How to Start an LLC - A Thorough Guidebook

Looking to kickstart your very own business venture? Our ultimate guide on how to start an LLC which provides knowledge and detailed guidelines to assist you.
2:31 PM, Jun 30, 2023
2:31 PM, Jun 30, 2023
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Are you prepared to make money out of your hobby? Forming a limited liability company is a common and efficient strategy for separating business and personal finances. 

But how do you even start? In this post, we'll walk you through the steps of how to start an LLC, from coming up with a name to submitting the necessary papers, so you can get to work worry-free on building your business. So, shall we?



How to Start an LLC in 7 Simple Steps

The limited liability protection offered by an LLC is attractive to many entrepreneurs. 

Members of a limited liability corporation (LLC) have no personal liability for the business's debts because the LLC is a legal entity distinct from the members themselves.

Creating a limited liability company necessitates formal registration with the appropriate state agency. Although the specifics of how to start an LLC in your state will vary, there are several things you'll need to do regardless of where you call home.



Below are the steps on how to get an LLC:

Step 1: Choose and Reserve a Name for Your LLC

In the majority of jurisdictions, using the same name for two separate businesses is illegal. 

You can't have two companies with the same name, such as "Joe's Donuts, LLC" and "Joe's Donuts, Inc.," even if they're in different cities. 

Many jurisdictions prohibit the use of words like "bank" or "insurance" in business names.

Many states now allow you to check the availability of a potential LLC name by conducting a search of current business names on the internet. 

Prior to the process of how to start an LLC, it’s prudent to verify that the desired name isn’t already in use.

Researching whether other local firms use the same or a similar name is a good idea, in addition to checking for restrictions under state law. 

Picking a name that isn't already in use is a good way to prevent trademark infringement and consumer misunderstanding. 

It's also worth checking to see if the domain name you've been eyeing is available.

Your chosen LLC name may be taken, so reserving it’s a good idea if you aren't ready to file your LLC paperwork just yet. 

Almost every state has some sort of paperwork or fee that can be used to reserve a name. 

Each state has its own rules regarding the length of the reserve period, the cost of filing, and the frequency of renewals.

Step 2: Choose a Registered Agent

A registered agent (also known as a statutory agent) must be designated by an LLC in nearly every state.

A registered agent is a third party who accepts a legal process on behalf of a limited liability company and forwards it to the correct party within the company.

The LLC's registered agent can be a member or an officer of the LLC or anybody else who is at least 18 years old and a resident of the state. Registered agent services are offered by businesses like Northwest Registered Agent for a fee.

Step 3: File Organization Paperwork With the State

The paperwork and steps needed to create a limited liability company vary by state. Articles of organization typically include the following details but are not limited to them:

  • The company's full name and mailing address
  • How long it has been around, if not forever
  • The registered agent's full name and mailing address
  • Reason(s) for establishing Limited Liability Company
  • Typically, the individual who does open an LLC must sign the paperwork, and in some states, the registered agent must sign as well

If you want to start an LLC in your state, you'll need to file the necessary paperwork with the secretary of state. 

However, some states have a separate agency that deals with business registrations. If one does open an LLC, the formation cost varies by state because of the filing fee required by each.

Step 4: Prepare an LLC Operating Agreement

Your limited liability company's (LLC's) operating agreement should serve as a road map for the business. 

It lays out the rights of members in the event of the death or resignation of another member, as well as the procedure to be followed in the event of the company's dissolution. 

It also details the members' ownership interests and voting rights.

Your state's legislation may not necessitate filing the operating agreement with the state. 

To avoid unnecessary conflict in the future, business owners must clearly identify their roles and duties.

Step 5: Determine the Licenses Needed

The state will provide a certificate or other document verifying the existence of your LLC after the formation documents have been filed and approved. 

Once you have the certificate, you can find out if your firm requires any other licenses or permits, such as a zoning permit or liquor license.

Step 6: Get an EIN

The next thing to do is apply for an EIN or an Employer Identification Number. You might think of your EIN as your company's version of a Social Security number. 

It's specific to your company and essential for things like banking, taxes, and personnel decisions.

Step 7: Register to Do Business in Other States (Optional)

Your limited liability company (LLC) may need to get a certificate of authority from each state in which it conducts business. 

