How to start an LLC

Forming an LLC isn’t difficult, but there are a series of things that must be done to set one up. See below to learn more about the specific requirements in your state.

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Step-by-step guides for launching an LLC

1. Run a business name search

Whether you settled on a name years ago or are still weighing your options, there are several rules to be aware of. For starters, the business name must have “LLC” or “Limited Liability Company” in the title.

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2. Choose a registered agent

The Articles of Organization ask the owner to list a registered agent. A registered agent is a person or company that accepts official documents for a company. For instance, a registered agent could receive tax documents, file updates from the secretary of state’s office, or legal documents. 

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3. Create an operating agreement

An operating agreement explains how a business is run and should include the company’s hierarchy, an explanation of how decisions are made, and a summary of day-to-day operations. The document should also provide financial direction, explaining how profits and losses are managed.

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4. Create Articles of Organization

When establishing an LLC, articles of organization are filed with the state in which it is organized in order to be officially recognized and sanctioned by that state.

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5. Obtain an EIN

Most businesses need an EIN, or an employer identification number, to function. This nine-digit number is issued by the IRS and is required for many financial transactions including paying taxes, hiring employees, or applying for a bank loan.

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6. Look into business licenses

Depending on your business, it likely needs one or several licenses to operate. Each state is different in its requirements. Check with state and local officials to see which business licenses are required.

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7. File an annual report

Most states require LLCs to file an annual report with the state. The report is meant to keep state officials informed about your business and points of contact. Should the state need to reach business owners to deliver notices or updates, the report provides that contact information.

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8. Maintain good standing

A Certificate of Good Standing serves as proof that the entity exists and is authorized to transact business in the state. It means that the entity has filed all reports and fees with the Secretary of State’s office.

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9. Estimate LLC costs

There are various fees that come with forming an LLC. The exact amount varies from state to state.

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Frequently Asked Questions

Yes. The owner of an LLC can serve as his or her company’s registered agent. The registered agent is responsible for accepting important notices on behalf of the company. To name yourself, simply list your name and address on the Articles of Organization.  If at any point you’d like to elect another person or pay a registered agent service to fill this role, you can file an update (usually called a Statement of Change) with the secretary of state’s office. 

The cost to form an LLC varies by state. Most states require owners to pay a filing fee when they register. This filing fee can range from $50 to $500. The average fee is $132, but it’s important to research the cost in your state.  If an owner decides to work with a business formation company, which can file the formation paperwork on behalf of a company owner, expect to pay a flat fee to file the document as well as the state’s filing fee.

Yes. The two terms mean the same thing. The IRS website can provide an EIN.

No. An owner can file the paperwork for his or her own business. However, an owner can seek the advice of a lawyer or work with a business formation company to have the document filed with the state as well. 

In most states, an LLC must file an annual report and pay a filing fee or franchise tax. The rules vary by state. How do you find out what’s required in your state? The best place to start is to search the secretary of state’s website.

Yes. If you plan on doing business in the state and want to obtain the perks of an LLC, like limited liability and pass-through taxation, you must register the company with the state by filing formation documents usually known as Articles of Organization.

Typically, a manager is selected from within the company or hired from outside. Owners are called members. If one owner is selected, the LLC is referred to as a single-member LLC. A board of directors isn’t necessary for an LLC.

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