If you’re interested in starting an LLC at no cost, you’ve come to the right place. Here, we’ll provide you with a step-by-step guide on how to form an LLC in any state in the US.
Limited Liability Companies are simple to set up and the process includes choosing a name, obtaining a registered agent, registering with the state, and creating an operating agreement. Find the following guide to create an LLC step by step in detail.
How to Start an LLC Step by Step
Start Your LLC in 5 Easy DIY Steps for Just $0:
- Select a State
Here, simply select the state you want to form an LLC in.
- Name your LLC (or reserve a name)
Obviously, you must name your LLC. You can also reserve the name if you see the procedure may take time.
- Choose a Registered Agent
You can choose a registered agent by yourself or hire an LLC services company.
- File the Articles of Organization (certificate of formation)
Articles of Organization, are part of a formal legal document used to establish an LLC at the state level. By finding the best LLC service for you, we earn an affiliate commission to keep the lights on.
- Create an Operating Agreement
You can create an LLC without an Operating Agreement. But this documentation is necessary to avoid any future mess.
As a small business owner, you can start an LLC (by yourself or by hiring a reliable LLC service online) to protect yourself from personal liabilities. However. here you’ll learn how to start an LLC in the United States for $0 by following easy to understand step by step guide. Simply select your state and follow the steps.
#1: Select a State
As in every State, there’s a possible procedural difference in forming an LLC. Therefore we’ve covered State by State guide to help you form an LLC by yourself. To start an LLC on your own, select your State below and follow the A to Z guide to form.
Start an LLC in:
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
Important! If you’ve served in the U.S. Armed Forces and have been honorably discharged, there’s good news for you. Fortunately, forming an LLC for veterans can be done at no cost.
#2: Name Your LLC
Naming an LLC sounds pretty nice but that is nowhere near naming your child. In fact, it is not as easy as it seems. Mostly, the exact name is not always available. If you’re lucky enough to find the desired name of your company, there are still some precautions you must take.
LLC document filing takes time. So it’s better to reserve your LLC name by paying some extra bucks (reservation fee). It’s not illegal, nearly every state allows you to reserve a name for a short period of time by filing name reservation a form. Yet, the length of the reservation period varies from state to state, and your efficiency. That’s why many people hire a registered agent from any well know reputable formation services like ZenBusiness or LegalZoom.
In addition, the name of your LLC must comply with the rules of the state you’re applying in. Because the company formation rules in the United States of America vary from state to state. For instance:
- Your LLC’s name must end with an LLC designator or its abbreviation.
- LLC name must not be matching to any other registered LLC or business entity.
If you’re considering starting a business as an LLC, but are unsure of what to name it, consider using our free AI-powered LLC business name generator to generate creative and unique small business name ideas randomly for your Limited Liability Company.
#3: Selecting a Registered Agent
A registered agent or a statutory agent is a person or sometimes a company that agrees to receive lawsuits, subpoenas, and other official & legal documents on behalf of the LLC on a physical street address in the state where the LLC is registered. Therefore every state requires its LLCs to name any registered agent.
The registered agent can be:
- A person who is a state resident.
- Must be over the age of 18 to serve.
- A member or an officer of the LLC.
- Or a private service company like ZenBusiness or Incfile.
A registered agent can be provided by a business formation company or you can hire one privately.
#4: Filing the Articles of Organization
LCC Articles of Organization or certificates of organization are part of a formal legal document used to establish a limited liability company (LLC) at the state level. That is why to create your LLC, you must file articles of organization.
This Organizational Paperwork is filed with your state’s corporate filing office, often the Secretary of State (or in some states. You can fill out the articles of organization online. The information to be filled in may include:
- The name of an LLC
- The address of an LLC
- Details of the registered agent such as the name and address
- The names of the LLC owners
- The objective of why the LLC was formed
- How it will be managed
- And the length of its existence
The paperwork must be signed by an LLC formation company representative, registered agent, or whoever is the person forming the LLC. As for the charges, all states charge a filing fee, but the LLC cost varies from state to state – mostly around $100. You’ll have to pay a filing fee when you submit the articles.
#5: Creating an LLC Operating Agreement
An LLC Operating Agreement is an internal document that defines how your LLC will be run, which includes:
- How will it be managed?
- How profits and losses will be allocated?
- The ownership interests
- Voting rights of the members
- How and who will govern the company
- What happens if the member dies
- What to do in case of any member leaves the business
- Law on dissolving a company
- And much more
In fact, you can mention anything that is needed to secure the rights and responsibilities of the members & the company to minimize future disagreements.
That is why most states don’t require an LLC Operating Agreement to form an LLC. It is all about an effort to let things define to avoid any mess in the future. Because in the absence of an operating agreement, state law will govern how your LLC operates.
