How to Start an LLC? 8 Easy Steps to Form an LLC (In any State)
An LLC is one of the best business structure options available for a small business. Here are a few of the ways an LLC can help you:
- In an LLC, members are not liable for the business’s debts. Not only this, but they can choose the management structure they want.
- Unlike a C corporation, the profits of an LLC are only taxed once.
- It’s as easy as eight steps to form an LLC.
So, how can you get started forming an LLC for your business? Let us help you get started today.
- Jump to Best LLC Formation Services
- What is an LLC?
- Advantages of Forming an LLC
- The Eight Steps on How to Form an LLC
- Step 1: Pick your state
- Step 2: Choose your name
- Step 3: Choose your registered agent
- Step 4: File your documents
- Step 5: Decide on a management structure
- Step 6: Draw up an operating agreement
- Step 7: Obtain your EIN
- Step 8: File to do business in other states
- Get Professional Help in Starting an LLC (Quick & Hassle-free)
What is an LLC?
A limited liability company is a business structure in which the owners are not held personally liable for their business’s debts or liabilities. This structure combines the attributes of a sole proprietorship and a partnership. An LLC can have one owner or several owners.
An LLC helps protect your assets should your business be sued or go bankrupt. You may lose your business, but your personal assets would be safe from creditors.
For an individual that owns an LLC, the income from the business will pass through the business and be taxed as personal income. If an LLC has more than one member, it is taxed as a partnership.
The profit passes through the business, and each person’s share is taxed as personal income. In both of these cases, the advantage is not having to pay both personal and corporate income taxes. Although, you also have the option of being taxed as an S-Corporation or a C-Corporation.
Advantages of Forming an LLC
There are several advantages to forming an LLC beyond the limited liability.
Some of these advantages are listed below.
The Eight Steps on How to Form an LLC
Once you’ve decided to proceed with forming your business as an LLC, there are a few steps you have to take to get you to your goal.
Step 1: Pick your state
The first step in forming an LLC is choosing the state of formation, which is where your LLC will operate. For most small business owners, this will be where you live. If your LLC has physical operations in more states than the one, you will need to register a foreign LLC in all other states you do business in.
There are some benefits to forming LLCs in states other than the one you live in, though. Some states, such as Delaware, have particularly friendly laws to attract business formation. However, every time you register an LLC, this means more paperwork and fees, so consider the costs and benefits of registering in every state you choose.
Step 2: Choose your name
Now it’s time to choose a name, and you quite possibly already have one in mind. But first, you need to make sure that the name you choose isn’t already taken and meets the guidelines your state of the formation allows. There are several websites that offer business name searches to check if the name is already taken, and here are some common state naming rules for LLCs.
- The name of the company must include the words limited liability company or any of its abbreviations such as LLC.
- The name must not include words that might lead one to confuse it with a government agency.
- Some words are often restricted, such as bank or university, and may require additional filing or an individual who is licensed to perform the function such as a doctor to be a member of the LLC
Step 3: Choose your registered agent
The registered agent for your LLC is the one that will receive legal papers such as a suit on behalf of your company. This can be an individual or a business hired to serve the function.
Most states require every LLC to have a registered agent nominated during formation. This can be a member of your LLC, but the registered agent must have a physical address in the state of formation and be available at all times during normal business hours.
Step 4: File your documents
Now it’s time to start filing! You will need to fill out formation documents, often known as a business’s “articles of organization,” however the name can be slightly different depending on the state. It could also be called “certificate of formation” or other similar names. So, you will need to fill these documents out and send them along with the filing fee and a few other details. Including:
- The name of the business
- The name as well as contact information for all members of the LLC
- The LLC’s address (However, if the LLC has multiple addresses, you will need to decide on a primary address that will serve for tax purposes as well as other official mail.)
- The length of time the business has existed
- The registered agent’s information
- Other information about the LLC (This includes an explanation of the LLC’s purpose as well as its mission statement.)
Step 5: Decide on a management structure
Due to choosing to file as an LLC, you have the benefit of choosing your management structure. There are two primary options to choose from member-managed or manager-managed.
A member-managed LLC means that all LLC members are involved in running and making decisions for the LLC. A manager-managed LLC places management responsibility in the hands of a manager or managers who do not need to be members of the LLC.
Step 6: Draw up an operating agreement
The operating agreement of an LLC outlines its structure, such as management structure, member roles, and its ownership. This legal document is typically not required, but it is typically a good idea anyway. Here are some sections that you should include when making an operating agreement.
- Organization: This describes where and when the company was created as well as its members and ownership structure.
- Dissolution: This describes how the LLC can be dissolved.
- Contribution of Capital: This describes which members will contribute to the LLC and how funds will be raised in the future.
- Distribution of Profits: This describes how profit and loss will be allocated.
- Changes of Membership: This describes how members can be added or removed.
Step 7: Obtain your EIN
Next, you will need to acquire an EIN, which stands for an employer identification number. This is kind of like a Social Security number for your website. This will be necessary for hiring employees or opening bank accounts for your business. You can quickly and easily apply for an EIN number online on the IRS website.
Step 8: File to do business in other states
This may not apply to everyone, but for most LLCs, it is likely business will be conducted across state lines. Once you have registered in your home state, you will need to qualify in states where you will be performing significant business. However, the standard of significant business is different depending on the state.
Often this will include having a physical presence in the state such as a storefront; additionally, sales greater than $500 often require registering. At this point, you will need to file for a foreign qualification in the state. However, before performing any business, make sure you check the rules concerning foreign qualification in the state.
Get Professional Help in Starting an LLC (Quick & Hassle-free)
These are TOP-3 LLC Formation Services That Will Form an LLC For You
Sometimes you aren’t looking to research all the laws and do the work of forming an LLC yourself. If this describes you, then don’t worry. There are many LLC formation companies that are happy to do the job for you.
Here are three of the best LLC formation services out there:
Service #1: ZenBusiness
Review count: 4000+
Form an LLC today with ZenBusiness for only $49. They Have 98% customer satisfaction rating and over 4000+ verified reviews.
ZenBusiness is a very popular LLC formation service with many positive online reviews for its good customer service. They have many other positive features which we will list as well. They also have a couple of aspects which could be better, and we will mention these too.
Service #2: IncFile
IncFile is one of the top LLC formation companies in the business. It has a lot of advantages that we will list below along with a few disadvantages.
If you want to know more, check out our full IncFile review here.
Review count: 3900+
Form an LLC today with IncFile starting from $0 + state fees. They Have 97% customer satisfaction rating and over 3900+ verified reviews.
Service #3: Northwest Registered Agent
Northwest Registered Agent is a well-respected company with several advantages, but they do have a couple of disadvantages to consider as well. Overall their support is pretty much unrivaled. Here’s a full review of Northwest.
Starts From $35
Review count: 4150+
Form an LLC today with Nortwest. They have 98% customer satisfaction rating and over 4150+ verified reviews. They will include 1 year of free registered agent service!
Forming an LLC isn’t too difficult, and using one of these three LLC formation services can make it a breeze. If you want to save a little bit of money — feel free to form it yourself, I bet it will be a worthwhile experience.
Don’t let the ease of forming an LLC fool you. The benefits of formation are many and can include cost savings and protecting your personal assets should the worst come to pass.
And if you have any suggestions or thoughts on how we can improve this guide — don’t hesitate to contact us!
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