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How to Start an LLC

Step-by-step guide to starting a limited liability company (LLC).

A limited liability company (LLC for short) 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 his or her personal liability for business debts and lawsuits should consider forming an LLC.

Here are the steps you need to take to start a limited liability company (LLC) in any state. For information on how to set up an LLC in your state, see the 50-State Guide to Forming an LLC.

Steps to Start an LLC

Steps to form an LLC

  1. How Do I Choose a Name for My LLC?
  2. How Do I Form an LLC?
  3. What Are the Registered Agent Requirements?
  4. Should My LLC Be Member Managed or Manager Managed?
  5. Create an LLC operating agreement.
  6. How Do I Create an LLC Operating Agreement?
  7. How Do I File Annual Reports?
  8. Can My LLC Do Business in Other States?

1. How Do I Choose a Name for My LLC?

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

  1. that your LLC's name end with an LLC designator, such as Limited Liability Company or Limited Company, or an abbreviation of one of these phrases, and
  2. that the name is not 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.

2. How Do I Form an LLC?

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." To learn about the specific requirements of forming an LLC in your 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 need your LLC's name, the name and address of its registered agent, and other basic information, like how it will be managed or the names of the LLC owners. You'll have to pay a filing fee when you submit the articles. In most states, the fees are modest - typically around $100.

3. What Are the Registered Agent Requirements?

LLCs are required to have a registered agent. This 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 agent for service of process for a fee. An LLC member can act as registered agent for the LLC.

4. Should My LLC Be Member Managed or Manager Managed?

Most small LLCs choose to be managed directly by their members, but LLCs can appoint one or more people (outsiders) to manage the LLC – somewhat like a board of directors oversees a corporation. Managers vote on key issues such as taking out a loan, purchasing real estate, or changing strategic plans.

5. How Do I Create an LLC Operating Agreement?

Even though most states don't require it, you should create an operating agreement while setting up your LLC. This 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. What Are the Tax and Regulatory Requirements?

Additional tax and regulatory requirements may apply to your LLC. These include:

EIN: If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you start a one-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 may obtain an EIN by completing an online EIN application on the IRS website.

Business Licenses: Depending on its type of business and where it is located, your LLC may need to obtain other local and state business licenses. Check with the appropriate state agencies to ensure you are properly registered, licensed, and permitted to do business in your state.

Sales and Employer Taxes: In some cases (for example if you will 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 LLC Tax and Annual Filings Requirements: 50 State Guide.

7. How Do I File Annual Reports?

Many states require LLCs to file an annual report with a filing fee. In some states, these fees can be significant – as high as $800 per year in California. See LLC Tax and Annual Filings Requirements: 50 State Guide to find out the rules in your state.

8. Can My LLC Do Business in Other States?

To do business in a state other than the state where you formed your LLC, you will need to register your LLC in that state and appoint a registered agent for service of process. For more information on out-of-state or foreign LLC registration requirements, see the 50-State Guide to Qualifying Your LLC to Do Business in Another State.

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Appointing a registered agent is a simple - but essential - step for every business. Learn more about what a registered agent does.

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