Key Takeaways

  • DIY LLC Formation: An LLC can be easily formed on your own by following the necessary steps, which include picking a business name, filing the Articles of Organization, and obtaining an EIN.
  • Required Steps for DIY LLC: Essential steps include reserving your LLC name, selecting a registered agent, and drafting an operating agreement.
  • State-Specific Requirements: Different states may have slightly varied requirements, such as publication notices in local newspapers.
  • Additional Considerations: After forming an LLC, ensure that you obtain any necessary permits and licenses for your specific industry.

DIY LLC

A DIY LLC, also known as a “do-it-yourself” LLC, is easy and inexpensive to form. An LLC, or Limited Liability Company, consists of owners (members), and is a rather popular business structure, particularly due to the limited liability protection for its members.

While it is rather easy to form, the rules for establishing an LLC vary by state. Regardless of the state in which you choose to form your LLC, the basic requirements of establishing your LLC are the same.

6 Key Steps to Successfully Form Your DIY LLC

Starting a Do-It-Yourself LLC requires you to complete several critical steps. Here’s an updated guide to help you form your LLC seamlessly:

  1. Choose Your LLC Name: It's essential to select a unique name that complies with state rules and includes the term “LLC” or its abbreviations.
  2. Designate a Registered Agent: This person or service will receive legal documents and government notices on your behalf. Choose a reliable agent to ensure timely receipt of important legal communications.
  3. File Articles of Organization: This is the key document needed to establish your LLC with the state. It includes basic information about your LLC, such as its name, address, and the names of the members.
  4. Create an Operating Agreement: While not always mandatory, it’s highly recommended to have a formal operating agreement to define the responsibilities, management structure, and operating procedures of the LLC.
  5. Obtain an EIN: An Employer Identification Number (EIN) is essential for tax purposes and is needed to open business bank accounts or hire employees.
  6. Apply for Necessary Permits and Licenses: Depending on your industry, local or state licenses may be required to legally operate your business.

Obtain a Copy of the Articles of Organization from the SOS Website

Some states refer to this document as the “certification of formation,” or the “certificate of organization.” You can find this document on the Secretary of State’s website in the state where you want to establish your business. When you obtain this document, you should also find out whether the state in which you choose to register your LLC requires you to post a notice in the newspaper with your business registration.

Verify Additional Filing Requirements for Your State

In addition to filing your Articles of Organization, certain states may require you to submit additional forms or documentation. Some states also require a publication notice in a local newspaper. Be sure to review your state's specific guidelines to ensure you meet all filing requirements.

Pick Your Business Name

There are standard requirements when choosing your business name, and these include:

• You must choose a name that is available for use. You cannot use a name that is already being used by another LLC in that same state.

• The name must include the LLC designator, i.e., L.L.C., LLC, etc.

• The name cannot include prohibited terms, i.e., Bank, Insurance, etc.

Once you have chosen your business name, you can pay a fee to reserve the name for a period of time. This will also depend on the state in which you are reserving the name. Most states also don’t require that you register the name since the articles of organization will automatically register your business name once you file it.

Fill out the Articles of Organization

The articles of organization will need to include the business name, principal place of business, member names/addresses, and registered agent information. Keep in mind that you cannot use a P.O. Box as your address, nor can your registered agent use a P.O. Box. If you are forming a single-member LLC, you can use your home address as the principal place of business; some people choose not to use their home address, as that address will become public record.

Also included in the articles of organization is the management structure. Therefore, if you plan on hiring a third-party manager to oversee the daily operations of the business, then you will identify the manager. Furthermore, some multi-member LLCs choose a member to manage the LLC.

Double-Check Filing Accuracy

Before submitting your Articles of Organization, carefully review all details. A mistake on the form can delay your LLC’s approval. Make sure that the business name, members’ information, and address are correct, and that your LLC’s structure aligns with your planned operations.

Publish a Notice in the Newspaper

This will depend on the state’s requirement. If the state does, in fact, require this, then you will need to publish a notice in the newspaper indicating that you intend on forming an LLC. You will then need to re-publish the notice several times over a period of weeks. Thereafter, you will submit an affidavit of publication to the Secretary of State’s office, which provides that you published the notice in the newspaper on certain dates.

After you’ve published the notice in the newspaper (if required), then you will submit the articles of organization and the appropriate fee to your Secretary of State’s office.

Consider Alternatives for Publication

If your state requires publishing a notice, be aware that this can often be costly and time-consuming. In some cases, you may choose to use an online publication service that can streamline this process.

Draft an Operating Agreement

While most states don’t require this, you should still draft an operating agreement that lays out the important decisions of the business. This includes voting rights, member roles and responsibilities, the allocation of profits/losses, how the sale of a member’s interest will be handled, what happens if a member becomes disabled, incapacitated, or dies, along with other provisions that you deem necessary. Some states require that the operating agreement be in writing, i.e., Arkansas.

Customize the Operating Agreement

Although not always required, an LLC operating agreement helps formalize the business relationship between members. It should clearly outline how the LLC will be managed, how profits and losses will be shared, and procedures for adding or removing members.

Obtain an EIN

You will need to obtain an EIN, also referred to as an Employer Identification Number, with the IRS. You will need this number in order to open a business account and hire employees. The form is free and can be submitted online on the IRS website.

Obtain Permits and Licenses

Depending on the industry in which you operate, you might need to obtain additional permits and licensing in order to conduct business. Be sure to find out what is required of you by visiting your Secretary of State’s website. Some examples of licensing can include a seller’s permit or zoning permit.

Research Specific Industry Requirements

The types of permits and licenses you’ll need depend on the nature of your business. For instance, a retail business might need a sales tax permit, while a construction company could need specific safety certifications. Make sure you understand all local and industry-specific regulations.

Frequently Asked Questions

  1. What are the benefits of a DIY LLC?
    A DIY LLC allows you to save on formation fees, retain full control over your business structure, and enjoy limited liability protection.
  2. Do I need a lawyer to form a DIY LLC?
    You don't need a lawyer, but it can be helpful for ensuring that your LLC is structured properly. For simple LLC formations, you can handle it yourself using state guidelines.
  3. How long does it take to form a DIY LLC?
    The time varies by state. Some states approve LLCs within a few days, while others may take a couple of weeks. Make sure to check your state’s processing times.
  4. Can I form an LLC without a registered agent?
    No, every LLC is required to have a registered agent to receive legal documents. You can act as your own agent or hire a third-party service.
  5. What taxes will I need to pay for my LLC?
    As an LLC, you'll pay federal income taxes and potentially state taxes, depending on your location and the nature of your business. You may also need to pay self-employment taxes. Check with your state's tax authority for specific details.

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