foundation of a Limited Liability Company (LLC) in the USA is far less complex than many believe. Nevertheless, there are numerous companies that deliberately complicate the situation in order to capitalize on it. These so-called start-up agencies promise low entry prices, but often conceal the considerable additional costs that founders will incur over time. This business model leads to confusion and leaves many people paying unnecessarily high fees. In this article, we uncover the tricks used by these providers and show you how you can protect yourself.

What is an LLC?

A Limited Liability Company (LLC) is a corporate structure in the USA that allows the founders to Limitation of liability and offers flexible tax options. It combines the advantages of a partnership with those of a corporation, without the disadvantages.

The true complexity of LLC formation

The basic requirements for founding and managing an LLC are actually straightforward. These include filing the articles of organization, drawing up articles of association (Operating Agreement), as well as compliance with annual reporting obligations. These tasks are neither time-consuming nor complicated if you have the right information.

The scam of supposedly low start-up prices

Many start-up agencies lure customers with seemingly cheap offers. However, these prices often only cover the absolute minimum requirements. As soon as the LLC is founded, the founders are charged additional, often hidden costs that are considerably higher than expected.

Hidden costs and fees

In addition to the basic start-up fees, many providers charge additional costs for:

  • Annual reports and renewals: State fees for the annual renewal of the LLC.
  • Registered Agent FeesCosts for the provision of a registered representative, which is required by law.
  • Consulting and administration feesOften unnecessarily high fees for simple administrative tasks.

The role of the states in the cost structure

Some providers recommend incorporation in states such as New York or California, where social security contributions are the highest due to mass immigration. Although these liberal/democratic countries are considered economically attractive, the running costs for founders are also the highest there.

Avoiding pitfalls when setting up a company

To avoid excessive costs and unnecessary complexity, founders should:

  • Do your own researchUnderstand the legal requirements and check whether you can set up the company yourself.
  • Use credible sources: Use reliable online resources and official government sites.
  • Choose cost-conscious servicesChoose transparent and cost-effective online services that have no hidden fees.

The strategy of scaremongering

Another way to unsettle founders is to deliberately create fear and uncertainty. Providers stir up fears of high penalties and legal problems in order to then offer expensive consulting services and legal representation. In most cases, however, these fears are unfounded and only serve to fleece customers.

The truth about legal fees

The often touted high legal fees for founding and managing an LLC are in most cases completely exaggerated. The basic legal requirements can normally be met without expensive legal support. It is advisable to only use specialized lawyers if you really need them and preferably local specialists.

Anonymity and data protection with LLCs

Many believe that LLCs in the USA have a high Anonymity offer. In fact, LLCs offer considerable anonymity and privacy in many states. Although the USA is not subject to the Common Reporting Standard (CRS), they exchange information within the framework of FATCA (Foreign Account Tax Compliance Act), but mainly in one direction, namely to the US authorities. For EUCitizens This means that their data is relatively secure in the USA and that there is no comprehensive reporting to EU countries. This feature makes the LLC attractive to many who want to protect their privacy.

Tax obligations and profits

A non-domestic LLC, i.e. an LLC operated by non-US citizens, does not have to file tax returns in the USA, provided that no income from US sources are available. This means that the owners of the LLC only have to file their tax returns in their country of residence. Advice from US tax advisors is often unnecessary in these cases and therefore saves costs.

Formalities and proof of ownership

The requirements for forming and operating an LLC can vary by state. Some providers use this to exaggerate the complexity and offer expensive services. Proof of ownership can also cause confusion, but in most cases it is easy to manage.

The role of online services in LLC formation

There are numerous low-cost online services that can assist with the formation of an LLC. These offer transparent pricing models and help to fulfill the basic requirements without forcing customers into a dependency on expensive consulting firms.

Conclusion

Forming an LLC in the USA is less complex and costly than many people think. Through careful research and the use of cost-effective online services, founders can avoid the most common pitfalls and save unnecessary costs. It is important not to be confused by misleading information and overpriced offers and to understand the actual requirements.

FAQs

How expensive is it really to set up an LLC?
Incorporation costs vary by state, but are generally between $50 and $500 (state fee). Additional costs for registered agents and annual reports may apply, but should be transparent.

Are lawyers necessary for LLC formation?
Not really! The basic requirements can be met without expensive legal support. For more complex cases, it may make sense to consult a lawyer, but then a local one.

What are the hidden costs of forming an LLC?
Many providers conceal additional costs for annual reports, registered agents and advisory services. It's important to read the small print and choose transparent providers that tell you straight up, no additional costs.

Is the anonymity of an LLC guaranteed?
Full anonymity is only offered by Wyoming and Nevada. LLCs also offer a high level of data protection in many other states, especially for EU citizens. FATCA mainly affects the Exchange of information with US authorities and is of no further importance for non-US citizens.

Which states are the most favorable for LLC formation?
Countries like New Mexico and Wyoming are popular due to their low incorporation costs and flexible business conditions. New York and California are more expensive to administer (running costs).

Can I set up the LLC myself?
Yes, with the right information and resources, many founders can set up on their own or use low-cost online services.

Closing words

Don't be fooled by formation agencies that portray LLC formation as overly complex and expensive. Inform yourself thoroughly and use transparent, cost-effective services to avoid unnecessary costs and set up your LLC successfully.

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Disclaimer: Please note that the above dates, tax rates and regulations may change over time. Do not make any independent decisions without first consulting an expert for your individual situation. It is in your interest to always receive individual information from an experienced expert who knows your situation.

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