How to File a LLC: Everything You Need to Know
Knowing how to file a LLC can help ensure your business is formed legally and properly.3 min read
Knowing how to file a LLC can help ensure your business is formed legally and properly. When you form a limited liability company (LLC), the process isn't as complex as you might believe. You do need to follow certain steps, but they are fairly simple and straightforward. By taking these steps, you will form a legal business that can operate within the state.
The first step is choosing a business name, which must be available and unique from any other business name in the state, and it must comply with any state rules. From there, you must file the formal document, often referred to as the articles of organization. With the document, you will need to pay the required filing fee. The fee depends on the state, but it's generally between $100 and $800.
Additional steps needed to form an LLC include:
- Drafting and implementing your LLC's operating agreement, which will outline the responsibilities and rights of all members.
- Obtaining permits and licenses to operate your business.
- Publishing a notice of intent to register an LLC (not required in all states).
Choosing a Name for Your LLC
When you're choosing your LLC's name, you must make sure it complies with the state LLC division rules. In most states, the LLC division is part of the corporation's division under the Secretary of State.
Although requirements vary between states, some general rules apply:
- Your proposed LLC name can't be identical to another LLC's name.
- The name can't include restricted words, such as city, bank, corporation, insurance, or any other words restricted by your state.
- The name must include the words “Limited Liability Company” or an accepted abbreviation.
The LLC office within your state typically keeps a database of existing LLC names, which you can search to determine whether the name you want for your LLC is available. Some states also offer the option to reserve an LLC name for a period of time, which prevents someone else from taking it as you prepare and file the articles of organization to legally form the business. This option may require payment of a fee.
Filing Articles of Organization
The next step in forming an LLC is preparing your Articles of Organization and filing the document with the state office. You may also hear this document referred to as a “Certificate of Organization.”
When you form an LLC instead of another business entity, such as a sole proprietorship or partnership, you will have to pay a filing fee. This must be paid when you file the articles of organization. The filing fee in most states is around $100, but others require a larger fee. When forming an LLC in California, you would have to pay the filing fee plus an $800 annual tax.
An LLC's articles of organization is a document that is short and simple. Most LLC owners and members can prepare their own document by filling in the sections on the form provided by the filing office in your state. The required information often includes the names of all members, the business name, and the address. In most states, one LLC member can handle the drafting and signing of the articles of organization, although all members can prepare and sign the document together.
Many states also require LLCs to appoint a registered agent, also called the agent for service of process. The registered agent can be a member of the LLC and is designated to receive and handle any legal documents that relate to the LLC.
Create an LLC Operating Agreement
Although operating agreements aren't usually required to be filed with the state filing office, it is still important for every LLC to have one on file. Within the agreement, members can outline rules and responsibilities for the operation and ownership of the business. This document is similar to the corporate bylaws or partnership agreement in other business formations.
An operating agreement will typically include information on:
- The voting power for all members.
- The percentage of ownership for each member.
- The management structure of the LLC.
- Any applicable buy-sell provisions, or how members can buy or sell their ownership interests.
- The allocation of losses and profits.
- The responsibilities and rights of all members.
- How meetings will be held and votes will be taken.
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