How to Form an LLC

Overview

• A Limited Liability Company (LLC) offers limited liability protection and pass-through taxation.
• Popular business structure for its simplicity and protection.

Steps to Form an LLC

Step 1: Select Your State

• Best to form an LLC in your home state.
• Register a foreign LLC if operating in multiple states.
• Use state-specific guides for detailed instructions.

Step 2: Name Your LLC

• Conduct an LLC name search to ensure uniqueness.
• Adhere to state naming guidelines.
  • Must include "limited liability company" or abbreviations (LLC, L.L.C.).
  • Avoid words that imply government affiliation.
  • Restricted words may require additional paperwork.

Step 3: Choose a Registered Agent

• A registered agent is responsible for receiving legal documents on behalf of the LLC.
• Must be a resident or authorized corporation in the state.
• Professional registered agent services are recommended.

Step 4: File LLC Articles of Organization

• Submit formation documents to the state’s business division.
  • Known as Articles of Organization, Certificate of Formation, or Certificate of Organization in different states.
• Consider using an LLC formation service.
• Average filing fee is about $100.
• NAICS codes may be required.
• Decide management structure: member-managed or manager-managed.

Step 5: Create an LLC Operating Agreement

• Outlines ownership and operational procedures.
• Not legally required in all states but recommended.
• Includes sections on organization, management, contributions, distributions, membership changes, and dissolution.

Step 6: Get an EIN

• Obtain an Employer Identification Number (EIN) from the IRS.
• Necessary for hiring employees and opening a business bank account.

Post-Formation Steps

File an Annual Report

• Required by most states to update registered agent information and pay annual fees.

Maintain Compliance

• Obtain necessary licenses and permits.
• Register for state taxes applicable to your business.
• Understand federal tax options (pass-through taxation, S corp, C corp).
• Follow hiring laws if employing staff.

Beneficial Ownership Information (BOI)

• Currently, BOI reporting is not required for US-based LLCs under the Corporate Transparency Act.

Frequently Asked Questions

LLC vs. Other Business Structures

• LLCs offer asset protection and are simple to manage.
• More suitable for small businesses than corporations.
• Better liability protection compared to sole proprietorships.

Costs and Requirements

• Varies by state, typically between $35 to $500.
• No need for a certificate of good standing unless required by specific circumstances.

Additional Resources

• Links to detailed guides and resources for each step and state-specific requirements.

Note: Always consult with a professional to ensure compliance with state-specific regulations and requirements.