Key Takeaways

  • The process to form an LLC varies by state but generally includes choosing a business name, filing Articles of Organization, appointing a registered agent, and securing licenses and permits.
  • Some states require additional steps like publishing a public notice.
  • LLCs can be taxed as sole proprietorships, partnerships, or corporations depending on ownership and IRS elections.
  • Understanding the ongoing compliance requirements and available formation services can simplify the process and reduce errors.
  • Using a professional service or attorney can help avoid common pitfalls in LLC formation.

LLC Filing: Everything You Need to Know

LLC filing involves the paperwork that you are required to file with the respective state you organize your LLC in. Particularly, an LLC, also referred to as a Limited Liability Company, requires you to file various paperwork in terms of the business structure, articles of organization, business license(s), and other paperwork that is required of the particular state you wish to operate.

How to Form an LLC

[1] Choosing a name for the LLC

The name can't be the same as the name of another LLC on document with the Secretary of State’s office in the state you are operating in. You can view the list of names already being used on the Secretary of State’s website to ensure that you are using a name that is currently open to use. Further, the name must end with an LLC designator, i.e., "Restricted Liability Company" or "Constrained Company" or a shortened form of one of these expressions, i.e., LLC or L.L.C. Other important items must be kept in mind, as the name cannot utilize certain terms, including but not limited to Bank, Insurance, Corporation, or City. If you are not a lawyer, you cannot utilize the terms ‘Lawyer’ or ‘Attorney’. Likewise, if you are not a doctor, you cannot use such terms as ‘Doctor’. Be sure to review the Secretary of State website for all requirements and limitations.

[2] File Articles of Organization     

Filing the articles of organization is rather simple and straightforward. It must include the name and address of the owner as well as a registered agent, who will act as the legal agent for potential legal proceedings that may arise. This document can usually be obtained from the Secretary of State’s website; however, this document can also be found in the public domain as a template version.

[3] Create an LLC Operating Agreement 

This will include the purpose of the business, the management of the LLC, the meetings and voting that will take place on an annual (or quarterly) basis, depending on how the owner of the LLC chooses to operate, whether or not employees will be hired to work for the business, and any other important items that the LLC owner deems important for the overall operation of the business.

[4] Publish a Notice (Some States Only)    

It is a prerequisite to distribute a straightforward notice in a nearby daily paper, expressing that you expect to create an LLC. The notice is required to be distributed a few times over a period of weeks and after that present a "sworn statement of production" to the appropriate Secretary of State.

[5] Get Licenses and Permits          

The LLC owner will need to obtain any appropriate licenses required, depending on the type of industry the business will operate. This could include zoning permits, restaurant permits, employee permits, etc.

[6] IRS default designations

Immediately after creating the LLC, the IRS automatically treats the business as a partnership, but only for income tax purposes. If the LLC is solely-owned, then tax must be paid on business profits as if it were a sole proprietorship. Both designations have different tax filing rules. There is an option to elect corporate tax treatment by filing IRS Form 8832.The LLC designation cannot be changed for five years.

[7] Corporate filing requirements  

If corporate tax election is chosen for the LLC, the IRS will treat the business as a separate taxpayer in the same way a separate taxpayer is from his friend. The business is solely responsible for reporting all income and deductions on Form 1120 each year and paying the appropriate income tax by the deadline.

[8] Sole proprietor filing requirements      

In a sole proprietorship, the IRS does not allow the LLC to be separate and apart from the owner. Therefore, Schedule C will need to be filled out identifying the difference between the LLC operations and the owner, thereby ensuring that the business expenses do not fall on the owner personally.

[9] Article 3—Governing Authority           

The authentication of development must state whether the LLC will or won't have directors. On the off chance that the LLC will have supervisors, select choice An and give the name and address of each underlying director in the space gave.

Benefits of Forming an LLC

Forming an LLC provides several advantages for business owners:

  • Limited Liability Protection: Owners are generally not personally liable for the debts or legal liabilities of the business.
  • Pass-Through Taxation: Income typically passes through to owners’ personal tax returns, avoiding double taxation.
  • Flexible Management: LLCs can be managed by members or appointed managers.
  • Credibility: Establishing an LLC can enhance the business's legitimacy with clients and lenders.
  • Fewer Formalities: Compared to corporations, LLCs have fewer compliance and meeting requirements.

Ongoing Compliance and Annual Obligations

Forming an LLC is only the beginning. Ongoing requirements include filing annual or biennial reports, renewing licenses, maintaining a registered agent, and paying state fees or taxes. Some states impose a franchise tax or a minimum annual fee regardless of income. Failure to meet these requirements can lead to penalties or administrative dissolution. It's important to track deadlines and consider setting up compliance alerts or using professional help.

Using an LLC Formation Service

Many business owners opt to use LLC formation services to streamline the process. These companies handle paperwork, submit filings, act as registered agents, and often include extras like Operating Agreement templates or compliance reminders. Some providers even offer free formation (you only pay state fees). These services can save time and help avoid common filing errors, especially for first-time business owners.

What Is a Registered Agent and Why You Need One

A registered agent is a person or business authorized to receive legal correspondence and official government notifications on behalf of your LLC. Most states require one as a condition of forming an LLC. The agent must have a physical address in the state where the LLC operates and be available during normal business hours. While you can act as your own agent, hiring a third-party service ensures privacy and continuous availability.

Understand State-Specific Requirements

LLC formation rules are governed at the state level, which means requirements can vary significantly. Some states may require unique forms, higher filing fees, or additional documentation. For example, New York mandates publishing a formation notice in two newspapers, while California has specific requirements for annual reporting and franchise taxes. Before you form an LLC, it's essential to review your state's Secretary of State website to ensure you're compliant with all local regulations.

Frequently Asked Questions

  1. What is the easiest state to form an LLC in?
    States like Delaware and Wyoming are popular for their business-friendly laws, but the best choice depends on where you plan to operate.
  2. Can I form an LLC without a lawyer?
    Yes, but consulting an attorney can help ensure proper formation and avoid legal issues, especially if your business has multiple members or complex needs.
  3. Do I need an operating agreement?
    While not required in every state, an operating agreement is highly recommended as it outlines ownership, roles, and dispute resolution procedures.
  4. How long does it take to form an LLC?
    It varies by state but typically takes between a few days and a few weeks. Expedited processing is available in many jurisdictions for an additional fee.
  5. What happens if I don’t comply with annual LLC requirements?
    You may face penalties, fines, or administrative dissolution of your LLC. It’s crucial to stay up-to-date on your state’s reporting and fee deadlines.

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