An LLC, or limited liability company, is a business entity that combines the characteristics of corporations, partnerships, and sole proprietorships. Forming a limited liability company offers several benefits for business owners, making it an attractive option for organizing a business. It provides limited liability protection to its owners while offering flexibility in management structure and tax advantages. This article will give guidance and tips on how to get an LLC.
How to Get an LLC
To get an LLC in any state, the general steps you can take include the following:
#1. Choose a Name and Register It
Your LLC name must be distinguishable from other business entity names registered with the state, and it must indicate that the business is a limited liability company by including the words “limited liability company,” “L.L.C.,” or “LLC” at the end of the business name. You can reserve a name temporarily if you’ve chosen an available name but aren’t ready to file LLC formation paperwork yet. Check trademark availability and consider using a “doing business as” (DBA) name if needed.
#2. Get a Copy of Your State’s LLC Articles of Organization Form
To establish your LLC as a legal entity, you’ll need to file a document with the state agency that handles business filings in your state. This document is called the Articles of Organization in most states, but some states use a different name, such as a certificate of formation. Each state has a form you can use. To find your state’s form, visit the website you used for business name research.
#3. Designate a Registered Agent
Every state requires LLCs to have a registered agent available at an address within the state during normal business hours to receive official or legal documents on behalf of the LLC. You can name yourself, an employee, or a professional registered agent company as the registered agent. However, if you decide to act as your LLC’s registered agent, be aware that your name and address will become public records.
#4. Prepare and File the Articles of Organization
Officially create an LLC by filing articles of organization with your state. The articles typically include the registered agent’s name and the address of the agent’s registered office. Filing fees vary by state, usually between $50 and $150, with some states charging more than $200. After your LLC paperwork is approved, you’ll receive a certificate of formation from the state confirming that your limited liability company officially exists. Designate a registered agent for the LLC, pay a filing fee, and include a statement about the LLC’s purpose. Some states require you to indicate how the LLC will be managed. The Secretary of State’s website typically provides sample articles of organization in either Word or PDF format.
#5. Obtain Business Licenses and Permits
Depending on your business type and location, you may need one or more licenses or permits to operate legally. Some common ones include a seller’s permit, general business licenses, industry-specific licenses, registration in other states (if your business has a location in a state other than the one where you formed your LLC), and business name. Confirm the licenses and fees your business needs to operate legally in your state. Be mindful of important deadlines, as you will likely have to apply to renew your license or permit periodically.
#6. Make an Operating Agreement
Although not required by all states, an operating agreement is a good idea to outline your LLC’s management and financial structure. While not mandatory in most states, an operating agreement is advisable, especially for multi-member LLCs. It outlines the LLC’s operations’ management structure, ownership, and other aspects.
#7. Get an Employer Identification Number (EIN)
Apply for an EIN from the Internal Revenue Service (IRS) for tax purposes
#8. Open a Business Bank Account
Open a separate bank account for your LLC to keep your personal and business finances separate.
Remember that the simplest and least expensive place to start an LLC is usually the state where you live. If you form an LLC in another state, you’ll also need to register your LLC as a foreign business entity in your state.
#9. Keep Your LLC Active
Setting up your LLC is only the start. Once it’s formed, you must ensure your business remains in good standing with your state. Refer to your state’s business filing website for current information on how to do so. You may need to file an annual report that updates information about your LLC and pay an annual filing fee.
How to Get an LLC for Free
Forming an LLC completely for free is not entirely possible. However, you can minimise costs by using low-cost formation packages and services like Incfile or GoForma. These services help you navigate the process, prepare the necessary documentation, and file the required forms. However, you will still need to pay the state fee for your specific state.
Step on how to form an LLC for free:
#1. Choose a Formation Service
While you can form an LLC independently, a service like Incfile can simplify the process and provide additional benefits. Incfile offers a $0 LLC package, where you only pay the state fee required for your state.