Forms comparable to those used when one originally decided to open an LLC will need to be filled out and submitted. 

A registered agent is required in every state where your company is permitted to operate.

Many entrepreneurs find that once they open an LLC, it’s the best business structure for their needs. LLCs can be formed and kept in most states with little effort. 

However, it’s critical to have a properly filled-out application and an operating agreement that sets forth the rights and obligations of the members.



Important Steps to Follow After Forming an LLC

How to Start an LLC: File Annual Reports

The next step isn't necessary until you've been trading for at least one tax year, but you should nevertheless learn it now. 

Annual reports, often called "statements of information," are required by most states and contain important information about your company and any developments since your last filing. 

This lets your state provide you with information on any further legal needs, such as licenses, that you may need to keep operating.  

Keeping detailed records of all of your company's transactions is a must. In this approach, you won't have to waste time (and even miss a deadline) searching for important documents.

What Should You Include in Your Annual Report?

Be sure to include the LLC's official name, office address, registered agent's contact details (if applicable), and the LLC number issued by the state's secretary of state. 

An LLC's annual report must comply with the laws and regulations of the state in which it’s based. 

Annual reports include:

  • Your primary place of business
  • Contact information for members and supervisors
  • Your state entity number and other important identification information
  • Your company's raison d'etre
  • Names and addresses of approved signatories
  • Details about your company's designated agent
  • Filing Instructions for the Annual Report

You can file your limited liability company's annual report with your state online if required to do so. You may probably assume by now that there will be some sort of cost involved. 

The lowest fee is $50 in Mississippi, while the highest is $500 in Massachusetts.

What Happens if You Don’t File an Annual Report for Your LLC?

Despite its seeming triviality, submitting your annual report on time is crucial, and doing so could have dire implications. 

Some states, for instance, may dissolve your LLC if you fail to file your annual report on time, while others may levy late fees, fines, and taxes.

How to Start an LLC: Open a Business Bank Account

Neither state nor federal law requires the proprietor of an LLC to open a bank account in the name of the business. There are, however, indications that you should:

  • When running a business, it's important to keep the company's finances discrete 
  • If you don't, you risk losing your company's limited liability status, which is why it's in your best interest to do so
  • Having a separate bank account for your LLC will help establish its credibility and professionalism
  • You'll have a clearer picture of your financial status if you keep your business and personal funds separate
  • Keeping track of company and personal costs separately is essential for completing your tax return at year's end 
  • Monitoring firm expenditures helps ensure a continuous flow of funds

How to Start an LLC: Obtain the Required Business Licenses and Permits

When one wants to open an LLC, it can be formed in most states without the need for a separate business license. However, you'll need this and other licenses to legally operate your limited liability company.

Different jurisdictions may have different necessities in terms of business licenses and permissions. 

Visit the SBA website to learn more about the licensing and registration requirements in the state where your LLC is based. Licenses and permissions can usually be applied online nowadays.

License types:

  • Certificate of Incorporation
  • Registration for Sales Tax
  • Legalization of Measurement
  • Permits to Practice a Profession or Occupation
  • Alarm license approval based on results of health inspection
  • Registration for Unemployment Insurance and Workers' Compensation

How to Obtain Business Licenses and Permits?

Pick the state you'll be doing business in, and then zero in on the specific municipality and county. The next step is to research local rules and regulations for registering a business on the website of the Small Business Administration. 

Be prepared to provide your EIN (Employer Identification Number). Visit the IRS website and fill out an application if you don't already have one. 

Your company's unique identification number (EIN) will subsequently be required; you can retrieve this code from any of several available online resources. Verify if you need any other licenses or permits in addition to the business license. The filing fee might be anything from $50 to $500, so be prepared to pay that amount.

How to Start an LLC: Learn More About Tax Requirements

One of the best investments you’ll make when you open an LLC is employing a seasoned accountant whose experience with running LLCs and educating yourself about tax.

The method by which you will be taxed depends on how you form your business structure. 

You may elect to be taxed as a Sole Proprietorship (in case you’ve formed a single-member LLC), as a Partnership (multi-member LLC), or instead, elect an S-Corp status.

