What Is an LLC License & Why Do You Need One

Last Updated on December 6, 2023 by Dr. Gabriel O’Neill, Esq.

Navigating the labyrinth of business structures can feel as daunting as a mythical Greek maze. Yet, tucked amidst the twists and turns, you might just stumble upon a fantastic beast of the business world—the Limited Liability Company or LLC. But what exactly is this creature and, more importantly, what is an LLC license? The answer to that question is a lot like the golden thread that guided Theseus – it’s the line that could lead you safely through the labyrinth of entrepreneurship.

In this article, we’ll unravel the mystery of LLC licenses, their benefits, the process of obtaining one, and why your business might need it. We’ll also shed some light on how services like ZenBusiness can streamline this process, making it as simple as a walk in the park rather than a daunting maze. 

So, hold onto your explorer hats, entrepreneurs, as we embark on this enlightening journey into the world of LLC licenses and the innovative solutions designed to help you navigate this path.

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What is an LLC license?

The term “LLC license” is an informal reference to the documentation that establishes a Limited Liability Company (LLC). It’s important to clarify that there is no specific license needed to create an LLC, nor does an LLC itself serve as a business operating license.

The key legal document that forms an LLC is known as the “Articles of Organization” or “Certificate of Formation”. This document, upon its filing with the respective state authority, along with any necessary supplemental documents and fees, officially activates the LLC as a business entity. This can serve as a de facto “LLC license”. Typically, a copy of these Articles of Organization will be required when setting up a business banking account.

Some states also provide a “Certificate of Good Standing” or a similar document, which validates the legitimacy of the business. For any questions related to LLC licenses or registration rules in your respective location, it is recommended to visit your state’s Secretary of State website for comprehensive information.

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Importance of Obtaining an LLC License

Obtaining an LLC (Limited Liability Company) license is important for various reasons:

• Limited Liability: This is the key advantage of an LLC. Members are not personally liable for the company’s debts or liabilities. This means personal assets, like your home or car, are usually protected if the business incurs debts or is sued.

• Flexible Taxation: An LLC has the flexibility to be taxed as a sole proprietorship, partnership, S corporation, or C corporation, providing a broad range of tax handling options.

• Credibility: Having LLC in your business name can boost your business’s credibility. Customers, suppliers, and partners may prefer to deal with a registered business entity.

• Ownership Flexibility: An LLC can have an unlimited number of members, and these can be individuals, corporations, other LLCs, and foreign entities.

• Management Flexibility: Unlike corporations, which require a board of directors and must meet certain structured corporate governance requirements, LLCs can be managed more flexibly.

• Ease of Transfer: Ownership in an LLC can be easily transferred, either through sale, inheritance, or gifting, making it a practical option for many business owners.

• Perpetual Existence: LLCs continue to exist even if a member leaves or if ownership changes. This provides business continuity.

However, it’s essential to consult with a legal and financial advisor to understand the implications and obligations of forming an LLC.

Process of Acquiring an LLC License

Acquiring a Limited Liability Company (LLC) license involves a multi-step process, which may vary somewhat depending on the specific jurisdiction (state, country) where the LLC is being established. 

1. Selecting a Unique Business Name

The first step in establishing your business involves selecting a suitable name. You must verify that your chosen name is not already registered within your state’s business directory. For instance, if your enterprise is based in California, you would utilize the California Name Reservations search to confirm the name’s availability. Additionally, it is prudent to conduct a thorough search for existing trademarks and copyrights that could potentially prohibit your use of the chosen business name.

Read more: How to Come Up With a Unique Business Name

2. Appointing a Registered Agent

Determining the appropriate registered agent is a pivotal task when establishing a limited liability company. The registered agent is an individual or corporate entity designated to receive legal notifications on behalf of your enterprise. Given the need for a publicly accessible address for your registered agent, you may contemplate engaging in a professional service to preserve your privacy rather than personally assuming this role. Here are the best registered agent services right now.

The primary obligation of a registered agent is to manage the service of process, which involves the formal receipt and delivery of legal documents notifying you of impending litigation. Depending on the jurisdiction, you may serve as your registered agent as a cost-saving measure. However, this approach would necessitate making your personal contact information publicly accessible.

3. Filing Articles of Organization

Subsequently, you are required to submit the Articles of Organization, or comparable documents, to your Secretary of State’s office. This can be accomplished independently online or with the assistance of a professional. 

Before allocating substantial funds towards legal counsel, it is recommended to familiarize yourself with the process to determine whether you are capable of managing it autonomously or if you would significantly benefit from a legal expert’s guidance.

