1. What Is an LLC?
2. Can You Form an LLC for Free?
3. Steps to Form an LLC

Free LLC registration is a misleading promise made by some opportunistic online companies trying to sell you on unnecessary products. Forming an LLC always involves payment of mandatory filing fees.

What Is an LLC?

An LLC, or a limited liability company, is a legal business entity with a partnership-like organization and taxation and limited liability benefits of a corporation.

Structuring your company as an LLC separates your business from personal matters, whether you are just starting or if you have had your business for a while. When it is compliant with all the regulations and requirements, an LLC will protect your personal assets in case of debts and liabilities accrued by your business.

It also offers flexibility in business management and tax preparation. You can always turn your LLC into a corporation if your situation changes.

Can You Form an LLC for Free?

Because an LLC must pay taxes and file reports in the state that it operates in, it is best to register your LLC in that state.

Any person can create an LLC without a professional help, but forming a company will still take some investment because of the required filing fees. These fees can range from $50 to $250, depending on the state. In addition, in certain states, like California, businesses must pay an LLC franchise tax of up to $800 per year.

You must be wary of companies that falsely claim a free LLC registration because mandatory state filing fees must still be paid. In the end, you might pay even more than you would have had you hired a lawyer because of the unnecessary upgrades and add-ons those companies will try to sell you on.

Steps to Form an LLC

Creating an LLC is quite simple if you follow the right steps:

1. Choose a Name

Choose a name for your business according to your state's requirements for LLCs.

The general rules for naming are as follows:

  • The name must be distinct from any other business' name.
  • The name must indicate that it is an LLC with endings like "Limited Liability Company," "Limited Company," or the abbreviations "LLC," "L.L.C.," or "Ltd. Liability Co."
  • In the name of your business, avoid using certain forbidden words like “bank,” “insurance,” or “corporation.”

You can check the name availability at the state's LLC office. It is possible to reserve your chosen name for some time before filing articles of organization.

2. File Articles of Organization

Next step is to file “articles of organization.” These are basic formation documents, also known as a "certificate of formation" or "certificate of organization." You can file them online, by mail, or in person with the state's LLC filing office. You must submit a filing fee of about $100 with your articles of organization.

These documents contain the LLC's name, address, its purpose, the period of its existence, and, in some case, names of the members. It will only take a few minutes for you to fill out these forms.

3. Designate a Registered Agent

Most likely, you will have to provide the name and address of your LLC's “registered agent,” also known as a “resident agent” or “agent for service of process.” This is the person you appoint to accept official documents for your company.

4. Decide on Management Structure

Indicate whether the business will be managed by members, by you or one of the members, by managers, or by a hired professional.

5. Create an Operating Agreement

Though not required by state law, it is a good idea to create an operating agreement. It will define the ownership structure and operation procedures of the company.

The following are the essential elements to include in an operating agreement:

  • Interest percentage each member has in the business.
  • Rights and responsibilities of the members.
  • Voting power of the members.
  • Distribution of profits and losses.
  • Management rules of the LLC.
  • Meeting and voting rules.
  • Provisions about buying and selling members' interests.

6. Publish a Notice of Formation

Some states require for you to publish a notice in your local newspaper about forming an LLC. After that, you receive an affidavit confirming that your notice is compliant with the state requirements.

Completion of these steps establishes your business.

7. Obtain Permits and Licenses

The last thing is acquiring all the necessary permits and licenses for operating a business, such as a business license, or a “tax registration certificate,” a federal employer identification number, a seller's permit, a zoning permit, etc.

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