How To Set Up An LLC
Forming an LLC in any state is simple! All you have to do is follow our free guide below to get started.
If you are thinking about hiring a professional service to form an LLC, read our Best LLC Formation Services review.
The laws for setting up an LLC can vary from state to state but the steps are very similar.
The best place to start when forming an LLC is by following our simple step-by-step LLC guides, especially if you are choosing to conduct business in the state where you already live. However, note that if your LLC will have a physical presence in other states, you will need to file as a foreign LLC in those states.
Step 2) Name Your LLC
First things first— you need the right business name in order to register your LLC with the state. Naming your new business goes well beyond creative branding. You could have the most catchy name in Connecticut but if it isn’t unique and legal, you can’t use it.
In order to form an LLC successfully, you have to be sure no one else in your state is using your name and that it meets state guidelines. You can easily complete an LLC name search using our state-by-state guides.
If you need help coming up with a catchy name, try our business name generator. You can use this tool to generate both business names and domain names.
You can also search Godaddy for available domain names.
Step 3) Choose A Registered Agent
When you fill out your LLC registration forms, you will also need to list your registered agent in most states. A registered agent is sometimes called a resident agent, statutory agent, or agent for service of process.
A registered agent will be responsible for receiving important legal documents on behalf of your LLC. A registered agent’s most important job is to accept service of process (legal summons) in the event of a lawsuit.
Many entrepreneurs choose to hire a registered agent service to help with this part of their business. You can also appoint a friend, colleague, or yourself. In most states, your registered agent must meet these requirements:
- is 18 years or older
- has a physical address in the state where business is conducted
- is available (in person) during normal business hours
To learn more, read our What Is a Registered Agent article.
Step 4) File Your LLC With the State
This is the step we’ve all been waiting for— it’s time to officially form a limited liability company. You can do this on your own, with the help of a lawyer, or through a professional LLC filing service.
To form an LLC, you will have to file your LLC formation documents with the state. These formation documents are called the Articles of Organization; in some states, they are known as the Certificate of Formation or Certificate of Organization.
Most states offer online filing and fees for registering your LLC will vary from state to state.
To learn exactly how to complete this step for your LLC, just select your state.
Now is also the time to decide whether your LLC will be member-managed or manager-managed. Read our full guide on Member-Managed vs. Manager-Managed LLCs.
Step 5) Create an LLC Operating Agreement
Creating an LLC operating agreement when forming an LLC is the only way for you and your members to legally define your roles and lock down your LLC’s management and ownership structure. Having this document in place will also give you something to return to if there’s a dispute.
An LLC operating agreement isn’t filed with the state — it’s stored in your company records. The operating agreement should outline:
- each member’s responsibilities.
- how new members will be admitted.
- how existing members may transfer or terminate their membership.
- how profits and dividends are to be distributed.
Step 6) Get an EIN
The Employer Identification Number (EIN), sometimes called a Federal Employer Identification Number (FEIN) or a Federal Tax Identification Number (FTIN), is basically a Social Security number (SSN) for your company. Your EIN allows the IRS to keep track of your business’s tax reporting.
Steps After Forming an LLC
Maintain Your Alabama LLC's Personal Asset Protection
When running your business, it’s important to separate personal assets from your LLC so you can maintain the corporate veil. You can do so by taking the following steps:
Open a Business Bank Account
A business bank account helps separate personal expenses and company expenses, which is required for personal asset protection.
Get a Business Credit Card
Similar to business bank accounts, getting a business credit card helps separate personal and business expenses.
Reduce the Liability of Your LLC
Get Business Insurance
Follow Hiring Laws
Stay compliant with employment laws such as:
- Verifying new employees are allowed to work in the US.
- Reporting employees as "new hires" to the state.
- Withholding employee taxes.
- Printing workplace compliance posters and placing them in visible areas of your workspace.
You might also be required to invest in Workers' Compensation Insurance if you are planning to hire employees. This type of policy provides coverage for employee job-related illnesses, injuries, or loss of life.
Obtain Business Licenses and Permits
Determine if your LLC requires licenses and permits to remain compliant. Business licenses and permits vary by state, so be sure to conduct the proper research and plan accordingly.
There are professional services that can take care of the paperwork and process for you. We recommend checking out our review of the Best Business License Services.
Register for LLC Taxes
If you are selling a physical product, you’ll typically need to register for sales tax, also known as "Sales and Use Tax.” If you have employees, you may need to register for unemployment insurance tax and employee withholding tax.
Check out this LLC Tax Guide to learn more about LLC tax structures, federal taxes, accounting, and more.
File Your LLC Annual Report
Many states require LLCs to file an annual report, which includes updating your registered agent address and paying your annual fee or franchise tax.
Learn how to file your LLC annual report by reading these 50-state guides.
Reduce Administrative Burden
Set Up Business Accounting
Setting up business accounting can help entrepreneurs prevent errors, stay compliant with the law, and make better financial decisions.
You can maintain your accounting in two ways:
- Use accounting software. This can come with an increased risk of errors especially when starting a new company.
- Hire an accounting service. They can provide advice to help optimize your bookkeeping and taxes as well as additional services such as payroll etc.
Set Up Employee Payroll
If you have employees, a payroll service will save you a lot of time and also save you from having to become an expert on state compliance or employee tax withholdings and filings.
You can check out this list of the Best Payroll Software to help you select the right one for your LLC.
What is an LLC?
An LLC stands for limited liability company. It is a type of business structure that business owners can use to protect their personal assets. Learn more about LLCs by reading our online guide.
What is the best business structure for a small business?
An LLC is easy to set up, flexible, and straightforward. Additionally, an LLC gives you liability protection and pass-through taxation.
Read our full guide on how to choose a business structure to learn about other options.
Can I start an LLC on my own?
Yes, you can start an LLC on your own by following our state-specific guides. You can also hire a professional LLC formation service to form your LLC.
How much does it cost to start an LLC?
The cost of forming an LLC varies by state and depends on if you complete the process yourself or hire a professional service. LLCs can cost anywhere from $50 to $500. Hiring a formation company could add another fee between $40 and $350.
What are the advantages and disadvantages of an LLC?
LLCs protect their owners’ personal financial assets. They are also fairly simple to form and maintain.
If you are planning to raise capital, investors typically prefer the stock structure of a corporation.
What is the Difference Between a DBA and an LLC?
LLC vs Sole Proprietor: Which Should You Choose?
LLC vs Corporation
How is an LLC Taxed?
Member-Managed vs. Manager-Managed LLCs
Single Member LLC Taxes
What is an EIN?