How To Start An LLC in 7 Steps
By Bazal Razzaq
Updated: June 18, 2023, 12:30pm
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Starting a Limited Liability Company(LLC) is a relatively simpler process that offers multiple benefits for entrepreneurs. Whether you’re a small business owner or a freelancer looking to formalize your business operations doesn’t matter. Opening an LLC can provide limited liability protection, tax advantages, and flexibility in management. In this article, we’ll walk you through the important steps to start your own LLC in basic terms.
Before starting an LLC, it’s important to understand what it is as a business structure and how it can benefit your company. As an entrepreneur, the very first thing to do is research the requirements, laws, and regulations specific to your state.
We’d suggest consulting with an attorney, an accountant, or a business professional for expert planning before making any major decisions.
Once you’re done with your research and planning, it’s time to pick a name for your LLC. The name you choose needs to be unique and different from your competitors. You can search online databases to check if your desired name is available and not already registered by another business.
Also, your LLC name can’t be misleading. It should give the general public an accurate idea of your services.
While choosing a name, take care of a few rules that apply in almost every state in America. Here’s a quick rundown so you won’t have to bother looking elsewhere:
- Your name shouldn’t be the same as any other registered business.
- Avoid misleading the public by including any detail that displays your business as a bank, corporation, or any other type of organization it’s not.
- There are no restrictive terms such as “trustee,” “board,” “or insurance.”
- Your LLC name shouldn’t contain any obscene or forbidden words.
- Check that it’s not being used as a domain name to avoid trademark or legal issues.
- In every state, the name should reflect its LLC status. It should end with one of the following abbreviations:
- Limited Liability Company
- Limited Company
- LLC(Most people stick with this one)
Before we move ahead with the next step, there’s a little something you should know:
DBA(Doing Business As): You can also use a trade name for your LLC called DBA or Doing Business As. It basically allows you to register a different name for your business and function under that name. For example, if your company’s name is “Jack’s Milkshakes Limited Liability Company,” you want your LLC to be named “Jack’s Milkshakes” or something simpler. Similarly, many businesses run under a DBA(or a fictional name. Getting a DBA is simple – registering it with the Secretary of State. There might be a fee involved in the process. While certain requirements for a DBA may exist, you don’t necessarily have to include “LLC” or a similar indicator in the name.
Now that you’ve decided on an available and compliant name, what’s next? If you’re not ready to with the rest of your LLC documents, you can reserve your LLC name so no one else uses it.
Unless you’ve been living under a rock, you may know that all LLCs in America need a Registered Agent. Who’s a registered agent? Well, let us guide you. A Registered Agent, sometimes called a statutory agent or resident agent, is an individual, entity, or service authorized to accept important official or legal notices and documents on behalf of your LLC.
These documents and notices could be legal and lawsuit notices, tax forms, and other such correspondence from the government.
It’s important to highlight that a registered agent is a legal need for businesses like your very own limited liability companies (LLCs), corporations, and partnerships, to set up a dedicated point of contact for official communications.
Who can be a registered agent?
The needs and requirements for a registered agent are pretty straightforward. Anyone can be your agent as long as they,
- Are 18 years of age or older,
- Have a physical address in the state you’ve registered your LLC with,
- Are available during regular business hours to receive your mail,
- Can’t become the LLC itself.
Even you can be the registered agent for your LLC. In fact, some companies serve as their own registered agent. In such cases, your official address will be the same as the agent’s address and go into public records. Also, you should be available throughout business hours to receive important legal, official, or tax forms.
The next step in any state is preparing and filing your Articles of Organization. It’s a formation document that makes your LLC official and legal. In different states, it’s known by different names, like,
- Articles of Incorporation
- Certificate of Formation
- Certificate of Organization
- Statement of Formation.
Regardless of what’s it called, the purpose remains the same. It’s a legal document that establishes your LLC with the Secretary of State and outlines the details of its members.
The required filing fee varies by state and ranges from $50 to $520. The state office takes about two to three weeks to process the document.
While it may sound daunting, it’s just filling out a basic online form and submitting it. You can do this yourself or hire an attorney to help you with the whole process. The form includes the following information:
- The name and address of your LLC
- Main Business Purpose
- Total number of shares authorized
- The names and addresses of its members.
- Registered agent’s name and address.
- Management structure
- Signature of the person forming the LLC.
