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How to Start an LLC in 7 Simple Steps 

How to Start an LLC
(Last Updated On: December 6, 2023)

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Do you have the desire to transform your interest into a prosperous enterprise? Forming an LLC is a widely used and successful approach to safeguard your possessions and attain the advantages of a structured business setup. 

How do I get an LLC? Our article will assist you in learning how to start an LLC, from selecting a name to submitting documentation, so that you can confidently start your business. Let’s commence!

How to Start an LLC in 7 Simple Steps

Many small business proprietors choose to open an LLC primarily because it protects them against liabilities. A Limited Liability Company is a separate entity from its members, so the members aren’t held accountable for any business debts.

If you want to know how to start an LLC, you must complete the required paperwork and submit it to the relevant state authority. Each state has its own set of regulations and procedures, but no matter where you reside, there are specific steps that you must take to open an LLC.

Step 1: Choose and Reserve a Name for Your LLC

In most states, it’s not permitted for two separate business entities to have identical names. This means that even if the businesses are located in different cities, having “Joe’s Donuts, LLC” and “Joe’s Donuts, Inc.” with the same name wouldn’t be possible. 

Several states have limitations on using specific terms in a company’s name, including “bank,” when creating an LLC. If you want to know how to start an LLC, one crucial step is to check the availability of your proposed business name in various states online. 

This is important because it ensures no vital information is left out and helps you determine whether the name is already used before filing your LLC paperwork. Apart from adhering to state laws, conducting thorough research is advisable to determine if other businesses in the vicinity are using identical or comparable names. Opting for a different name can prevent any confusion and potential allegations of trademark infringement. 

Checking the availability of a domain name that corresponds with your business name can be beneficial. If you’re figuring out how to start an LLC and have already selected a name, but still need to file the necessary documents, reserving the chosen name might be a good idea. 

Many states offer provisions for reserving a name, which typically involves completing a form and paying a fee. However, the duration of the reservation period, renewal policies, and fees vary from state to state.

Read more: How to Choose a Business Name

Step 2: Choose a Registered Agent

When you decide to open an LLC, it’s essential to note that in almost all states, you must appoint a registered or statutory agent. 

This person or entity will be responsible for receiving legal notices, subpoenas, and other official papers on behalf of the LLC and forwarding them to the appropriate individual within the organization. How to start an LLC includes understanding these requirements for a registered agent.

In most states, individuals at least 18 years old and residents of the state are permitted to act as registered agents, including members or officers of the LLC. Companies such as Northwest Registered Agent offer registered agent services for a fee. 

Step 3: File Organizational Paperwork with the State

Every state has its unique process and requirements for setting up a Limited Liability Company (LLC). Typically, this involves submitting articles of organization that include details such as:

  • The duration of its existence, if not indefinite
  • The registered agent’s title and address
  • The person forming the LLC must typically sign the paperwork (In some states, the registered agent must also sign)
  • The reason the LLC was established
  • The LLC’s name and address

The typical process of starting an LLC involves submitting the paperwork to the secretary of state in most states. However, specific states have a separate department responsible for handling business filings. Regardless, a filing fee is required in all states, although the cost to open an LLC can vary depending on the state.

Step 4: Prepare an LLC Operating Agreement

The LLC operating agreement plays the role of a guidebook that outlines the procedures for how to start an LLC running it. 

It covers essential aspects, including the members’ voting rights and ownership interests, the distribution of profits and losses, the conduct of meetings, the governance of the LLC, the provisions for members in case of their exit or demise, and the process of dissolution of the company in case of its closure. 

In some states, filing the operating agreement may not be necessary, and the state’s laws may not mandate it. Business owners must have an operating agreement that outlines their duties and rights and reduces the possibility of future disputes.

Step 5: Determine the Licenses Needed

Starting an LLC involves submitting and authorizing formation documents. Once completed, the state will issue a certificate or other verification to prove your LLC’s existence. 

Knowing how to start an LLC is crucial in obtaining this acknowledgment from the state. Upon obtaining the certificate, you can identify any mandatory authorizations or licenses, such as a zoning permit or a liquor license, which your business may require.

Step 6: Get an EIN

To proceed further, acquiring an Employer Identification Number is necessary. Your business’s EIN can be compared to your Social Security Number. It’s essential for various business requirements such as banking, taxes, and staff recruitment. Additionally, it’s exclusive to your business.

Step 7: Register to Do Business in Other States (Optional)

Suppose you’re considering starting an LLC operating in multiple states. It’s essential to know that registration may be necessary for each state to conduct business legally. The registration process involves filling out and submitting specific documents, similar to those submitted during the initial formation of the LLC.

Additionally, if you open an LLC, appointing a registered agent is mandatory in all states where the LLC is authorized to operate. Learning how to start an LLC is a popular and flexible choice for many small business owners. 

