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How to Form an LLC | State Step-by-Step Guide

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The Limited Liability Company is a popular choice when starting a business because it protects the owners from business-related lawsuits and provides potential tax benefits.

Related: What are the benefits of an LLC? 

LLC State Guides

The requirements to form an LLC are different by state. Click on your state below to get specific information for forming an LLC.

What are the Steps to Start an LLC?

Every state is different, but here are the basic steps for registering an LLC.

Choose the LLC Name

Deciding on the perfect name for a business can be a challenge, but registering a name for an LLC can make it more difficult.  When forming a business entity, which includes the LLC and corporation, each state requires the names of these business entities to be unique from any other registered entity in the state.  The level of uniqueness varies by state.  It is frustrating to decide on a name and then find out that the name is already registered.  One suggestion is once you have a list of names, some can be quickly eliminated by doing a business name search to make sure it’s available to use.

Each state has a few restrictions on naming an LLC.  Common words that can’t be used usually include names, including insurance, bank, or the name of a state or government agency.

Last, a designator has to be used.  A designator is a word to describe the type of business entity and is placed at the end of the business name.  Each state will have specific ones, but common designators include LLC, L.L.C., or Limited Liability Company.

After picking your name, each state offers the ability to register it before forming the LLC, with a filing fee.  Registering a name beforehand isn’t required and can be done at the time of filing the LLC without having to pay extra.   If you aren’t ready to register the LLC, many states allow delaying the filing for up to 90 days.

Select the Address of the Principal Office

An LLC will need a physical address (no PO Boxes) in the state where the LLC has formed.  The office can be the street address of the LLC’s office, a home address, or an address where the business records are stored.

Related: Why can’t I use a PO Box for my LLC?

Appoint a Registered Agent

Each state requires that there be a person or company with a physical presence in the state.  This person is called a registered agent and must have a physical address in the state to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

The registered agent can be one of the LLC members (owners) of the LLC, an attorney, a friend, or a commercial registered agent.

Even though the business owner can be the registered agent, their name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home.

List the Members or Managers

Some states will want to know how the LLC is managed.  There are two options:

  • Member-Managed LLCs have members with active involvement in the management of the business. This is how most LLCs are managed.
  • Manager-Managed LLCs have a manager hired by the members to run the LLC, like a CEO of a corporation.

File the Articles of Organization

The first step in forming an LLC is filing the Articles of Organization (sometimes called the Certificate of Formation or Certificate of Organization).  The Articles of Organization are the name of the form used to create an LLC.  These Articles are then filed with the Secretary of State or a similarly named state agency.

The following sections are some common questions asked on the LLC Articles of Organization.

How much does it cost to form an LLC?

The fee to form an LLC varies between $40 and $500 depending on the state the LLC is being registered in. 

Why is the LLC better for protecting its owners?

Unlike a sole proprietorship or general partnership, where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate business entity.  By creating a new business entity, the owner’s personal assets and the assets of the business are separated, which provides protection from lawsuits. Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Also see: How can an LLC protect your assets?

What is required after forming the LLC?

Filing the Articles of Organization with the Secretary of State is a major part of forming an LLC, but there are a few other items to complete.

Creating an Operating Agreement

An Operating Agreement is a legal document outlining the roles and responsibilities of the members of the LLC, how to distribute profits, who has signing authority, the LLC tax status, and much more.  An Operating Agreement is only required in California, Delaware, Maine, Missouri, Nebraska, and New York.   Even though it is not required to create an Operating Agreement in most states, it’s especially recommended for multi-member LLCs.

Applying for an EIN

After filing the LLC, be sure to register for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS).  The EIN is like a social security number for an individual, but instead for a business.  This number is required before registering with the state, opening a checking account for the LLC, or hiring employees.  There is no cost to apply, and it takes about 5 minutes to get.  See how to apply for an LLC EIN.

Registering for Business Licenses & Permits

Not directly related to the LLC, most businesses will need to apply for business licenses, sales tax permits, self-employment taxes, and more.  See the Guide to Starting a Business in your state for more information.

Filing the Annual Report

In most states, you will have to renew the LLC by filing an annual report, though Pennsylvania only requires filing once every 10 years. The fee for filing an annual report varies by state but generally ranges between $0 to $500 annually.

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

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