- Duration of your LLC
You can submit the form online through the Secretary of State’s office, but many business owners prefer an online LLC filing service. These filing services make it easier for you to start an LLC. They help you with important tasks like picking a legal business name, serving as your registered agent, and submitting all the necessary documents to the state.
Featured Best LLC Services
On Northwest Registered Agent’ Website
On IncFile’ Website
On Business Rocket’ Website
Once you’ve hired a registered agent, you need to register with federal and state governments to pay taxes for your LLC. This means you’ll need to set up a tax system to ensure you properly fulfill your tax obligations.
Federal Employer Identification Number(EIN)
An EIN is a nine-digit number issued by the IRS(Internal Revenue Service) in the United States of America. It is a unique identifier used for tax purposes and is important if you hire employees, file tax forms, or open business bank accounts.
This identification number recognizes your LLC for legal and financial purposes.
When do you need an EIN?
It’s important to remember that you need a federal EIN, not only when you own an LLC but also in other business types, like,
- Sole Proprietorship
- Nonprofit Organization
- Government agencies
- Estates and Trusts
Moving ahead, you need an EIN when and if:
- Your LLC has employees, including part-time, full-time, and temporary employees.
- Your business functions as a corporation or partnership. These entities require identification for legal and tax purposes.
- You own a nonprofit organization like a charity or a religious group.
- You’re a nonresident alien who must report and pay taxes on income earned in America.
- You’re a part of estates or trusts created as part of an inheritance or financial planning.
State Tax Identification Number:
When you set up an LLC, many states may provide you with a special identification number. While in some states, this may not be the necessary case. They may ask you to register with a specific department, like the Department of Revenue or some similar departments, and receive the number on your own.
Every business requires licensing and permits; your LLC is no different. Remember that different states have different rules and regulations when starting an LLC. So, the compliance needs and requirements change from state to state.
Often, there is a tonne of paperwork involved in starting an LLC.
You can check with your local government to understand what licenses and permits you need to get your LLC up and running.
Usually, you’ll need a license to protect your services and legalize them. Company licenses show your compliance with market norms, while permits allow you to sell specific goods or services in your state.
Some formation services offer features that research what licenses you need, and some help you file applications. No matter the case, we recommend the best LLC services for your comfort.
For any more information, you can head to our Home Page.
An operating agreement is an internal document containing information and ground rules on the LLC’s operating terms. It describes the roles, rights, and responsibilities of its members. While this may not be a requirement for all states in America, you should consider drafting one in case the co-owners/members ever get into a disagreement, a fight, or a misunderstanding and need help arriving at a solution.
The document explains how a company will be managed, controlled, and cared for and how the owners/members will work together. It’s like a rulebook for your business, where the rules are to be followed by the owners/members.
What To Include In An LLC Operating Agreement?
- Basic LLC Information
- Ownership Percentage of Owners/Members
- Voting Rights and Responsibilities
- Powers and Tasks of Members and Managers
- Sharing Profits and Losses
- Business Operations
- Dissolution or termination
- Special provisions and amendments to the agreement
You can include These basic sections in your agreement, irrespective of your state.
If you invest enough time and attention into creating a well-crafted agreement, your LLC can set itself up for growth, stability, and unity among its members.
…and that’s a wrap! You’ve finally covered all there is to cover when starting an LLC. Next time the question, “How To Start An LLC,” pops into your mind, you won’t be left clueless. Yay!
Now, you can focus on maintaining your LLC. Don’t worry. As promised, we’re always on your side! We’ve got that covered too!
Featured Best LLC Services
On Northwest Registered Agent’ Website
On IncFile’ Website
On Business Rocket’ Website
Frequently Asked Questions
Starting an LLC is a simple and exciting process. Follow these simple steps to form one:
- Choose a unique name for your LLC.
- Appoint a registered agent
- Prepare and file Articles of Organization
- Get an EIN from the IRS.
- Apply for business licenses and permits
- Create an operating agreement
Always research the specific regulations in your state and seek professional consultation when and if needed.
Yes, an LLC can be a nonprofit if it meets the needs and requirements of the state.
The state needs to allow the nonprofit to get LLC status. Then, the nonprofit LLC should be completely owned by a tax-exempt nonprofit entity(as suggested by the IRS).
That said, not just anybody can go ahead and form a nonprofit LLC. Only existing nonprofit organizations can open nonprofit LLCs as subsidiaries or LLC cells.
Yes, it’s possible and common for multi-member LLCs to open joint bank accounts where all members have equal access.