An LLC, or a limited liability company, is very popular among small business owners due to the liability protection it can provide. The owners (or members in an LLC) are not personally responsible for any business debts their company may have because an LLC exists separately from its owners. The difference between an LLC and a corporation is that LLC’s have far less reporting requirements, and are overall more flexible and easier to set up than an S corp or a C Corp.
You also don’t need the services of a legal counsel to form an LLC, and can do it online, right from your computer or even a Mobile phone.
Although the specific rules in regards to setting up an LLC will vary by state, generally speaking, the requirements are very similar.
For a modest fee, an online service provider such as LegalZoom can prepare all the necessary paperwork for you, as well as do all the required filings in the state where you decide to form your LLC. Online companies like LegalZoom, BizFilings or RocketLawyer have years of experience and have set up hundreds of LLCs, so setting up an LLC with one of them should be a breeze.
Now that you know where you can form your LLC online, let’s talk about the several steps you’ll need to follow to get it up and running.
Step 1: You’ll Need to Choose a Name
The very first thing you should do before filing your LLC paperwork is to check whether the name you want is available in your state. You can do that by searching existing business names online in your state.
In most cases, you won’t be able to register a name that’s already taken by someone else in your state, even if the business is located in another city. So for example, if “Victor’s Tasty Hotdogs, Inc” which is located in San Diego is taken, you won’t be able to register “Victor’s Tasty Hotdogs, LLC” in San Francisco, etc.
Researching and choosing a unique name beforehand can save you from potential trademark infringement claims and can help help you stand out and avoid confusion. It’s also a good idea to check whether a domain name is available in case your business name is.
Step 2: You Can Reserve Your Name
If you’re not ready to file your LLC documents just yet, but a business name you want is available, it’s always a good idea to reserve it. You don’t want your name to be taken where you’re ready to file in a few weeks or a few months. You can file a form and pay a name reservation fee and pretty much every state has this option. Filing fees, renewal policies and reservation period may be different for every state, so please check with your state for more info on this.
Step 3: You’ll Need to Choose a Registered Agent
Naming a registered agent is a mandatory requirement for every LLC, by absolutely every state. A registered agent is basically a person who will be receiving official documents such as subpoenas, lawsuits, etc., on behalf of the LLC and then pass them over to an LLC member (owner or owners). If you want to include yourself as a registered member, you can also do that.
But there are also companies that provide registered agent services for a small fee. If you don’t want to pay a company to serve as your registered agent, that’s fine too. You can have anyone over 18, and resident of the state where you’re forming your LLC, to be your registered agent in most states.
Step 4: Preparing an Operating Agreement for Your LLC
What is is LLC Operating Agreement? An LLC operating agreement is basically an explanation of how you plan to run your LLC. It talks about things such as how profits and/or losses will be allocated, voting rights and ownership interests of the members, how the business will be governed and a few other important things.
Many times the operating agreement is not required by the laws of the state where you’re planning to file, and is usually not filed with the state, but nonetheless it’s a great way for business owners, especially those with a few members, to have a clear understanding of each others responsibilities and rights, to minimize any potential misunderstandings in the future.
Step 5: Filing Organizational Paperwork With the State
Every state has its own rules and procedures for establishing an LLC, but generally, the following things should be included in your articles of organization:
- Full name and address of your LLC
- How long do you plan to have your LLC
- Why did you form your LLC (its purpose)
- Full name and address of your registered agent (again, this can be you)
Once the paperwork is ready, it has to be signed by you (the person who is forming the LLC). Certain states require a registered agent to also sign the paperwork.
When all the paperwork is ready and signed, you then have to file the LLC formation documents with the secretary of state, although in several states you file them in a different department that is in charge of business filings, so please check with your state to see where you need to file. The LLC formation cost will vary from state to state, but what is certain is that all of them will charge a filing fee and we’re not aware of any state that does this for free.
Step 6: Obtaining a Certificate of Formation from Your State
Once you file all the LLC formation documents and everything is approved, you should be issued a certificate, or some other document by the state where you filed, that basically will confirm that your LLC now legally exists and you can start business under the LLC’s name.
Once you have your formation certificate, you will be able to get a tax ID number for your new business, set up a business bank account and do anything else you need to do to start getting your business off the ground.
Step 7: You Can Register to Do Business in Other States
Will your LLC do business in any other state other than where you originally formed it? If so, you might have to register it in any other state where you want to do business. The registration process is very similar to the original paperwork you filed, and you will also need to have a registered agent in every state where you plan to do business.
Forming an LLC is a great and flexible option for many small and medium-sized business owners because they are not only relatively easy to set up and run, but also because they are relatively easy to maintain and don’t require lots of paperwork, etc.
We do however highly recommend preparing all the required documents and do all the filings via an online service provider like LegalZoom because even a small error on your end can take weeks to correct. Companies like LegalZoom have set up LLCs many, many times, and know exactly what to do and how to do it.