#2. Register for a Free Account
If you’re eligible, you can create a free GoForma community account to form your LLC, which offers a select number of free company registrations monthly through an application process. This is to help young startup founders, BAME founders, and women in business.
#3. File the LLC Articles of Organization
This official document designates your LLC’s purpose and other details. You can file the Articles of Organization yourself or use a service like Incfile to prepare, file, and pay the required filing fee.
#4. Designate a Registered Agent
You must appoint a registered agent for your LLC. The agent will be further responsible for receiving legal documents on behalf of the LLC. This can be a designated service company or an LLC member.
#5. Register for an Employer Identification Number (Ein)
Apply for an EIN with the IRS to start your business with the right tax structure. Incfile’s Gold and Platinum packages include free EIN filing.
#6. Set up a Business Banking Account, Domain Name, and Business Email
Once your LLC is formed, you can set up a business banking account, domain name, and email through Incfile’s Platinum package.
How to Get an LLC in California
To form an LLC in California, consider the following steps:
- Choose a name for your California LLC. Names for California LLCs must end with “Limited Liability Company,” “LLC,” or “L.L.C.” You can search names on the California Secretary of State’s Business Search tool.
- Hire a California registered agent: A registered agent must receive legal documents for your LLC. The agent for the LLC must have a physical address in California.
- File Articles of Organization: File the form online, in person, or by mail or fax. The state of California generally takes about one week to process articles for an LLC.
- Apply for an EIN from the IRS. Apply and obtain an EIN (employer identification number) for your California LLC.
- Comply with California tax requirements and regulatory requirements. To get an LLC, register with the California Employer Development Department and pay requisite employer taxes if you have employees.
- Obtain permits or licenses necessary for an LLC in California. Obtain health department permits, zoning permits, home occupation permits, professional licenses, and more as needed.
- File a biennial report (Statement of Information) with the Secretary of State. File every two years during a six-month filing window based on the month the LLC was formed.
How to Get an LLC in Michigan
To get an LLC in Michigan, follow the general steps of forming an LLC. However, check for laws, taxes, permits and licenses that are particular to any LLC in Michigan and follow them.
- Choose an LLC Name that is available and distinguishable from other entity names registered in Michigan.
- Choose a registered agent for the LLC who is at least 18 years old, resides in Michigan, and is generally available to receive documents during normal business hours.
- File the Articles of Organization for the LLC with the Michigan Corporations Division. The cost is $50; you can file online, in person, or by mail. Online filing typically takes 24 hours, while mailing takes 3-5 business days.
- Register for a Business License as most businesses in Michigan, an LLC inclusive, must register with various government agencies, depending on their specific activities or locations.
The entire process of forming an LLC in Michigan can take two to four business days. Also, it depends on the specific requirements and the Michigan LLC system.
Note: Any foreign LLC operating in Michigan must apply for a Certificate of Authority to transact business in Michigan (CSCL/CD-760).
How to Get an LLC in Texas
To get an LLC in Texas, follow the general steps of forming an LLC. However, check for laws, taxes, permits and licenses that are particular to an LLC in Texas and follow them.
Generally, to get an LLC, you’ll need to file the Certificate of Formation with the Texas Secretary of State, either online or by mail. This requires a filing fee of $300. The online filing process can be completed in 3 business days, while filing by mail can take 5 to 7 business days.
Although not mandatory for an LLC in Texas, an operating agreement is encouraged to avoid future conflicts. It outlines the management structure, ownership, and also other aspects of an LLC. Also, understand Texas’s tax requirements as over 90% of LLCs in Texas fall under the “no due tax threshold,” meaning they don’t have to pay taxes. However, if your LLC in Texas makes over $1,230,000 annually, you may have to pay a franchise tax.
Do I Need an LLC for My Business?
You don’t need an LLC to start a business, but forming a limited liability company can offer several benefits, especially for businesses that require personal liability protection and a formal business structure. There are alternative business structures, such as corporations, limited liability partnerships, sole proprietorships, and general partnerships, which also limit liability for business debts.
