How to Start an LLC

Forming a Limited Liability Company (LLC) is a powerful way to protect your personal assets while enjoying flexibility in management and taxation. Whether you're starting a small business or launching a side venture, an LLC offers a variety of benefits, including liability protection, tax flexibility, and operational ease. Here’s a step-by-step guide to forming an LLC, with key legal insights and helpful resources to ensure your success.

1. Choose a Name and Check Availability

The name of your LLC must meet your state’s specific naming rules and be distinct from any other registered businesses in the state. Here’s what you need to do:

• Uniqueness: Your LLC’s name must be distinguishable from other businesses in your state. Most states provide an online tool through the Secretary of State website where you can search business names.
• Name Requirements: The name must include “LLC” or “Limited Liability Company” (or similar variations depending on your state). It cannot include words that could confuse your LLC with a government agency (such as “FBI” or “Treasury”).
• Domain Name: It's a good idea to check if your LLC name is available as a domain name for your website. This helps protect your brand identity and makes it easier for customers to find you online.
• Name Reservation: If you’re not ready to file immediately but want to ensure the name is available, you can typically reserve it for a small fee with your state’s business filing agency.

Pro Tip: A memorable and easy-to-spell name can help your brand stand out. Consider branding tools and SEO when choosing your LLC name.

2. Designate a Registered Agent

A registered agent is a person or business entity that is designated to receive legal documents and official government notices on behalf of your LLC. This is an essential requirement for LLCs in all states.

• Requirements: The registered agent must have a physical address in the state where your LLC is formed. They will receive service of process for lawsuits and other legal notices.
• Who Can Be a Registered Agent?: It can be you, another member of the LLC, or a professional service. Many business owners opt for a professional registered agent service to ensure that they receive all documents in a timely manner and remain in compliance with state regulations.

For more on choosing the right registered agent for your LLC, check out Our Real Estate Services: From Contract Review to Closing.

3. File Articles of Organization

The Articles of Organization (sometimes called a Certificate of Formation or Certificate of Organization) is the official document that creates your LLC. This is filed with the state’s business filing agency, typically the Secretary of State. Here’s what’s generally required:

• Business Name: The name you’ve chosen for your LLC.
• Registered Agent: The name and address of your LLC’s registered agent.
• Business Address: The physical location of your business (this can be a home address or office).
• Member Information: Depending on the state, you may need to list the names of the LLC’s members (owners). In many cases, the LLC’s members are not publicly listed.
• Filing Fee: Filing fees for Articles of Organization vary by state but typically range from $50 to $500. The fee is payable when submitting the documents.

Once submitted, the state will process your Articles of Organization, and you’ll receive official recognition of your LLC.

For detailed guidance on legal considerations during the LLC formation process, visit Meet Our Business Law Team: A Look at Our Experience and Credentials.

4. Create an Operating Agreement

An Operating Agreement is an essential internal document for your LLC. While it’s not always legally required in all states, it’s highly recommended to avoid future conflicts. This document outlines how your LLC will be run and addresses key operational aspects.

Key provisions of an Operating Agreement might include:

• Ownership Structure: Specifies each member’s percentage of ownership in the LLC.
• Management Structure: Defines how the LLC will be managed—whether by members (member-managed) or by appointed managers (manager-managed).
• Profit and Loss Distribution: Outlines how profits and losses will be shared among the members.
• Decision-Making Process: Defines how business decisions will be made and whether they require unanimous approval or majority votes.
• Dispute Resolution: Describes the process for resolving conflicts among members, such as mediation or arbitration, to avoid costly court battles.

For guidance on drafting a strong operating agreement, see A Guide to Drafting a Business Partnership Agreement.

5. Obtain an EIN (Employer Identification Number)

An EIN (also called a Tax ID Number) is issued by the IRS and is required if you plan to hire employees or open a business bank account. The EIN identifies your LLC for tax purposes.

• Why You Need an EIN:
• If you have employees.
• To open a business bank account.
• To file federal and state taxes.
• To apply for business licenses.

You can apply for an EIN for free on the IRS website. The process is simple, and you’ll typically receive your EIN within minutes.

To apply for your EIN, visit the IRS EIN Application.

6. Comply with State and Local Requirements

In addition to the federal requirements, your LLC may need to meet specific state and local requirements. These can include:

• Permits and Licenses: Depending on your industry, you may need special permits or licenses (e.g., a health permit for a restaurant or a sales tax permit if you’re selling goods).
• Zoning Regulations: Make sure your LLC’s business activities comply with local zoning laws, particularly if you’re operating from a physical location.
• State Taxes: Check if your state requires any special business taxes, such as state sales tax, employment taxes, or franchise taxes. Some states have specific LLC fees or annual reports.

Your state’s small business portal is a helpful resource for finding out what licenses, taxes, and other requirements apply to your business. Additionally, the U.S. Small Business Administration provides a comprehensive guide to understanding these requirements.

7. Maintain Your LLC

Once your LLC is formed, you need to maintain compliance with ongoing state requirements to keep your LLC in good standing.

Key ongoing responsibilities include:

• Annual or Biennial Reports: Most states require LLCs to file an annual or biennial report that provides updated information about your LLC, such as its business address and members. Some states also charge a filing fee for these reports.
• State Fees and Franchise Taxes: Some states charge an annual fee or franchise tax to maintain your LLC’s active status. These fees can vary based on your LLC’s income or other criteria.
• Accurate Record Keeping: Keep detailed financial records, including receipts, invoices, and tax filings. This will help ensure tax compliance and avoid legal issues down the road.

For legal support throughout the life of your LLC, consider the insights shared in The Business Law Firm Difference in Corporate Litigation.

Key Takeaway

Starting an LLC involves more than just paperwork—it’s about laying the foundation for your business’s success and protecting your personal assets. With proper planning, the right legal resources, and a clear understanding of your state’s requirements, you can confidently form an LLC and set yourself up for long-term growth. Resources like the U.S. Small Business Administration and expert legal guidance from firms like those at Meet Our Business Law Team will help you stay compliant and succeed in your new venture.