Form an LLC

Easy Ways to Save Time and Money

A limited liability company (LLC) is among the most popular business structures, providing limited liability protection along with the benefits of pass-through taxation.

Take advantage of our exclusive 85% discount and form your LLC withNorthwestfor just $39 + State Fees in under 5 minutes.

Form an LLC in 7 Steps

A limited liability company (LLC) is a business structure that provides limited liability protection and flexible tax choices. Follow our step-by-step guide below to learn how to start an LLC today.

Check out our Spanish version of this LLC guide, ¿Cómo Crear Una LLC?, 

Step 2: Name Your LLC

In addition to adhering to your state’s naming regulations, you must perform an online LLC name search to make sure your LLC name is original. The following are typical state LLC naming guidelines:

  1. The phrase “limited liability company” or an acronym (LLC or L.L.C.) must be in your company name.
  2. Words like FBI, Treasury, or State Department that could give the impression that your LLC is a government agency cannot be used in your company name.
  3. Restricted terms (such as Bank, Attorney, and University) could necessitate additional paperwork and the inclusion of a licensed professional, such a physician or attorney, in your LLC.

See our How to Name a Business guide for additional information on choosing a name for your company.

Step 3: Choose a Registered Agent

A registered agent is a person or organization that has been assigned to send and receive legal documents on your company’s behalf. These consist of formal letters like state filing notices and court summonses.

The majority of states mandate that each LLC designate a registered agent at the time of incorporation. In the state where your LLC is incorporated, your registered agent must be a corporation that is permitted to conduct business there or a state resident.

To learn more about how to choose the best one, see our post on What Is a Registered Agent.

For added piece of mind and assistance in upholding legal compliance, we advise hiring a professional registered agent service.

Step 4: File LLC Articles of Organization

You must submit your formation documentation to the state’s business division, which is typically a division of the Secretary of State’s office, in order to formally incorporate an LLC. These documents are referred to as the Certificate of Formation or Certificate of Organization in certain states.

Usually, you can submit your own formation documents in person, by mail, fax, or online. Nonetheless, we advise you to choose an LLC formation service to manage the filing procedure.

To form an LLC, the typical state filing fee is about $100. Check out our LLC cost guide to learn about the filing fees for Articles of Organization in your state.

What Is an NAICS Code?

Some states require listing your business’s North American Industry Classification System (NAICS) code on your formation documents when establishing your LLC. To learn more about these codes, check out our LLC NAICS Code guide or use our NAICS Code Lookup guide to find your LLC’s specific code.

Member-Managed vs. Manager-Managed

Now is the perfect time to choose your LLC’s management structure—either member-managed or manager-managed:

  • Member-managed: In this structure, a small group of members actively participates in the daily operations of the business.
  • Manager-managed: Here, a larger group of members typically appoints managers to handle daily operations, while the members themselves remain more passive.

For a deeper understanding of these management structures, explore our Member-Managed vs. Manager-Managed guide.

Step 5: Create an LLC Operating Agreement

An LLC operating agreement is a legal document detailing an LLC’s ownership structure and the roles of its members.

While most states don’t legally require an operating agreement, it’s wise to create one when establishing an LLC. An operating agreement typically includes six key sections:

  • Organization
  • Management and Voting
  • Capital Contributions
  • Distributions
  • Membership Changes
  • Dissolution

For an in-depth guide, along with free templates and a custom operating agreement tool, check out our What Is an LLC Operating Agreement article.

Step 6: Get an EIN

An Employer Identification Number (EIN), sometimes referred to as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN), serves as a Social Security number (SSN) for your LLC. Obtaining an EIN is essential if you plan to hire employees or establish a business bank account.

You can acquire your EIN at no cost through the IRS website, by fax, or via mail. To discover more about EINs and the advantages they offer your LLC, check out our article on What Is an EIN.

Step 7: File a BOI Report

Starting January 2024, LLC owners will need to submit a Beneficial Ownership Information (BOI) Report to the US Financial Crimes Enforcement Network (FinCEN). Existing LLCs can file their report anytime between January 1, 2024, and January 1, 2025, while new LLCs must submit their report within 90 days of formation.

The BOI report includes information similar to what’s found in your Articles of Organization, such as your LLC’s name and member details, and it can be filed online at no cost. Not filing an accurate report on time may result in a fine of $500 per day or even imprisonment for up to two years.

Note: Some entities are exempt from filing, including large companies (i.e., those with over 20 full-time employees), tax-exempt organizations, and publicly traded companies.

For additional guidance on filing your BOI report, we suggest checking out our article on BOI Reports for LLCs.