It’s important to note that each state’s laws encompass unique rules and regulations for business entities, including LLCs. As an owner of an LLC, you are designated a “member” of the LLC. You have the option of operating as a single-member LLC or as a multi-member LLC in collaboration with partners. The ownership structure of your business is explicitly delineated in your Articles of Organization.

4.  Complying With Essential Documentation Requirements

Once officially registered within your designated state, it becomes essential to concentrate on the required paperwork necessary for the operation of your business. This generally includes documents such as the LLC operating agreement and any other licenses or permits relevant to your industry or field. If you encounter any uncertainties or queries, it is advisable to consult a legal expert who can assist in navigating this process.

Simultaneously, it would be prudent to obtain an Employer Identification Number (EIN), a unique identifier used for tax-related purposes. You can look up the EIN from the Internal Revenue Service (IRS) website, without any associated filing fees.

It is noteworthy that businesses are not mandated to establish a new legal entity within each state of operation. Rather, your LLC, once established in one state, can be utilized as a foreign LLC in another. The term “foreign LLC” is a technical designation used to refer to an out-of-state business entity.

Inadequate or incorrect completion of the requisite forms, coupled with a failure to adhere to business operating guidelines, could potentially jeopardize the liability protection offered by an LLC. Such an eventuality could expose you to personal liability in case of a business-related lawsuit.

5 Best LLC Services to Get an LLC Business License

Here are the five best LLC services available for entrepreneurs:

ZenBusiness 

ZenBusiness is highly regarded for its comprehensive LLC formation services. They offer a user-friendly online platform that guides users through the entire process. ZenBusiness provides customizable formation packages that include essential features like registered agent services, operating agreement templates, and state filing assistance. Their affordable pricing, excellent customer support, and commitment to compliance make them a popular choice among entrepreneurs.

Swyft Filings

Swyft Filings is an online platform that offers a user-friendly and efficient process for entrepreneurs to form and manage LLCs. They provide a range of service packages, including name availability searches, document preparation and filing, and access to essential business documents. Their customer support is responsive and knowledgeable, and they offer additional services for ongoing compliance. Swyft Filings is known for its competitive pricing, making it a reliable and cost-effective option for entrepreneurs looking to establish and maintain their LLCs.

Tailor Brands

Tailor Brands is an online platform that specializes in logo design and branding services for entrepreneurs forming limited liability companies (LLCs). Using AI algorithms, Tailor Brands creates unique logos and offers customizable branding tools to establish a cohesive brand identity. The platform also assists with LLC formation by guiding selecting of a business name and handling the preparation and filing of formation documents. 

While Tailor Brands focuses primarily on branding, it does not offer additional services like obtaining an EIN or ongoing compliance support. Overall, Tailor Brands is a convenient option for entrepreneurs looking for logo design and branding solutions during the LLC formation process.

Northwest Registered Agent

Northwest Registered Agent stands out for its exceptional customer service and personalized approach. They prioritize privacy and security, ensuring that sensitive information remains confidential. Northwest Registered Agent offers reliable registered agent services and comprehensive LLC formation packages. Their packages include essential features like custom operating agreements, EIN acquisition, and compliance alerts. Their commitment to personalized support and attention to detail make them a trusted choice.

Bizee (Previously Incfile)

Bizee is known for its simplicity and affordability. They provide a straightforward LLC formation process, allowing users to easily complete the necessary paperwork online. bizee offers competitive pricing and includes features such as registered agent services, business tax consultation, and access to a personalized online dashboard. They also provide lifetime customer support to assist with ongoing compliance requirements.

Do You Need a Business License to Form an LLC?

While forming a Limited Liability Company (LLC) does not necessitate an LLC-specific license, various types of businesses might require specialized permits or licenses to operate legally. The following are examples of businesses that may require such licenses:

• Product Sales: Businesses selling tangible goods might require a sales tax license and a reseller’s permit, acknowledging the company’s authority to sell products and collect sales taxes.

• Food Service: Establishments such as restaurants or food preparation businesses might need to comply with health department regulations, which might involve obtaining particular licenses or permits.

• Controlled Items: Businesses dealing in controlled items like liquor, tobacco, firearms, and cannabis usually have to comply with stringent distribution, sales, and tax regulations. They might need additional permits or licenses.

• Professional Services: Professionals such as lawyers and accountants may need to secure a license from a state or federal organization.

• Personal Care Services: Barbershops and cosmetology businesses might need licenses granted by a state board. Service providers often operate their own businesses and rent space from a salon, necessitating individual business registrations and licenses.

• Medical Services: Medical and healthcare professionals, including those in non-medical fields like chiropractic and massage therapy, may need to fulfill specific licensing requirements.

• Financial Services: Businesses handling finances generally fall under state and federal financial guidelines, necessitating comprehensive compliance.

