What is an LLC?
An LLC (Limited Liability Company) is a business structure that combines pass-through taxation with limited liability protection. This means owners, called members, aren't personally liable for company debts while enjoying the tax benefits of partnerships or sole proprietorships.
Step 1: Choose Your State
While most business owners choose their home state, some opt for business-friendly states like Delaware, Nevada, or Wyoming. Consider these factors:
- Filing Fees: Vary significantly by state
- Annual Fees and Taxes: Ongoing costs differ
- Regulations: Different rules for LLC operations
- Legal Protections: Varying levels by state
For more information, visit Nolo's guide on choosing a state for your LLC.
Step 2: Select Your LLC Name
Your company name must be unique and follow state guidelines:
- Search your state's business database for availability
- Include "LLC," "L.L.C.," or "Limited Liability Company"
- Avoid restricted words requiring additional licenses
- Check trademark availability at USPTO.gov
To verify name availability, use your state's business name database, such as the California Secretary of State's website.
Step 3: Appoint a Registered Agent
A registered agent accepts legal documents on behalf of your LLC and must:
- Have a physical address in the formation state
- Be available during business hours
- Be at least 18 years old
Consider professional services like Northwest Registered Agent or ZenBusiness.
Step 4: File Articles of Organization
This official document establishes your LLC with the state and typically includes:
- LLC name and address
- Registered agent information
- Management structure
- Member names (state-dependent)
- Filing fee payment
Most states allow online filing through their Secretary of State website, such as Florida's Division of Corporations.
Step 5: Create an Operating Agreement
While not always required, an operating agreement is crucial for:
"Establishing ownership percentages, voting rights, and management responsibilities while protecting your limited liability status."
Key elements include:
- Ownership structure
- Profit distribution
- Management roles
- Voting rights
- Member entry/exit procedures
Step 6: Obtain an EIN
Apply for a free Employer Identification Number through the IRS website. This tax ID is necessary for:
- Opening business bank accounts
- Hiring employees
- Filing taxes
- Establishing business credit
Step 7: Set Up Business Banking
Recommended Banks for LLCs
| Bank | Features | Monthly Fee |
|---|---|---|
| Chase | $300 bonus offer | $15 |
| Wells Fargo | Free incoming wires | $10 |
| Capital One | Unlimited transactions | $0 |
Step 8: Comply with Additional Requirements
Business Licenses and Permits
- Business license
- Sales tax permit
- Professional licenses
- Industry-specific permits
Insurance Coverage
- General liability
- Professional liability
- Workers' compensation (if required)
Maintaining Your LLC
Keep your LLC in good standing by:
- Filing annual reports
- Paying state fees
- Maintaining accurate records
- Holding required meetings
- Keeping personal and business finances separate
For ongoing compliance assistance, consider using services like LegalZoom or consulting with a local business attorney. For additional resources, visit the Small Business Administration (SBA) website.