The LLC Guide
Do Business the Right Way
LLCs are created at the state level in the US. The general process is the same in every state. We recommend working through this starting an LLC guide to understand the general concept and then choosing a state to see the state specific process to actually file, create, and start your limited liability company.
LLCs are the most common and easiest form of business in the US to start, run, and manage.
What is an LLC?
An LLC is a business structure much like a corporation—but with more flexibility regarding management and taxes. Like a corporation, an LLC is formed at the state level and has limited liability. This means that the debts and assets of the business belong to the LLC, not you. So if the business is sued, damages are usually limited to the LLC’s assets (not your house or car).
When it comes to taxes, LLCs are typically taxed like partnerships or sole proprietorships (but can elect to be taxed like a C or S corporation). LLCs can also self-manage, much like a partnership (but can choose to appoint managers to operate more like a corporation). Moreover, if you play your cards right, you can even live privately with an LLC.
Not sure if an LLC is the right business entity for you? Check out our LLC vs Corporation page.
Starting an LLC
Types of LLCs
Not all types of LLCs are created equal. There are single-member LLCs, multi-member LLCs, Series LLCs, nonprofit LLCs and more. There are many choices for how to set up and manage your LLC. There are even choices for how the IRS taxes a limited liability company. S-corp tax classification is especially popular because of the possibility to save money on self-employment taxes. With the many options available, it’s important to understand the different types of LLCs to determine which one is right for your business.
Before you can form an LLC, you’ll need to find the perfect business name—and make sure it’s not already taken. Fortunately, every state has an online database where you can search for available names. In every state, except for Alabama, you do not need to reserve the LLC name prior to filing the Articles of Organization.
When choosing a name, you’ll also need to avoid restricted words or phrases. For instance, in Washington, business corporations are prohibited from including words like “bank” or “trust” in their names. Nearly all states also require LLC names to include a phrase or abbreviation identifying the business entity, such as “L.L.C.,” “LLC,” or “Limited Liability Company.”
Check your name’s availability in your state with a Free Business Name Search.
If someone had to notify your LLC of a lawsuit, who would they speak to? Where would they go? To ensure these questions never go unanswered, your LLC will need to designate a registered agent to receive service of process (lawsuits) and official mail. Your agent must be available during normal business hours at a physical address in the state where you’re forming an LLC. Note that your registered agent’s information will become part of the public record of your company.
Everything you need to know about designating a Registered Agent.
Articles of Organization
Now that you’ve made the big decisions, it’s time to file the LLC state form. This form—most commonly called the Articles of Organization—is filed with an agency in the state where you want to form an LLC. In most states, LLC formation documents are processed by the Secretary of State. With the exceptions of Iowa and Nebraska, states offer either a paper or online form you can complete. You can also write your own Articles of Organization. Requirements vary, but at minimum, you’ll need to include your LLC’s name, your registered agent, and a signature.
We offer a free template for your LLC Articles of Organization. Want the particulars—forms, filing times, fees—for your state? Select your state from our drop-down above or the map below.
EIN for LLC
After starting an LLC, you’ll likely need a federal tax ID from the IRS. This Federal Employer Identification Number (known as a FEIN or EIN) is much like a social security number for your LLC. Every LLC that will pay taxes or hire employees needs an EIN. Apply for an EIN with the IRS by filing Form SS-4. Applying online on the IRS website typically takes just a few minutes.
Everything you need to know about getting an EIN.
LLC Operating Agreement
Your operating agreement is the governing document of your LLC. How the LLC distributes its profits and losses, who owns what percentage of the company, how management structure is defined, everything—it’s all in the operating agreement. Your operating agreement is not filed with any state agency when forming an LLC; it’s an internal document. However, it’s not something you want to be operating an LLC without.
Business Bank Account
To maintain your new LLC’s limited liability, you’ll need to keep your personal assets separate from business assets—so you’ll want to open a business bank account. Opening an account typically requires a few key business documents: your Articles of Organization, operating agreement and EIN. Depending on the bank—and how clearly powers are defined in your articles and agreement—you may also need an LLC resolution to open a bank account.
Make sure you have everything you need. We offer a free LLC resolution to open an LLC Bank Account.
LLC Funding & Assets
Your business bank account doesn’t do much good empty—your new LLC needs to be funded with capital contributions. Let’s say your business needs $10,000 to start. Each member would pony up a portion of that $10K from their personal money or assets to put into the new business account. In exchange, members receive a proportionate percentage of membership interest. You can change the percentages at any time if people want to contribute more later on.
Need to document all this money changing hands? We offer free LLC Forms, including capital contribution agreements and membership certificates.
Licenses and Reports
After you form an LLC, your state will still want you to check in every so often to update or confirm basic information about your company. These updates normally take the form of annual, biennial or periodic reports. Occasionally, these reports are combined with other state requirements. For instance, Arkansas pairs its annual report with an annual franchise tax. Some states (including Alabama, Alaska, California, Louisiana, Nevada and Washington) also require LLCs to file an initial report. This is a report due upon or shortly after starting your business.
Also, each state (and sometimes municipality) has specific business license requirements for certain trades. Depending upon the type of business you’re operating, you may need to obtain business licenses and permits.
Interested in your state’s reporting requirements? Learn about Business Renewal Service.
LLCs will also need to understand their tax filing requirements with their state and the IRS. Single-member LLCs are taxed as disregarded entities and multi-member LLCs are taxed as partnerships. LLCs can also elect to be taxed as an S-corporation or a C-corporation. Each tax classification has different filing requirements.
Everything you need to know about LLC Taxes.