• Transportation: Commercial transportation providers, given their higher risk of safety accidents, often need additional permits or licenses.

• Mining and Energy Extraction: Due to their significant environmental impact, these industries usually face more regulations, often necessitating additional licenses and permits.

• Construction: Construction businesses might require a permit for each job and potentially a contractor’s license or other certification. Operating without proper permits can lead to fines and other penalties.

Please note, this list is not exhaustive. Once registered as LLCs, other businesses might also need to obtain specific business licenses or permits. For further information or assistance in understanding the licensing requirements for your company, it is recommended to contact your local government or a business licensing expert.

Timeframe for Obtaining an LLC License

The timeframe for obtaining an LLC license can vary depending on several factors. The process typically involves filing the necessary paperwork, meeting state-specific requirements, and securing the appropriate licenses and permits. While it is important to note that timeframes can differ among states, on average, it may take several weeks to a few months to complete the entire process. 

Factors such as the complexity of the application, backlog of applications at the state level, and any additional requirements specific to the industry can impact the timeframe. It is recommended to begin the process early, allowing ample time for research, document preparation, and any potential delays to ensure smooth and timely acquisition of the LLC license. 

Consulting with professionals and utilizing services like ZenBusiness can help expedite the process and ensure compliance with all necessary steps.

How Zenbusiness Can Help to Get LLC License?

ZenBusiness provides comprehensive services to assist individuals in obtaining licenses and permits for their LLCs. They offer step-by-step guidance in forming an LLC, including assistance with filing the necessary paperwork, choosing a compliant business name, appointing a registered agent, and drafting an operating agreement. ZenBusiness also helps in acquiring an Employer Identification Number (EIN) from the IRS. 

Additionally, they recognize the importance of obtaining the right licenses and permits specific to the industry and location of the LLC. ZenBusiness can identify the required licenses and permits at the federal, state, county, and city levels through a business license report, ensuring compliance and avoiding penalties. Their services aim to simplify the process and provide support to maximize the benefits of having an LLC.

Benefits of Having an LLC License

Having an LLC license offers several key benefits:

• Limited liability protection: An LLC provides personal liability protection, separating the business assets from the personal assets of the owners. This shields the owners from being personally responsible for business debts or legal liabilities.

• Tax advantages: LLCs enjoy flexible tax options, allowing owners to choose how they want the business to be taxed. They can opt for pass-through taxation, where profits and losses pass through to the owners’ personal tax returns, or choose to be taxed as a corporation, potentially reducing overall tax liability.

• Flexibility in business operation: LLCs offer flexibility in structuring and operating the business. Owners have the freedom to determine the management structure, allocate profits and losses, and make decisions without the rigid formalities of other business structures.

• Enhancing business credibility: Holding an LLC license can enhance the credibility and professionalism of a business. It demonstrates a formalized legal structure and can instill confidence in customers, suppliers, and partners, potentially leading to increased opportunities and growth.

These benefits make the LLC structure an attractive option for entrepreneurs looking to establish and grow their ventures.

Maintenance and Compliance of an LLC License

Maintenance and compliance requirements for an LLC license can vary depending on the jurisdiction in which the LLC is registered. However, here are some general considerations:

Reporting and Renewal Requirements

Maintaining an LLC license involves fulfilling reporting and renewal obligations. These requirements vary by state and may include filing annual reports, updating business information, and paying renewal fees. ZenBusiness can guide on these obligations and help ensure timely compliance.

Consequences of Not Maintaining an LLC License

Failure to comply with maintenance requirements can result in various consequences. These may include fines, penalties, loss of liability protection, suspension, or even dissolution of the LLC. It is crucial to stay updated on the licensing obligations to avoid these potential issues.

Role of Legal Advisors in Maintaining Compliance

Legal advisors play a significant role in ensuring ongoing compliance with LLC licensing requirements. They can provide expert advice, monitor regulatory changes, and assist with filing reports and renewals. Engaging legal professionals can help minimize risks and maintain the LLC’s legal standing.

Conclusion – What is an LLC Business License?

In conclusion, an LLC license is a critical component for entrepreneurs and businesses seeking legal recognition, liability protection, and operational benefits. While it is important to note that an LLC itself is not a license, the process of obtaining an LLC involves fulfilling various requirements and securing the necessary licenses specific to the industry and location of the business. 

By properly forming an LLC, entrepreneurs can establish a solid foundation for their business, enjoy tax advantages, and project a professional image. It is essential to understand the licensing obligations, maintain compliance, and seek professional assistance when needed to navigate the complexities of the process. 

With the support of services like ZenBusiness, entrepreneurs can streamline the licensing process, ensure adherence to legal requirements, and focus on the growth and success of their LLC.