Cost: It generally costs more to form and operate an LLC than to be a sole proprietor or have a partnership. Filing fees must be paid to legally establish the LLC. Once the LLC is formed, annual fees and taxes will have to be paid to the state. These vary from state-to-state, but can be as high as $800 per year or more for highly profitable LLCs. Investment Disadvantages: LLCs are not ideal for business owners who seek outside investors. This is particularly true if you’re looking for funding from venture capitalists, who ordinarily will only fund corporations. Corporations work best for outside investments because stock can be issued in exchange for investor’s’ money. Outside investors can invest in LLCs and receive LLC ownership interests, but this can be more complicated than with a corporation. To learn more, see 'LLC Tax and Filing Requirements'.