1. Overview of an LLC
2. Forming a Limited Liability Company

To get an LLC online, you start by forming your business in the state where it will be operated. The reason being that each state has its own rules and requirements for forming a limited liability company.

If your plans include operating the business in multiple states, you may be required to register in each of the states. This may involve filing a notice with the applicable secretary of state and paying any related filing fees.

Overview of an LLC

An LLC, once formed in accordance with the laws of the state where it is doing business, provides the benefit of limited liability protection for the owners. An LLC business structure combines the liability protection afforded to a corporation along with benefits from taxation available to sole proprietorships and partnerships.

While an LLC is allowed to have multiple owners, these owners are not personally responsible for the debts or liabilities of the company, which is opposite of how a partnership operates.

In regard to double-taxation imposed on corporations, an LLC is a flow-through entity, which means the business is not taxed twice.

One reason for forming an LLC is the option to separate personal business from the LLC's business. Another reason is the flexibility in who can own and manage the LLC and decide how it is to be managed.

Some business owners choose an LLC structure as an alternative to a corporation, especially those who seek investors or who have plans of a "public" company in the future. It is possible to create an LLC and at some point convert it to a corporation, as the business changes.

Forming a Limited Liability Company

When applying to form an LLC, keep in mind while the general requirements are much the same for each state, some states have different or exact rules that must be followed:

  • To hire legal counsel is not a requirement, but it is advisable, especially if the LLC will have multiple owners or outside investors.
  • Choose an applicable name for your business that follows the naming rules for your state. For most states, the name must end with Limited Liability Company, LLC, or other abbreviation. It must be distinguishable from all active domestic and foreign LLCs filed with your state. Check your state's database for name availability.
  • You will need to file formal paperwork, usually referred to as Articles of Organization. The articles may also be referred to as a Certificate of Formation. Depending on your state, filing fees can range from around $100 to $800. The articles are the official documents for forming an LLC with the Secretary of State.
  • Create an Operating Agreement for the limited liability company. The agreement outlines the responsibilities, roles, and rights of each of the LLC members. A typical agreement includes things such as a member's percentage of interest in the business, voting power, rules for meetings, buying and selling rules, and more. An Operating Agreement, in most cases, is not filed with the initial paperwork and is not always required by law for each state. Regardless, it is or may be necessary for your state.
  • Some business types require specific licenses and permits. Obtain these according to your state's requirements.
  • Most states require that the owner name a registered agent. In some states, the agent may be referred to as the "agent for service of process," who is responsible for handling all legal correspondence on behalf of the LLC.
  • Not all states allow the formation of a limited liability company online. For states that do not allow online formation, you are required to create and submit your Articles of Organization by mail.
  • If you have employees or are planning to have employees in the future, you must obtain an Employer Identification Number (EIN) from the Internal Revenue Service. An EIN serves as a social security number for your business and allows you to make business transactions, open a business bank account, and hire employees.
  • Some states will require that you publish a notice in a newspaper to make the business official. This may be required over several weeks. Once completed, you will then submit an "affidavit of publication" to the secretary of state.

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