How to Start an LLC - How to Form an LLC | TRUiC (2024)

Simple Steps to Save You Time and Money

Form an LLC in 7 Steps

A limited liability company (LLC) is a business structure that offers the benefit of limited liability protection and flexible tax options. Read our step-by-step guide below to learn how to start an LLC today.

1. Select Your State
2. Name Your LLC
3. Choose a Registered Agent
4. File Your LLC with the State
5. Create an LLC Operating Agreement
6. Get an EIN
7. File a BOI Report

Check out our Spanish version of this LLC guide, ¿Cómo Crear Una LLC?,here.

Step 1: Select Your State

For most new business owners, thebest state is to form an LLCin the state where you live and plan to do business in. If your business will have a physical presence (e.g., storefronts, offices, sales reps, etc.) in different states, you'll need to register aforeign LLCin those states. Use our state-specific guides below to learn how to start an LLC in your state:

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Step 2: Name Your LLC

You'll need to complete aLLC name searchonline to make sure your LLC name is unique, and you'll need to meet your state's naming guidelines. These are some common state LLC naming rules:

• Your company name must include the phrase "limited liability company" or one of its abbreviations (LLC or L.L.C.).
• Your company name can't include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
• Restricted words (e.g., Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.

To learn more about naming your business, read ourHow to Name a Businessguide.

For business name ideas, check out ourBusiness Name Generator. Then, create a logo with ourFree Logo Generator.

Step 3: Choose a Registered Agent

A registered agent is a person or business that sends and receives legal papers on behalf of your company. These documents include official correspondence like legal summons and state filing notices.

Most states require every business to nominate a registered agent when forming an LLC. Your registered agent must be a resident of the state you're doing business in or a corporation authorized to conduct business in that state.

Read ourWhat Is a Registered Agentarticle to learn more about choosing a registered agent.

We also recommend hiring a professionalregistered agent serviceto provide you with peace of mind and help you staycompliant with the law.

Step 4: File LLC Articles of Organization

To officially create an LLC, you'll need to file your formation documents with the state's business division, usually part of the Secretary of State. In some states, theArticles of Organizationare known as theCertificate of FormationorCertificate of Organization.

You can typically complete file formation documents yourself online, by mail, by fax, or in person. However, we recommend hiring anLLC formation serviceto file for you.

The average state filing fee to start an LLC is about $100. To find out what the Articles of Organization filing fees are for your state, visit ourLLC cost guide.

What Is an NAICS Code?

Some states require you to list your business’s North American Industry Classification System (NAICS) code on your formation documents when forming your LLC. You can learn more about these codes with ourLLC NAICS Codeguide or find your LLC’s code with ourNAICS Code Lookupguide.

Member-Managed vs. Manager-Managed

Now is a good time to decide the management structure for your business — member-managed or manager-managed:

• Member-managedentails a small number of members that are involved in daily business operations.
• Manager-managedentails a large number of members that are typically not involved in the daily operations of the business.

For a more in-depth look into LLC management structures, check out our guide onMember-Managed vs. Manager-Managed.

Step 5: Create an LLC Operating Agreement

An LLC operating agreement is a legal document that outlines the ownership structure and member roles of an LLC.

Although most states don’t officially require you to have an operating agreement, it's still a good idea to create one when forming an LLC. There are six main sections of an operating agreement:

• Organization
• Management and Voting
• Capital Contributions
• Distributions
• Membership Changes
• Dissolution

For a complete online guide, as well as free operating agreement templates and a free custom operating agreement tool, read ourWhat Is an LLC Operating Agreementarticle.

Step 6: Get an EIN

An Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is like a Social Security number (SSN) for your LLC. You’ll need an EIN to hire employees oropen a business bank account.

You can get your EIN for free on theIRS website, via fax, or by mail. If you’d like to learn more about EINs and how they can benefit your LLC, read ourWhat Is an EINarticle.

Step 7: File a BOI Report

Beginning January 2024, LLC owners are required to file a Beneficial Ownership Information (BOI) Report with the US Financial Crimes Enforcement Network (FinCEN). Existing LLCs can file their report any time between January 1, 2024, and January 1, 2025, while new LLCs will need to file within 90 days of formation.

This contains similar information to that of your Articles of Organization, such as your LLC name and member information, and can be filedonlinefor free. Failure to file an accurate report on time can result in a $500 per day fine or even a jail sentence of up to two years.

Note:There arecertain filing exemptions, such as for large companies (i.e., more than 20 full-time employees), tax-exempt entities, and publicly traded companies.