Steps After Formation

File an Annual Report

Most states mandate that LLCs submit an annual report, which includes updating your registered agent’s address and paying the required annual fee or franchise tax.

Discover how to complete your LLC annual report by exploring our comprehensive 50-state guides.

Keep Your Company Compliant

Get Licenses and Permits

When establishing an LLC, it’s essential to identify whether your business requires any licenses or permits to remain compliant.

At both the state and local levels, the requirements for business licenses differ based on your state of formation, in addition to the regulations set forth by county and city authorities.

To begin your search for the necessary business licenses for your LLC, consult our business licensing guide.

Register Your LLC for State Taxes

Depending on your business’s nature and location, you might need to register for various forms of state tax:

  • If you are selling tangible products, you will usually need to register your business for sales and use tax.
  • If you have employees, you may be required to register for unemployment insurance tax and employee withholding tax.
    Read our LLC Tax Guide to discover how taxes will affect your business.

Moreover, most states mandate LLCs to file an annual report, which includes updating your registered agent address and paying your annual fee or franchise tax. Find out how to file your LLC annual report by exploring our 50-state guides.

Understand Your LLC’s Federal Tax Options

LLCs are classified as pass-through entities for taxation purposes. Pass-through taxation indicates that all profits from the business are reported on the individual tax returns of the LLC members.

Each member is responsible for paying self-employment taxes and income tax on their respective share of the business income after deducting any allowable expenses. This method of taxation is the default for LLCs.

Additionally, LLCs have the option to elect taxation as S corporations (S corps) or C corporations (C corps). Choosing S corporation status allows members to be taxed as employees of the business, which can potentially lower the overall tax burden under certain conditions. For more details, refer to our LLC vs. S Corp guide.

The way you compensate yourself as an owner will also influence your federal tax obligations. Check out our guide for insights on how to pay yourself in an LLC.

Follow Hiring Laws

When you decide to hire employees for your LLC, you must follow these legal compliance requirements:

  • Verify that new employees are working in the US
  • Report employees as “new hires” to the state.
  • Provide employees with compensation insurance for employees.
  • Print compliance posters and place them in visible areas of your workspace.
  • Pay employees at least minimum wage and as often as your state requires>/b> (weekly, biweekly, etc.).

How to Form an LLC FAQ

What is the best business structure for a small business?

Limited liability companies (LLCs) offer protection for your personal assets, and they represent the most straightforward and cost-effective legal business structure to establish and uphold.

Consult our Business Structure guide if you require assistance in selecting the ideal business type for your small business.

Is it better to start a corporation or LLC for my small business?

A corporation is a sophisticated legal business structure managed by a board of directors and owned by shareholders. Small business owners will find forming a corporation advantageous only if they seek external investors or require the ability to publicly trade stock.

Discover why LLCs are the ideal legal business structure for the majority of small businesses in our LLC vs. Corporation guide.

What are the benefits of an LLC vs. sole proprietorship?

In contrast to a sole proprietorship, an LLC is regarded as a distinct legal entity separate from its owner. Many sole proprietors could gain significant advantages by converting their sole proprietorships into LLCs, as LLCs provide liability protection while remaining affordable to establish and operate.

Only businesses that carry no risk of liability should function as sole proprietorships, since there is no legal distinction between a sole proprietor and their business.

Check out our LLC vs. Sole Proprietorship guide for further information.

What are the advantages and disadvantages of an LLC?

Limited liability companies (LLCs) offer protection for your personal assets while enhancing your business’s credibility. An LLC is the easiest and most cost-effective legal business structure to establish and manage.

However, LLCs may not be the best option for securing investors. If your business depends on external funding, consider reviewing our How to Start a Corporation guide.

Can you start an LLC on your own?

The cost of forming an LLC can differ significantly based on your state. Generally, you can anticipate spending between $35 and $500 at a minimum to establish your LLC, along with approximately $100 each year to keep the LLC active.

Can you start an LLC online?

Yes, you can start an LLC online in almost every state and Washington D.C. The only state that does not yet offer online filing for LLC formation is Maine.

In fact, many states strongly recommend that businesses file their documents online for faster processing and turnaround times. Read our state-specific LLC formation guides to learn more.

What is the average cost to set up an LLC?

The cost of creating an LLC will vary depending on your state. Expect to pay a minimum of between $35 and $500 to form an LLC and about $100 annually to maintain the LLC.

Is it required to get a certificate of good standing for an LLC?

LLCs do not have a legal obligation to obtain a certificate of good standing.

Explore our comprehensive collection of LLC resources.