Accountants are there to ensure you abide by federal and state tax laws and file your returns on time and in the correct manner.  

But they can also save you a small fortune over the years by applying legal tax reduction strategies that a less experienced general accountant might be unaware of. 

But you can also help yourself and reduce your bill by learning how to keep your debit and credit books in order.

Open an LLC Tax Filing Tips

To begin, investigate and claim all LLC-appropriate tax breaks and credits. 

Second, make sure you add any business tax deadlines to your calendar and examine them well in advance. Another option is to engage a professional accountant or tax preparer.  

Third, familiarize yourself with the tax regulations of your state. The forms you'll need to open an LLC file taxes are conditional on these three factors:

  • Whether there is only one member in your LLC or several
  • Choose a corporate tax status for your LLC if you don't want it to be treated as a pass-through entity
  • Furthermore, if the LLC has workers



How to Start an LLC: Get Business Insurance

In the event of a fire, flood, theft, natural disaster, delayed shipment, missed deadline, or customer data breach, business insurance can help cover the costs.

Everyday dangers like falling down the stairs, having an automobile accident or getting hurt on the job. 

The loss of supplies, reimbursement for business interruption, and legal fees may all be included in the scope of some insurance.

In the event that a consumer sustains an injury while on your premises, "public liability insurance." may be required by law. 

Furthermore, some states mandate supplementary insurance for LLCs, while others give you the freedom to choose. 

Workers' comp, unemployment, and disability coverage are also obligatory if you have staff. To find out what kind of insurance your state mandates for businesses like yours, look up your state's website.

How to Start an LLC: Best LLC Formation Services 

The procedure of registering a company is often difficult, lengthy, and stressful. 

It can be challenging for entrepreneurs to meet all the legal and administrative obligations on their own. 

In today's digital age, entrepreneurs and small business owners have access to a wealth of resources, including a plethora of online business registration services. 

We'll go over some of the best LLC formation services out there and help you pick the one that's best for your company in this post.

Open an LLC: ZenBusiness

ZenBusiness is an online LLC formation service that provides numerous tools for new and aspiring business owners. 

They offer all-inclusive, low-cost LLC formation packages with amenities like registered agent services and yearly report submission. 

ZenBusiness provides its customers with ongoing support and tools to ensure they meet all applicable regulations and thrive.



Open an LLC: Swyft Filings

When it comes to understanding how to start an LLC, no one does it faster or easier than Swyft Filings

Services for limited liability companies (LLCs) span from incorporation to compliance to acting as a registered agent. 

In addition to facilitating the registration of limited liability companies (LLCs), Swyft Filings offers individualized assistance to ensure that firms meet all state and federal requirements.



Open an LLC: Tailor Brands

Tailor Brands is a web-based branding and design agency that assists companies in developing a unified and professional brand identity. 

Logos, business cards, and social media profiles are just some of the branding services they provide. 

Tailor Brands also offers a set of materials and tools for designers to assist companies in developing their own unique brand elements.



Open an LLC: Northwest Registered Agent

Registered agent services, compliance management, and document filing are just a few of the business services available from Northwest Registered Agent

They focus on how to start an LLC and offer continuing support and resources to ensure their clients are always operating legally and successfully. 

If you need help on how to start an LLC, go no further than Northwest Registered Agent.



Open an LLC: Incfile

Services on how to start an LLC are quick and cheap with Incfile

Packages from this company include registered agent services, compliance management, and legal paperwork filings, among others. 

Because of the intuitive design of Incfile's platform, creating an LLC is a simple and quick process. 

In addition, they offer continuous assistance and resources to ensure that firms continue to operate legally and successfully. 

Incfile is an excellent choice for LLC formation services because it prioritizes low prices and easy accessibility.

Open an LLC: Why Form an LLC?

Entrepreneurs and groups of people who want to start a successful new firm often choose to do so by forming an LLC. Common motivations for establishing limited liability companies are:

  • Low startup cost:

Establishing and maintaining a limited liability business typically requires fewer resources than a corporation. 

There are states where the costs are under $100. If you want to start a business but don't want to break the bank, doing so, an LLC is the way to go.

  • Tax-related benefits: 

Even while corporate assets are kept separate from personal finances, LLCs have the unique ability to be recognized as pass-through entities and claimed on personal taxes.

