How to Start an LLC

What is an LLC and How Does It Work?

An LLC, or Limited Liability Company, is a business structure recognized by state law that combines key features of a sole proprietorship or partnership with the liability protection of a corporation. This means the business is treated as a separate legal entity, and its owners (called members) are typically not personally liable for business debts or legal issues—offering what’s known as personal asset protection.

LLCs are popular because they offer flexibility and ease of maintenance. Unlike corporations, LLCs don’t require a board of directors, shareholder meetings, or detailed corporate records. Formation requirements vary by state, but generally include filing formal paperwork and paying a filing fee.

The 6 Steps to Starting an LLC

Starting an LLC involves several key steps that help establish your business legally and set it up for long-term success. While requirements vary by state, the process generally follows these six essential steps:

1. Name Your LLC
   Choose a unique, compliant name for your business that meets your state’s naming guidelines.

2. Choose a Registered Agent
   Appoint a registered agent to receive legal documents and government notices on behalf of your business.

3. File Articles of Organization
   Submit your LLC formation documents (often called Articles of Organization) with the state and pay any required filing fees.

4. Create an Operating Agreement
   Draft an operating agreement that outlines the ownership structure and operating procedures of your LLC.

5. Apply for an EIN and Review Tax Requirements
   Obtain an Employer Identification Number (EIN) from the IRS to open a business bank account, hire employees, and handle taxes.

6. Get the Necessary Licenses and Permits
   Ensure you apply for and obtain any local, state, or federal licenses and permits required to operate legally.

✅ 6 Steps to Start an LLC

1. Name Your LLC

Your LLC name must:

• Be unique in your state

• Include “Limited Liability Company” or an abbreviation like LLC or L.L.C.

• Avoid restricted or misleading terms like “bank” or “insurance” unless licensed

🔎 Check name availability via your state’s Secretary of State database and the USPTO for trademarks.
🌐 Also, reserve a matching domain name for your website.

2. Choose a Registered Agent

A registered agent receives legal and tax documents on behalf of your LLC. They must:

• Have a physical address in the state

• Be available during normal business hours

You can act as your own agent, but hiring a professional:

• Avoids public receipt of legal documents

• Keeps you free for meetings and travel

• Helps maintain privacy and compliance

3. File the Articles of Organization

This step officially registers your LLC with the state.
Depending on your state, it may be called:

• Articles of Organization

• Certificate of Formation

• Certificate of Organization

You’ll need:

• LLC name and address

• Registered agent’s info

• Management structure (member-managed or manager-managed)

• Organizer’s signature

📍 Submit online or by mail through your Secretary of State website.

4. Create an Operating Agreement

Even if not required by your state, an operating agreement is essential. It outlines:

• Member roles and responsibilities

• Voting and profit distribution rules

• Procedures for adding or removing members

📝 Store it safely — it’s not filed with the state.

5. Apply for an EIN (Employer Identification Number)

Most LLCs need an EIN if they:

• Have employees

• Have more than one member

• Open a business bank account

💡 Free through the IRS website. Instantly issued if applied online.

6. Get Required Licenses and Permits

You may need business licenses or permits at the:

• Local (city/county)

• State, or

• Federal level

These depend on:

• Industry (e.g., food, health, construction)

• Location

• Business activities

💼 Use a Business License Report to find out exactly what you need for your business and location.

💡 Benefits of an LLC

• Limited liability for personal assets

• Flexible taxation (can choose pass-through, S corp, or C corp)

• Fewer formalities than corporations

• Enhanced credibility with customers and investors

• Flexible ownership and management structures

💵 Costs to Form an LLC

Costs vary by state and include:

• State filing fee: $50–$500

• Annual/biennial reports: $15–$200/year

• Business licenses/permits

• Optional: Name reservation, publication, domain registration

🔁 Types of LLCs

• Single-Member LLC – One owner

• Multi-Member LLC – Two or more owners

• Series LLC – One LLC with separate “series” (assets/liabilities)

• PLLC (Professional LLC) – For licensed professions

• L3C – Hybrid LLC with social mission

• Foreign LLC – Operating in a different state than formed

🌍 State-Specific Guidelines

Each state has different:

• Filing fees

• Publication requirements (e.g., New York)

• Compliance rules

• Reporting timelines

🔍 Always check your Secretary of State website or consult a professional for up-to-date rules in your state.