For more information on how to go about filing your BOI report, we recommend having a look at ourBOI Report for LLCarticle.

Steps After Formation

File an Annual Report

Most states require LLCs to file an annual report, which involves updating your registered agent address and paying your annual fee or franchise tax.

Learn how to file yourLLC annual reportby reading our 50-state guides.

Keep Your Company Compliant

Get Licenses and Permits

When youstart an LLC, you’ll need to determine if your business needs any licenses or permits to stay compliant.

On the state and local level, business license requirements vary depending on your state of formation, as well as on county and city laws.

To get started on a business licensing search for your LLC, read ourbusiness licensing guide.

Register Your LLC for State Taxes

Depending on the nature and location of your business, you may be required to register for several forms of state tax:

• If you are selling a physical product, you'll typically need to register your company for sales & use tax.
• If you have employees, you may need to register for unemployment insurance tax and employee withholding tax.

Read ourLLC Tax Guideto learn how taxes will impact your business.

Additionally, most states require LLCs to file an annual report, which involves updating your registered agent address and paying your annual fee or franchise tax. Learn how to file yourLLC annual reportby reading our 50-state guides.

Understand Your LLC’s Federal Tax Options

LLCs are taxed as pass-through entities. Pass-through taxation means that all of the business’s profit passes through to the LLC member’s individual tax returns.

Each member then pays self-employment taxes and income tax on their share of the business’s income after any tax-deductible expenses are taken out. This is the default way to tax an LLC.

LLCs can also elect to be taxed as S corporations (S corps) or C corporations (C corps). The S corporation tax status allows members to be taxed as employees of the business. This can reduce tax burden in certain circ*mstances. Visit ourLLC vs. S Corpguide for more information.

How you pay yourself as an owner will also affect your federal taxes. Visit our guide to learn more abouthow to pay yourself in an LLC.

Follow Hiring Laws

When you decide to hire employees for your LLC, you must follow these legal compliance requirements:

• Verify that new employees areable to work in the US.
• Report employees as "new hires" to the state.
• Provideworkers' compensationinsurance for employees.
• Withholdemployee taxes.
• Print compliance posters and place them in visible areas of your workspace.
• Pay employees at leastminimum wageand as oftenas your state requires(weekly, biweekly, etc.).

How to Form an LLC FAQ

What is the best business structure for a small business?

Limited liability companies (LLCs) can protect your personal assets, and LLCs are the simplest and most affordable legal business entity to form and maintain.

Read ourBusiness Structureguide if you need help choosing the right business type for your small business.

Is it better to start a corporation or LLC for my small business?

A corporation is a complex legal business entity that is run by a board of directors and owned by shareholders. Small business owners will only benefit from starting a corporation if they rely on outside investors or need to exchange stock publicly.

Learn why LLCs are the best legal business entity for most small businesses in ourLLC vs. Corporationguide.

What are the benefits of an LLC vs. sole proprietorship?

Unlike a sole proprietorship, an LLC is a separate entity from the business’s owner. Most sole proprietors would benefit from converting their sole proprietorships to LLCs because LLCs offer liability protection and are inexpensive to start and maintain.

Only businesses with zero liability should operate as sole proprietorships because there isn’t any legal separation between a sole proprietor and the business.

Visit ourLLC vs. Sole Proprietorshipguide for more details.

What are the advantages and disadvantages of an LLC?

Limited liability companies (LLCs) can protect your personal assets and increase your business’s credibility. An LLC is the simplest and most affordable legal business entity to form and maintain.

LLCs aren’t good for attracting investors. If your business relies on outside investors, take a look at ourHow to Start a Corporationguide.

Can you start an LLC on your own?

Yes, you can start an LLC on your own by following ourstate-based LLC formation guides. If you would prefer to have a professional service form your LLC, we recommend checking out our review of thebest LLC services.

Can you start an LLC online?

Yes, you can start an LLC online in almost every state and Washington D.C. The only state that does not yet offer online filing for LLC formation is Maine.

In fact, many states strongly recommend that businesses file their documents online for faster processing and turnaround times. Read ourstate-specific LLC formation guidesto learn more.

What is the average cost to set up an LLC?

The cost of creating an LLC will vary depending on your state. Expect to pay a minimum of between $35 and $500 to form an LLC and about $100 annually to maintain the LLC.

Is it required to get a certificate of good standing for an LLC?

LLCs are not legally required to get acertificate of good standing.

Our full list ofLLC resources.