LLCs are the best business structure for most small businesses. Some startups must depend on outside investors. If that's the case for your business, we'll discuss starting a corporation.
What is an LLC?
An LLC is a business structure that combines the limited liability protection (personal asset protection) of a corporation with the simplicity and favorable tax structure of a sole proprietorship.
Learn more here: What is an LLC guide
An LLC can protect your personal assets. A business that carries any risk of liability should become an LLC or corporation because these business structures will protect your personal assets in the event that your business is sued or defaults on a debt.
LLCs are very easy to run, unlike a corporation. Only a startup that needs to attract investors should choose a corporation.
LLCs offer several tax options, like S corporation tax status, that can save you money.
Learn more here: LLC Benefits
LLC vs Corporation for a Startup
Most startups will benefit most from an LLC but for those that will need funds from outside investors, it might be best to start a corporation.
There are 5 simple steps to starting an LLC:
- Name your LLC
- Choose a Registered Agent
- File LLC Articles of Organization
- Create an Operating Agreement
- Get an EIN
Choose your state from the list below to learn what needs to be done in your state:
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
If your LLC will have a physical presence in other states, you will need to file as a foreign LLC in those states.
Not sure which state you should start your LLC? Check out our Best State to Form an LLC guide.
Step 2: Name Your LLC
If you need help coming up with a catchy name, try our business name generator.
You can also search Godaddy for available domain names.
Step 2: Choose a Registered Agent
When you fill out your LLC registration forms, you'll also need to list your registered agent in most states.
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.
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 one of these Best LLC Services.
To form an LLC, you will have to file your LLC formation documents with the state. These formation documents are usually called the Articles of Organization.
Most states offer online filing and fees for registering your LLC will vary from state to state.
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.
The Employer Identification Number (EIN), is basically a Social Security number (SSN) for your company.
An LLC is taxed by default as a pass-through entity. This means the income passes through to LLC owners (members) individual tax returns where they are subject to self-employment taxes and income taxes based on the owner's tax bracket.
LLCs can also choose to be taxed as an S corporation or C corporation.
Learn more here: LLC Taxes
So you've formed your LLC, now what?
These are some of the most important things you need to do after forming your LLC:
- Open a business bank account
- Establish business credit
- Hire an accountant
- Register for business licenses and permits
- Get business insurance
- Establish your web presence
Learn more here: After Forming an LLC
IRS - Limited Liability Company (LLC):
IRS - S Corporations:
SBA - Small Business Guide:
SBA - Choose a Business Structure:
US Census Bureau - Small Business Statistics:
SBA Office of Advocacy - Data on Small Business:
FRED - SBA Data for Small Business:
How much do you need to start an LLC?
You can start an LLC for between $40 and $500. Learn about your state's LLC costs here: Cost to Start an LLC.
Does an LLC have a yearly fee?
Some states have no yearly LLC fee and other states have annual or biennial fees. Learn about your state's annual LLC costs here: LLC Annual Report
Can you start an LLC for free?
You can form an LLC yourself without paying a fee to an attorney or LLC formation service. You will still need to pay the state filing fee which ranges from between $40 and $500, depending on your state.
Learn more about your state's LLC costs here: Learn about your state's LLC costs here: Cost to Start an LLC.
Does having an LLC help with taxes?
LLCs are taxed as pass-through entities and aren't double taxed like a corporation. LLCs can also elect to be taxed as an S corporation or a C corporation.
Learn more about LLC taxes here: LLC Tax guide.
How do LLC owners get paid?
LLC owners are paid distributions (draws) that pass through to their individual tax returns. Income is then subject to self-employment tax and normal income taxes that are based on the owner's tax bracket.
An LLC can elect S corporation tax status and be paid a reasonable salary and distributions. This allows owners to not pay self-employment taxes.
Learn more about LLC vs S corp here: LLC vs S Corp