Opening and keeping up an LLC in most states is usually straightforward. If you’re wondering how to start an LLC, knowing this business structure can be an excellent option for your company is essential.

Nevertheless, when you open an LLC, it’s crucial to accurately complete the necessary forms and establish an operating agreement that outlines the duties and privileges of the members.

Essential Steps to Follow After Forming an LLC

File Annual Reports

Typically, this step is relevant once you’ve completed a year of trading for tax purposes, but it’s beneficial to be aware of it now.

A statement of information, commonly called an annual report, is a necessary document that provides essential information about your business to the state. This includes any updates or modifications since your last filing period. The state can notify you of additional legal obligations, like obtaining licenses to maintain business operations. 

When starting an LLC, it’s recommended to establish a record-keeping system to save time searching for essential documents with fast-approaching deadlines.

What Should You Include in Your Annual Report?

If you’re wondering how to start an LLC, you’ll need to provide several crucial pieces of information. These include the name of your LLC, its office address, details about any registered agent you may have enlisted, and the unique LLC number assigned by your state when you open an LLC.

When you decide to open an LLC, remember that each state has its own unique set of laws and regulations. Among these requirements may be the need to include specific information in an annual report. 

Therefore, staying up-to-date on your state’s specific requirements for LLCs is essential to ensure compliance with all relevant regulations.

The content of annual reports consists of:

  • Your managers’ and members’ names and addresses
  • Your primary place of business
  • Info about your registered agent
  • How to submit your yearly report
  • Important identifiers for your company, like your state entity number
  • The goal of your company
  • A list of those with signing authority

Starting an LLC requires you to fulfill certain obligations, one of which is submitting an annual report to the state government. This report can be completed online, and the process usually involves visiting the relevant website. 

Knowing how to start an LLC entails being familiar with such requirements and following them diligently. It’s important to note that a fee is required for this service, and the amount will vary depending on your state, ranging from $50 in Mississippi to $500 in Massachusetts.

What Happens if You Don’t File an Annual Report for Your LLC?

Submitting your annual report on schedule may appear a mere formality, but it’s crucial when learning how to start an LLC, and the repercussions of not doing so can be serious. In certain instances, states may levy fines, sanctions, and levies. In other cases, they may even revoke your LLC.

Open a Business Bank Account

Although LLC owners have no legal obligation to open a separate business account, it’s recommended for various reasons.

  1. Establishing a separate bank account for your LLC can enhance the image of your business and make it appear more legitimate and competent. It’s important not to neglect this aspect of your business’s financial management.
  2. The assistance it provides to your accountant in distinguishing between personal and business-related expenses during end-of-year tax return filing is a significant advantage.
  3. It’s crucial to open a business account to keep your finances separate from your business finances. Failure to do so may result in losing your limited liability protection. Therefore, having a distinct entity can enhance the likelihood of retaining protection.
  4. If you keep your business and personal accounts separate, it becomes simpler to comprehensively understand your financial situation. 
  5. By monitoring your business expenditures, you can make sure that your cash flow remains steady. 

Obtain the Required Business Licenses and Permits

It’s possible to open an LLC in most states without obtaining a business license. However, it’s essential to acquire a license and other necessary permits to ensure that your LLC is operating by state regulations.

The requirements for licenses and permits needed for a business may differ from state to state. You can check the SBA website to determine which permits and licenses are needed in the state where your Limited Liability Company (LLC) is registered. 

Applying for these licenses and permits can generally be done online.

Types of licenses:

  • Weights and measures registration
  • Alarm permit
  • Sales tax registration
  • Unemployment and worker’s compensation registration
  • Professional/occupational licenses
  • General business license
  • Health inspection certification

How to Obtain Business Licenses and Permits?

First, select your state and finalize the city and county where you intend to conduct your business. 

Afterward, browse through the Small Business Administration’s website and gather the necessary details related to the regulations imposed by the city and state authorities in your chosen location. Ensure you possess your Employer Identification Number (EIN). If you don’t have it, visit the Internal Revenue Service website and submit your application.

To proceed, you must obtain your business code which can be easily obtained from several websites offering this service. Additionally, ensure that you check for any permits you may need besides the business license. Keep a credit card handy to pay the filing fee, which may range from $50 to $500.

Learn More About Tax Requirements

To open an LLC requires careful consideration of various aspects, including tax matters. To ensure success, one must educate oneself on how to start an LLC and hire an experienced accountant with expertise in managing such businesses. 

This investment can prove invaluable for the LLC’s long-term prosperity. The taxation of your business will be determined by how you structure it. You can opt for a Sole Proprietorship if you have a single-member LLC, a Partnership for a multi-member LLC, or an S-Corp status as an alternative to the two. 

It’s essential to choose the right business structure to determine the appropriate tax method. The main role of accountants is to ensure that individuals and businesses comply with federal and state tax laws and submit their tax returns accurately and timely. 

