The LLC Guide
Corporate Compliance by Local Corporate Guides®
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 LLC.
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 LLC 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).
The desire to maximize business advantages led to the creation of the LLC, a relatively new business structure. Learn more about all the Benefits of an LLC.
Starting an LLC
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.”
If someone had to notify your business 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 LLC.
Everything you need to know about designating a Registered Agent.
Types of LLCs
Who’s going to be calling the shots and running the show—members or managers? The owners of your LLC are called members. Members can manage the LLC directly, or you can appoint or hire managers instead. While many LLCs are member-managed, managers can come in handy if you don’t run the day-to-day operations of your business. Also, most states require LLCs to list either members or managers on public documents (such as annual reports), so many LLCs appoint managers to help maintain member privacy.
Learn more about LLC Members and Managers.
Curious about whether or not you can form an LLC as a nonprofit? Wonder if a close LLC is a good choice for your business? Want to learn more about forming a series LLC? How about filing for an S-corp election? Check out our articles on these topics:
Articles of Organization
Now that you’ve made the big decisions, it’s time to file the 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.
Once your Articles of Organization are approved, you’ve legally formed your LLC with the state—but there’s much more to be done before your LLC is business-ready. Read on for additional steps or check out our page I Have an LLC…Now What?
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.
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.
LLC 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 LLC 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.
LLC Reporting Requirements
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 LLC. 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.
Everything you need to know about your state’s LLC Reporting Requirements.
Business Licenses and Permits
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.
A good place to start checking for LLC licensing requirements is with state departments. Here’s contact information for your state’s Secretary of State and licensing agencies.
Expanding to New States
While you may start an LLC in one state, you may want to do business in other states as well. Operating an LLC in a different state from where you formed requires some paperwork—typically an application for a Certificate of Authority. Overall, registering your out-of-state LLC (also called a “foreign LLC”) is a similar process to forming an LLC. You’ll need to pay a filing fee and appoint a registered agent in the new state. You’ll also likely to have to file annual or periodic reports in the new state.
Ready to Form an LLC?
To learn how to start an LLC in your state, click on the state name below. Or, to sign up for any of our services—from registered agent services to LLC formation—click “Get Started” now!