1. Creating an LLC: Basic Information
2. Select Your State
3. Picking a Name

To form an LLC online, you will need to complete steps such as submitting your Articles of Organization and paying state fees for limited liability company (LLC) formation.

Creating an LLC: Basic Information

For a new startup business, there's almost no more beneficial business structure than a limited liability company. The benefit of forming or converting to an LLC is being able to separate your personal and business affairs. When forming an LLC, you will need to comply with state laws.

With an LLC, you will have the tax advantages of a partnership or sole proprietorship and the personal liability protections of a corporation. An LLC provides you a reduced risk of audit and also allows deductions for certain business expenses. Like a partnership, an LLC can have multiple owners. However, unlike a partnership, these owners cannot be liable for debts of the business.

A corporation is another type of business structure that you could choose. Generally, companies choose to structure their business as a corporation if they eventually plan to make shares publicly available or are seeking outside investments. While there are benefits to forming a corporation, you will also need to observe strict corporate formalities, including:

  • Appointing a Board of Directors.
  • Issuing company stocks.
  • Creating corporate bylaws.

You can form an LLC and then later convert to a corporation if the need arises. One of the biggest differences between corporations and LLCs is that LLCs are pass-through entities. This means that LLCs are not liable for double taxation.

While there can be variances in the rules for forming an LLC depending on your state, the basic requirements are the same. Although you can form an LLC on your own, it's better to register your company with the help of an attorney. For example, there are many online legal services that can help you get your paperwork ready and submit your filings for an affordable fee.

Select Your State

The first thing you'll need to do when forming your LLC is deciding in which state you will organize your company. LLCs are formed based on state regulations, which is why you need to choose a state with beneficial laws. For instance, Delaware is very business-friendly, which is why many people choose to form their LLC in this state. However, if you want to keep your fees low and simplify the formation process, it's best to form your LLC in the state where it will primarily operate.

If your business expands and you decide to do business in other states, you will need to register your company in these states. Generally, to register in additional states, you will need to pay filing fees and submit a notice with the Secretary of State.

Picking a Name

After you have chosen the state where you will form your LLC, you need to pick a unique name for your company that complies with state rules. You will need to check with the Secretary of State to learn the naming rules in the state where you are registering. The name you choose for your LLC should be distinct from all other domestic and foreign companies in the state. If you are forming your LLC in California, you can visit the Secretary of State's website to perform a preliminary name search. Almost every Secretary of State will provide a tool for searching LLC names. You may even be able to reserve your desired name for a short period.

When naming your company, you must make it clear you are an LLC. This is why you must include a signifier of your status such as “LLC” or “Limited Liability Company.” You should also be sure you're not using any prohibited words in your company name. For instance, most states prohibit words such as “bank” or “insurance company” from being used in LLC names. You also can't use signifiers such as “Inc.” or “Corp.” as these words are reserved for corporations.

After performing your state-level LLC name search, you should also be certain that the name you have chosen does not violate any federally registered trademarks. Be certain that the name you choose won't limit your business as it grows. For example, using a geographic location in your LLC name may make it hard for you to successfully expand into other locations.

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