However, expert accountants can also assist in saving a considerable amount of money by utilizing legal tax reduction techniques that an inexperienced general accountant may not be knowledgeable about. Individuals can also lower their accounting expenses by mastering the art of maintaining accurate debit and credit records.

LLC Tax Filing Tips

When learning how to start an LLC, it’s crucial to know how to identify and take advantage of all tax deductions and credits available to you. Moreover, it’s wise to stay ahead of business tax deadlines by checking them in advance and keeping track of them on your calendar. By doing so, you can ensure that your LLC operates smoothly and successfully.

If required, you can opt to engage the services of a certified tax expert or accountant to file your tax returns. The third step is to conduct thorough research and gain knowledge about the tax regulations in your state. 

The specific forms required for filing your LLC taxes depend on three factors. It’s essential to have a complete understanding of these requirements when learning how to start an LLC.

  • And if your company employs people
  • If you decide to use the default (pass-through) tax status, give your LLC a corporate tax status
  • Whether your LLC has several members or just one

Get Business Insurance

If you have business insurance, you can safeguard yourself from unexpected events such as destruction caused by water or fire, damage to stock and premises, failure to meet a deadline, or breach of client data.

Everyday risks, like slip-and-fall injuries, employee car accidents, and work-related injuries, are typically covered by insurance policies. In addition, some policies provide coverage for supply breakdowns, business interruption compensation, and legal expenses. 

In case a customer gets injured while on your business property, it may be necessary for you to have “public liability insurance.” Opening an LLC involves some state requirements for obtaining extra insurance, which might be mandatory in some states and optional in others. 

It’s important to note that if you hire employees, you must obtain workers’ compensation, unemployment, and disability insurance as required by law. Knowing how to start an LLC can help you navigate these legalities smoothly.

It’s recommended to browse your state’s website to determine the specific insurance prerequisites that align with your business structure.

Best LLC Formation Services 

Registering a business can be daunting because of its complicated and time-consuming nature. Entrepreneurs often struggle to fulfill a multitude of legal and administrative obligations involved in the process of how to start an LLC. 

Thankfully, several online LLC services provide an all-inclusive solution for entrepreneurs and small business owners to start and manage their companies. We’ll discuss some of the best business registration services available and advise on selecting the most suitable one for your business requirements.

ZenBusiness

ZenBusiness - How to Start an LLC

Are you wondering how to start an LLC? ZenBusiness is the perfect website to guide you through creating or expanding your own business. With affordable and comprehensive services, they offer LLC formation packages, registered agent services, annual report filing, and other features to help you get started.

In addition, they provide ongoing support and resources to help businesses stay compliant and succeed.

Northwest Registered Agent

Northwest - How to Start an LLC

Northwest Registered Agent provides customized assistance and various business solutions, such as registered agent services, compliance management, and document submission. 

Their area of expertise is in LLC establishment, and they offer continued guidance and tools to aid businesses in maintaining compliance and thriving. Northwest Registered Agent is a dependable ally for services on how to start an LLC.

Bizee (Previously Incfile)

Bizee is a company that offers affordable and quick services on how to start an LLC. They have various packages, including compliance management, registered agent services, and document filing. Their platform is extremely user-friendly and simplified, ensuring that the process of how to start an LLC is seamless and uncomplicated. 

They provide continuous support and resources to help businesses maintain compliance and thrive. bizee prioritizes affordability and convenience, making it an excellent option for services on how to start an LLC.

Swyft Filings

Swyft Filings is a service that specializes in forming LLCs quickly and easily, offering a variety of services for LLCs, such as incorporation, compliance, and registered agent services. The company also offers tailored assistance to help businesses navigate how to start an LLC and adhere to state and federal regulations. 

Tailor Brands

Tailor Brands is an internet-based platform that assists companies in establishing a consistent and expert brand image. They propose various branding packages that comprise designing logos, business cards, and social media branding. 

Tailor Brands provides businesses with multiple design tools and resources they can use to fashion and personalize their branded assets.

Why Form an LLC?

Entrepreneurs and groups often choose to open an LLC when starting a new business venture. This type of legal structure offers potential for success and is a popular option among those seeking to establish their enterprise.

The decision to open an LLC is often based on several factors, including:

  • Tax-related benefits: One of the unique features of LLCs is that they can be considered pass-through entities and included on personal tax returns while keeping business assets separate from personal finances. This is a popular choice for many LLC owners as it can help prevent double taxation. However, LLCs can also be classified for tax purposes as sole proprietorships, partnerships, C-corporations, or S-corporations. It’s important to consider the tax implications and choose the option that best fits the needs of the business.
  • Liability shielding: The main advantage of operating an LLC is that it protects the members and owners against legal liabilities. This is achieved by properly separating the company’s assets from the member’s personal assets, which helps safeguard their assets in case of any legal disputes.
  • Low startup cost: Compared to corporations, limited liability companies are generally more affordable to set up and maintain, and may cost less than $100 in certain states. LLCs are an excellent choice for entrepreneurs seeking a budget-friendly business structure to launch their company. Starting an LLC isn’t complicated since there are service providers that can assist you in completing the paperwork and taking care of annual obligations like filing annual reports. 

