Setting up an LLC business is easy. Just follow our ten steps. You can complete the registration process yourself or hire a filing service to do it for you.
While the precise requirements of setting up an LLC differ from state to state, below you will find a general outline of the steps involved and what to expect.
HOW TO START AN LLC BUSINESS
Getting an LLC for your business is easy. You can follow the simple nine steps outlined below, or you can hire a professional service to complete the registration for you.
Completing the steps by yourself shouldn’t pose much difficulty for most people but if you’d like to engage the services of a professional LLC registration service – check out our guide to the Best LLC Formation Service Companies.
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3: REVIEW STATE ARTICLES OF ORGANIZATION
5: SUBMIT ARTICLES OF ORGANIZATION
6: CHOOSE MANAGEMENT STRUCTURE
8: GET YOUR EIN
HOW TO REGISTER A LLC BUSINESS – 10 EASY STEPS
How to start an LLC business? Don’t worry, registering a LLC is straightforward. We’ve broken the process down into ten easy-to-follow steps. In general, you will have to take these ten steps to register your business as an LLC.
However, the requirements differ slightly from state to state so be sure to check the specific requirements for the state you are registering in to ensure full compliance.
1: CHOOSE A STATE
The first thing you need to do is to select a state to register your LLC in. For most new companies it is best practice to choose the state you reside in and plan to do business in.
If you plan to have a physical presence in multiple states, (set up an office or storefront), you will need to register a foreign LLC in each additional state.
2: CHOOSE A COMPANY NAME
You need to choose a name for your LLC. Your business name must be unique and it must comply with state guidelines for the state you are registering in.
In general, the following stipulations must be met.
- The company name must include the phrase limited liability company or its abbreviation.
- It cannot include any terms that might confuse it with a government agency.
- The name must be unique and cannot be the same as any LLC already registered in the state.
- Certain words are restricted and may require additional paperwork to use, eg: University, Bank.
3: REVIEW STATE ARTICLES OF ORGANIZATION REQUIREMENTS
To register your business as an LLC with the state you will need to complete a document called the Articles of Organization. You’ll need to contact the state agency that manages business filings in your state.
While most states refer to this document as ‘Articles of Organization’, it is sometimes also called a ‘Certificate of Formation’. Once you have located the form, review it in preparation for the next step.
4: APPOINT A REGISTERED AGENT
Each state requires an LLC to designate a registered agent. The agent agrees to send and receive legal papers on behalf of the company.
In the event the company gets sued by a third party they will receive all legal documents. The agent then passes the papers onto the person that runs the LLC.
Agents can be an individual or a corporation but must reside in the state you’re doing business. They also must be available at an address within the state during regular business hours. For more see – What is an LLC Registered Agent?
5: SUBMIT ARTICLES OF ORGANIZATION
Next up you need to complete the Articles of Organization form and file it with your state authority. In most states, the filing office is called the filing office, often the ‘Secretary of State’.
You can complete the LLC formation document yourself online or in hard copy, or you can hire an LLC formation service to perform the task for you.
The specific requirements for completing this form differ from state to state. However, in general, you can expect to provide the following basic information.
- Name of Business
- Address of Business
- Purpose of Business
- How LLC Will Be Managed
- Registered Agent Contact Details
6: CHOOSE MEMBER OR MANAGER MANAGEMENT
You need to decide if your LLC will be member-managed or manager-managed. Member-managed works best for small LLC companies with a small number of members.
A member-managed structure sees the LLC members involved in the day-to-day running of the company. A manager-managed LLC works best for an LLC with a large number of members. In this structure, the LLC members are not involved in the day-to-day running of the company.
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7: CREATE AN LLC OPERATING AGREEMENT
When discussing ‘how to start an LLC business’ you need to think about how the company will be run. This is where an LLC Operating Agreement comes in. Although not a legal requirement in most states, they are highly recommended.
An LLC Operating Agreement is a legal document that clearly defines the ownership structure, member roles, and your LLC will be operated.
However, an Operating Agreement is recommended because it clearly defines how the LLC will be run and managed. It provides clarity for individual roles.
They are often used to confirm how profits will be distributed, how members leave the LLC, and who provides capital for the running of the business.
In general, LLC operating agreements define the following areas.
- Organization Structure
- Management Structure
- Voting Rights
- Capital Contributors
- Profit Distribution
- Membership Changes
- Company Dissolution
For more information see our full guide – What Is an Operating Agreement?
8: GET YOUR EIN
An EIN stands for Employer Identification Number. It is like a social security number for your LLC. You need your EIN to open a bank account for the LLC or to hire employees.
You can get your EIN on the IRS website for free. Sometimes an EIN is also referred to as a Federal Tax Identification Number (FTIN), or a Federal Employer Identification Number (FEIN).
9: KEEP YOUR LLC ACTIVE
Establishing your LLC is only the first step in running your own limited liability company. Once the LLC is up and running you need to make sure you comply with any ongoing state requirements.