This is favored by many LLC members since it prevents them from being taxed twice. Although LLCs are typically taxed like partnerships, C-corporations, or S-corporations, this isn’t always the case.

  • Liability shielding: 

Operating as an LLC affords its members and owners limited personal liability. 

Successful asset designation, for instance, can shield members' personal property from corporate liabilities.

There isn't much complexity involved in learning how to start an LLC; in fact, there are businesses that will do everything from filling out paperwork to filing annual reports on your behalf.



Open an LLC: Types of LLCs To Consider

There are a number of different LLC structures from which to pick when thinking about how to start an LLC, and you should be familiar with these options before making any final decisions. Examples of LLC Organizations Are:

  • Single-member LLC:

One individual owns and manages this Limited Liability Company

Although this LLC functions similarly to a sole proprietorship, it offers more favorable tax treatment and protection from personal liability.

  • Multi-member LLC:

LLCs that have more than one owner often fall into one of two categories: those managed by a manager and those managed by the members.

  • L3C: 

These organizations, also called "low-profit liability companies," serve as a hybrid between nonprofit limited liability companies and for-profit limited liability companies, maintaining an emphasis on the business's mission rather than profits.

  • Series LLC:

Series LLCs are hierarchical company structures in which one LLC owns multiple sub-LLCs with complete independence from each other. 

Each LLC in the series is essentially self-sufficient and has its own set of assets.

  • PLLC:

This limited liability company (LLC) is designed specifically for professionals who already hold relevant credentials.

  • Restricted LLC:

For the first decade after incorporation, Restricted LLCs pay no federal income tax. They’re similarly prohibited from giving money to their members. 

The articles of organization need to make it clear that there will be limitations placed on the LLC.

  • Uncommon: Anonymous LLC

There is no recognized name for this organization under the law. 

When a state does not disclose who owns a limited liability company, that company is known as an "anonymous" company. 

Even while much information concerning the establishment of a business is available to the public, there are still those who might choose to keep certain details under wraps. 

For instance, the proprietor of a single-member limited liability company (LLC) might not want their business's location publicly disclosed. Creating an LLC in most states requires providing identifying information. 

Currently, only residents of Delaware, Nevada, New Mexico, and Wyoming can make use of this choice.

How to Start an LLC – Frequently Asked Questions 

Open an LLC: Should I Get an LLC for My Small Business?

The limited liability company (LLC) is the most popular form of business organization because it’s simple, adaptable, and quick to form. 

In addition to shielding you from personal responsibility for business obligations, this setup also allows for "pass-through" taxation, whereby the revenues of the business are not taxed until they’re distributed to the LLC's shareholders. 

When tax time rolls around, business owners can deduct their take-home pay.

How to Start an LLC: Can I File for an LLC on My Own?

The free, detailed instructions on how to start an LLC will walk you through the process of forming your own limited liability corporation. 

To incorporate a business, you can use a professional service, such as ZenBusiness or Swyft Filing

How to Start an LLC: How Much Does it Cost to Start an LLC?

The price of forming an LLC varies from state to state and can even rise if you opt to have a professional handle the paperwork for you. 

The price of forming a limited liability company ranges from $50 to $500. 

If you decide to have a third-party formation company handle your business filings and other services, you may have to pay an extra $40 to $350.

How to Start an LLC: Is it Possible to Set Up an LLC for Free?

Usually, there is a fee to register an LLC in every state, albeit the amount varies. 

Some businesses claim to offer "free" LLC formation, but all they'll do is help you fill out the necessary paperwork for an LLC. 

However, the state's filing fee remains your responsibility.



How to Start an LLC: Bottom Line on How to Start an LLC

It's natural to feel some apprehension before reading this piece if you've never formed an LLC before. 

After all, you may feel like you're taking a huge risk by venturing into the legal unknown. There should be no holding you back now that you know how to form an LLC. 

So, wondering how to start an LLC? 

To open an LLC, just follow our instructions in order, and if you get lost or need more guidance, you can always come back to this article, talk to other local business owners, or look into a service like ZenBusiness, which specializes in helping people learn on how to start an LLC.

There is help accessible at any stage.



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