How Long Does It Take To Get an LLC?
The time it takes to get an LLC approved varies by state, also several factors can speed up or delay its formation. Generally, creating a limited liability company can take between a week to ten business days, depending on how fast the state processes business filings. Some states issue approval immediately after receiving the articles of organisation, in which the turnaround time can be as little as three business days. However, there are times of the year when it can take longer than expected, so it is important to plan accordingly. Usually, there is a heavy filing volume at the beginning and end of the year.
Several factors can speed up or delay the formation of an LLC, such as the type of processing and the correctness of the documents submitted. Mailed-in filings always take longer, while online requests are handled faster.
What Questions to Ask When Forming an LLC?
When forming an LLC, several questions should be asked to ensure that the business is set up for success. These questions include:
- What is the purpose of the business? Understanding the goals and objectives of the business can help determine its structure and also make other important decisions down the line.
- Where will the company be located? Knowing where the company will operate is important, as this will determine the taxation structure and other legal requirements.
- Who will be the members of the LLC? Deciding on the members of the LLC is important, as it will determine how much control each member has in the business and also how profits are divided.
- What tax structure will the LLC use? Deciding on a taxation structure for the limited liability company is essential, as it can impact its financial performance.
- How will the LLC be managed? Determining how the limited liability company will be managed is key, as it can dictate the success or failure of the business.
- Is liability protection important? If the business is operated with a partner, liability protection is important because of the potential for each partner to be liable for the other’s actions.
- Will there be outside investors who will own a stake in the company? If yes, it’s best to get legal advice on structuring the business.
- Can the company afford the filing fees and maintenance costs of an LLC?
- Who will have management control over the company?
- Do you need an attorney to help form a limited liability company? While it’s not necessarily required to form a limited liability company, it’s recommended to have an attorney assist with the process to ensure it is properly organised and to draft an operating agreement specific to the business.
How Do I Protect Myself From an LLC?
A limited liability company can protect your assets from misuse to pay business creditors, but it cannot offer absolute protection.
Here are some strategies to maximise your protection:
- Separate personal and business finances
- Purchase liability insurance for both your LLC and yourself to protect your assets
- Before establishing a limited liability company, meet with a CPA and an attorney to understand your responsibilities regarding taxes, filing costs, and maintaining the organisation’s structure.
- Avoid personally guaranteeing financing by establishing credit for the limited liability company.
- Consider asset protection trusts
How Do I Choose a Good LLC?
Choosing a good LLC involves several factors, such as selecting a suitable name, ensuring compliance with state regulations, and considering the tax implications.
- Naming your LLC: Pick a name that is memorable, distinctive, and easy to spell and pronounce. It should be relevant to your business and comply with your state’s guidelines.
- State regulations: Ensure that your LLC complies with the regulations set by your state. This includes preparing and filing the Articles of Organization with the state and paying the required filing fees.
- Tax implications: Consider the tax implications of forming a limited liability company. Depending on your business structure and location, you may need to pay taxes differently than you would with a sole proprietorship or corporation. Consult a tax professional to understand the tax requirements for your specific situation.
- Growth potential: When choosing an LLC name, consider your business’s future growth. Select a name that allows you to expand your product or service offerings without being tied to a specific product or service.
- Domain Availability: Check the availability of your desired domain name on social media platforms and domain registration sites like GoDaddy and Network Solutions.
- Legal support: Although hiring an attorney to form an LLC is unnecessary, you may consult one if you are concerned about the legal implications of choosing a name or other aspects of forming a limited liability company.
What Should My LLC Purpose Be?
When forming a limited liability company, it is important to include a purpose statement in the formation documents. This statement describes the reason or purpose for which the company was initially founded and what makes it unique. A good purpose statement is brief and precise, outlining the primary business activities that the limited liability company will engage in. It is important to exercise care when declaring a business purpose as a court may examine the purpose statement to determine whether you are personally liable as the owner.
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- WHAT ARE ARTICLES OF ORGANIZATION? Detailed Overview
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