A limited liability company (LLC) is a way to legally structure a business. It combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Any business owner who seeks to limit their personal liability for business debts and lawsuits should consider forming an LLC.

While state laws might vary, you can generally follow these steps to start an LLC. For information on how to set up an LLC in your state, see our 50-state guide to forming an LLC.

Steps to Start an LLC

1. Choose a Name for Your LLC
2. Appoint a Registered Agent
3. File Your Articles of Organization
4. Decide Whether Your LLC Should Be Member-Managed or Manager-Managed
5. Create an LLC Operating Agreement
6. Comply With Tax and Regulatory Requirements
7. File Your Annual Reports
8. Register to Do Business in Other States

1. Choose a Name for Your LLC

The name of your LLC must comply with your state's rules. While these rules differ, most states require your LLC's name to:

1. end with an LLC designator, such as "Limited Liability Company," "Limited Company," or an abbreviation of one of these phrases, and
2. not be the same as the name of another LLC or business entity already registered with your state.

Often, for a small fee, you can reserve your LLC name for a short period of time until you file your articles of organization.

For additional information, read our FAQ on choosing a business name.

2. Appoint a Registered Agent

LLCs are required to have a registered agent. This agent is an individual or company that agrees to accept legal papers on behalf of the LLC if someone sues the company. The registered agent must have a physical street address in the state where the LLC is registered. Most states maintain a list of private service companies (commercial registered agents) that will act as agents for service of process for a fee.

An LLC member can act as a registered agent for the LLC as long as they have an address within the state that the LLC is registered in.

3. File Your Articles of Organization

To start your LLC, you must file articles of organization with your state's corporate filing office, often the secretary of state. Some states (including Delaware, Mississippi, New Hampshire, New Jersey, and Washington) use the term "certificate of formation" instead. Two other states (Massachusetts and Pennsylvania) call the document a "certificate of organization."

You can form your LLC in your own state or in another state. (For additional information on which state to choose, read about where to form your LLC.)

To learn about the specific requirements of forming an LLC in your chosen state, choose your state from the list below:

You can usually complete the articles of organization online or by using a form available on your secretary of state's website. You'll usually need to provide the following basic information in your articles:

• your LLC's name
• the name and address of your registered agent
• the physical address of the LLC's principal office, and
• the names of the LLC owners.

You'll probably have to pay a filing fee when you submit the articles. In many states, the fees are modest—typically around $100.

If you still have some questions before you're ready to submit your official paperwork, read our article on the six questions to ask before forming an LLC.

4. Decide Whether Your LLC Will Be Member-Managed or Manager-Managed

Most small LLCs choose to be managed directly by their members, When all members participate in the day-to-day business operations, the LLC is considered to be "member-managed."

But LLCs can instead choose to appoint one or more people or entities to manage the LLC— somewhat like when a board of directors oversees a corporation. The members can select a member or nonmember to be a manager. When the members appoint someone to manage the business, the LLC is considered "manager-managed."

Managers vote on key issues such as:

• taking out a business loan
• purchasing real estate, and
• changing strategic plans.

For more information on the different management structures, read our article on member-managed vs. manager-managed LLCs.

5. Create an LLC Operating Agreement

Even though most states don't require it, you should create an operating agreement when setting up your LLC. This agreement is an internal document that establishes how your LLC will be run, including how the LLC will be managed. In the absence of an operating agreement, state law will govern how your LLC operates.

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All of the paperwork and procedural steps to start a limited liability company can be done online using Nolo's Online LLC Formation service.

6. Comply With Tax and Regulatory Requirements

Additional tax and regulatory requirements could apply to your LLC. You should review the following requirements when starting your LLC.

EIN: If your LLC has more than one member, it must obtain its own employer identification number (EIN) from the IRS—even if it has no employees. If you start a single-member LLC, you must obtain an EIN only if the LLC will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You can obtain an EIN online by completing an EIN application on the IRS website.

Professional and business licenses: Depending on the type of business and where it's located, your LLC might need to obtain other local and state business licenses. Many professions also require you to apply for and maintain a license. Check with the appropriate state agencies to ensure you're properly registered, licensed, and permitted to do business in your state. (For more information, read about the legal requirements for starting a small business.)

Sales and employer taxes: In some cases (for example, if you'll be selling goods and collecting sales tax or if you have employees), you'll need to register with the appropriate state taxing authority. For more information on LLC tax registration rules, see our state guide to LLC tax and annual filing requirements.

7. File Your Annual Reports

Many states require LLCs to file an annual report with a filing fee. Fees can vary significantly among states so you should check with your corporate filing office for specific information.

You can also review our state guide to LLC tax and annual filing requirements to find out the rules in your state.

8. Register to Do Business in Other States

To do business in a state other than the state where you formed your LLC, you'll need to register your LLC in that state and appoint a registered agent. For more information on out-of-state registration requirements, see our state guide to qualifying your LLC to do business in another state.

Talking to a Business Attorney

If you have experience starting a business, you can probably form your LLC on your own. But if you're starting your first business or you run into complex problems along the way, consider talking to a business attorney. They can help you review your state's LLC laws, draft your operating agreement, and create a tax-compliance plan.