Refer to your state’s business filing authority, (Secretary of State), to make sure your LLC remains active. You may need to submit an annual report and pay an annual fee.
10: ANNUAL REPORTS & FEES
Many states require the submission of an annual report and payment of a filing fee. Depending on the state you choose you may be required to produce a formal annual report and file it with your Secretary of State.
Annual reports are designed to give state authorities up-to-date information on the LLC over the previous 12 months. This includes the names and addresses of LLC members and the registered agent for the company.
LLC TIPS – MANAGING YOUR LLC AFTER REGISTRATION
Now that you know how to make a company an LLC here are some tips on how to run the company after you have completed your registration.
SEPARATE BUSINESS ASSETS & PERSONAL ASSETS
An LLC company offers its owners limited liability protection. If you mix your personal and business accounts you risk forfeiting this protection in the event your LLC is ever sued.
You need to separate your business and personal accounts when running an LLC. Failure to do this could result in your personal assets being pursued to cover company debt.
GET A TAX ACCOUNTANT
The best way to choose a tax plan for your LLC is to hire a tax accountant. This way you can be sure you are choosing the most advantageous taxation structure for the LLC and its members.
A tax accountant will offer professional advice and help you get off to the best start possible when setting up your business.
STATE TAXES
Depending on the type of business you are running and the state you are registered in, you may be required to register for state taxes. Three taxes that may apply to your LLC are sales & use tax and unemployment insurance tax.
The best approach is to check with your state authority to find out the exact taxes you will need to register for. If you’re selling a physical product you will most likely be liable for sales & use tax.
Also, if you intend to hire employees you will need to register the company for unemployment insurance tax and employee withholding tax. For more see our full guide on How an LLC is Taxed.
FEDERAL TAX OPTIONS
By default, LLC companies benefit from ‘pass-through’ tax. This means, all company profits pass through to its members without being taxed. The profits are then taxed as part of the individual’s personal tax returns.
However, there are options to operate under different tax regimes, which may provide greater benefits. LLCs can choose to be taxed as S corporations or C corporations if they prefer.
This may offer a smaller tax burden for the company. For more info, check out – LLC vs S Corp.
BUSINESS INSURANCE
In most states, any business with employees needs to have workers’ compensation insurance. This includes LLCs.
Workers’ compensation insurance provides cover for an employee’s medical expenses in the event of a work-related injury.
General liability insurance is not a legal requirement but is recommended for any business. Sometimes referred to as LLC general liability insurance it is an insurance policy designed to protect the assets of a small business from a wide range of risk factors.
LICENSES & PERMITS
Some business types need a federal license or permit. You need to check if your LLC requires a license or permit based on the nature of your business.
Examples of business activities that require a license or a permit include agriculture, aviation, firearms/ammunition, fishing, maritime transportation, mining, drilling, nuclear energy, broadcasting, and transportation and logistics. For more see – LLC business licenses.
HIRING LAWS
If you are hiring employees you need to familiarise yourself with hiring laws. Hiring laws include; verifying employees are legally able to work in the US, reporting new employees as “new hires” to state authorities, providing workers compensation insurance, collecting employee taxes, and paying employees at least the minimum wage as required by state law.
HOW TO START AN LLC BUSINESS FAQ
HOW MUCH DOES IT COST TO SET UP AN LLC?
The cost of registering an LLC varies depending on the state you choose to register the company in. The registration fees vary from as little as $50 right up to $500. You can also expect to pay an annual fee of approximately $100. For more see – How Much Does an LLC Cost?
WHICH STATE SHOULD I REGISTER MY LLC IN?
It is usually best to register your LLC in the state in which you reside and plan to do business in. In most scenarios, there are no significant advantages to forming an LLC in a different state.
DO I NEED TO HIRE A LAWYER?
No, you don’t need to hire a lawyer to start an LLC business. You can work through the process of how to start an LLC business yourself by following state guidelines. There is no legal requirement to hire a lawyer.
READ NEXT
- ADVANTAGES & DISADVANTAGES OF LLC – click here
- PROS & CONS REGISTERED AGENT SERVICE – click here
- TAX BENEFITS OF LLC – click here
OTHER COMPANY STRUCTURES
- LLC vs SOLE PROPRIETORSHIP – click here
- LLC vs PARTNERSHIP – click here
- LLC vs S CORP – click here
- LLC vs C CORP – click here
About the Author
Erik Chambers: Senior Editor
Erik is a 30-year industry veteran with a wealth of experience in cross-functional areas ranging from business consulting to business education. He has worked in the private sector where he has advised start-up enterprises on early formation, capital acquisition, and tax issues.
While he specializes in business formation he has also held roles in several academic institutions where he teaches organizational decision-making, business strategy, and operations management. Erik is a graduate of the McCombs School of Business at the University of Texas at Austin.