Read more: Benefits of Starting an LLC

Types of LLCs To Consider

If you’re wondering how to start an LLC, it’s essential to clearly understand the different LLC structures that exist. This knowledge will help you choose the most appropriate business model that suits your company’s purpose and intended operations.

The different types of LLC structures include:

  • Restricted LLC: During the initial ten years of their formation, LLCs that have restrictions placed on them are exempt from taxation and prohibited from distributing profits to their members. To qualify for these benefits, the articles of organization must explicitly state that the LLC is restricted.
  • PLLC: This type of business formation, known as a specialized LLC, is restricted to licensed professionals only and cannot be utilized by everyone.
  • Single-member LLC: This limited liability company is managed and owned by one individual. Although it resembles a sole proprietorship, it offers extra tax advantages and protection against liabilities.
  • Multi-member LLC: LLCs with multiple members are typically categorized as either manager-managed or member-managed entities, with no information left out.
  • L3C: The organizations referred to as “low-profit liability companies” connect non-profit LLCs and for-profit LLCs, focusing on the business purpose rather than profits.
  • Series LLC: A Series LLC is a type of business structure that includes multiple LLCs arranged hierarchically. The highest LLC in the hierarchy owns several lower-tiered LLCs, separated without limits. These LLCs function independently, and their assets are separated from one another.
  • Anonymous LLC: When it comes to the legal classification of certain entities, there is no specific term for the type of entity that an LLC falls under. In cases where the state doesn’t publicly identify the owner of an LLC, it is referred to as an “anonymous” LLC

Public records typically contain information about business formation, but some individuals may have reasons for wanting to keep their personal information as private as possible. For example, a single-member LLC owner may operate their business out of their residence but may not want this information to be made public. 

Most states do not currently allow businesses to open an LLC anonymously, except Delaware, Nevada, New Mexico, and Wyoming.

How to Start an LLC – Frequently Asked Questions 

Should I Get an LLC for My Small Business?

The most prevalent type of business entity is the limited liability company because of its simplicity and versatility in formation. 

This structure also provides liability protection, which means business debts will not be the owner’s personal responsibility, and pass-through taxation, where company profits go directly to the LLC owners with no initial tax deduction. The profits are then included in the individual income tax returns of the owners.

Can I File for an LLC on My Own?

According to a comprehensive guide on “How to Start an LLC”, you can establish a limited liability company independently without assistance. Several LLC Services like ZenBusiness or Northwest Registered Agent can help you understand how to start an LLC.

How Much Does It Cost to Start an LLC?

When learning how to start an LLC, it’s important to know that the cost to open an LLC depends on the state filing fees and whether you do it yourself or use a professional service. 

The cost to open an LLC can range from $50 to $500. If you choose to use a third-party formation company, there may be an additional fee of $40 to $350 for their services. It’s important to consider all costs before deciding.

Is It Possible to Set Up an LLC for Free?

If you’re wondering how to start an LLC, it’s important to note that the registration cost may vary depending on your state. However, one thing is for sure, there’ll always be a registration fee that applies to open an LLC.

Some companies claim to offer “free” LLC formation, but this simply means they will assist you in completing the paperwork without any charge. However, you’ll still have to pay the state’s filing fee.

Bottom Line on How to Start an LLC

It’s not unusual to feel anxious about knowing how to start an LLC business before reading this post since it may seem like a significant legal undertaking. However, now that you have learned how to start an LLC, you should feel confident moving forward. 

Take things one step at a time, and if you encounter any difficulties on how to start an LLC or require additional guidance, refer to this guide or seek advice from other business owners in your community. 

Another option is to use an LLC formation service like ZenBusiness for assistance on how to open an LLC. Remember that support is readily available throughout the entire process.

About the author

Dr. Alexander Sterling, Esq, a distinguished legal scholar with a business law degree and a Doctor of Juridical Science, is a leading expert in business registration and diverse business departments. Renowned for his academic excellence and practical insights, Dr. Sterling guides businesses through legal complexities, offering invaluable expertise in compliance, corporate governance, and registration processes.

As an accomplished author, his forthcoming book is anticipated to be a comprehensive guide for navigating the dynamic intersection of law and business, providing clarity and practical wisdom for entrepreneurs and legal professionals alike. With a commitment to legal excellence, Dr. Alexander Sterling, Esq, is a trusted authority dedicated to empowering businesses within the ever-evolving legal landscape.

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