Additional Basic Guidance on LLC
What to Do After Forming an LLC?
Once you have successfully registered your Missouri Series LLC, you must complete these 2 steps to stay organized and compliant:
1. Obtain Federal EIN
You need to obtain tax identification numbers aka EIN (Employer Identification Number) by registering with the IRS. EIN is used to identify a business entity for tax purposes. You need to file an EIN for each of the child series if it is
- Multi-membered LLC,
- A single-membered LLC with employees, or
- The LLC chooses to pay its taxes as a corporation
2. Obtain a Business License
There is no statewide business license. However, individual cities and counties have specific licensing requirements of their own. You may need additional licensing or permits depending on the parent LLC’s business activities.
3. Open Business Bank Accounts
Keeping business and personal accounts separate from the start not only helps you sort the finances from the start but allows you to get full advantages of the limited liability protection of the LLC structure.
Therefore, you should open a business account for the LLC. To open a business account, you need the following documents:
- A copy of your LLC Articles of Organization
- Your EIN
- A copy of your LLC operating agreement
An LLC (Limited Liability Company)
An LLC is a legal business model that combines the characteristics of a sole proprietorship, a corporation, and a general partnership.
For instance, an LLC can be formed and managed by a single person as it is done in a sole proprietorship.
On the other hand, an LLC has the perks of corporate personhood such as it can hire employees, having a bank account, buying property, etc. More importantly in case of any legal trouble or unforeseen business circumstances, the creditors can not claim the personal assets of the owner/s of the LLC.
How an LLC Manages its Interests/Taxes?
LLC is very flexible in terms of choosing the route to pay income taxes and in deciding how financial interests will be split up among the members.
An LLC often enables the transfer of the ownership interests to family members that are more tax-advantaged. The following are the possible choices for an LLC to choose its taxation process.
- As a sole proprietor or straight partnership model
- And as an S corporation model
- As a C corporation model
A) As a sole proprietor or straight partnership model
According to this taxation model, the LLC does not need to file its own tax return rather it is just required to submit a report containing information related to profit or loss through the LLC business.
All members of the LLC will receive the income as per the operating agreement of the LLC and then each member will pay the tax on his individual tax return. The net income of each member will also be subjected to payroll or self-employment tax under the Self-Employed Contributions Act (SECA). Overall, the total payable tax in this model is less than that of a corporation.
B) As an S corporation model
If an LLC chooses to pay its tax through the S corporation model, there will be no maximum limit of members, unlike an actual S corporation where only 100 shareholders (all should be US citizens) are allowed.
S corporation may provide some tax savings than a C corporation. Shareholders of S corporations do not pay SECA tax on their income, but each owner should pay them a reasonable salary which is subjected to Medicare and Social Security taxes under the Federal Insurance Contribution Act (FICA).
C) Finally, as a C corporation model
If an LLC classifies itself as the C corporation model, LLC will be a taxable entity. This means the LLC itself is taxed on its income unlike the above-stated two models, where income is passed among the owners and then it is taxed.
With this model, members will be subjected to double taxation as the income is taxed on the company level and then each member will be taxed on the individual level once the funds are transferred. Such a model will be beneficial for the high-income members of LLCs who can save money by having lower personal tax brackets.
Is LLC Formation A Right Choice?
- For entrepreneurs, who want to set up their business as a standalone or restrict their liabilities, give the business the ability to survive on its own and segregate their personal and business finances. From this perspective, an LLC is the easiest and most economical formal business entity.
- For owners who want a flexible tax treatment, and malleable management structure, an LLC is a perfect option for them as well.
- In the case of a business where owners are not sure where they need liability or a large business that requires a more robust structure, or for certain licensed professionals an LLC may not be a good business model.
Frequently Asked Questions (FAQs)
Do I need to Start an LLC?
If you work for a company, you might have the option to receive a salary instead of taking a portion of your profits as a dividend. If that’s the case, you might want to start an LLC. You will receive a salary for your work and any profits will be taxed only once (at the corporate level). This will save you thousands of dollars.
Another benefit to an LLC is that it protects your personal assets from being attached by creditors or lawsuits.
What is the difference between an LLC and a Corporation?
LLCs and corporations, as far as tax planning purposes, are very similar. With both types of companies, there is a difference between distributions (dividends) and salaries (W-2 income). Distributions are taxed as either ordinary income or capital gains, depending on the source.
Salary, on the other hand, is taxed as W-2 income and generally comes with a host of benefits not available for distribution. For more information, you can read our complete article on the difference between LLC and Corporation.
What is the difference between an LLC and a Sole Proprietorship?
A sole proprietor simply means that you are the only owner of your business. This is very similar to what an LLC is, but there are a few distinctions. If you have any employees, you must set up an LLC to protect yourself from being personally liable for business debts.
Sole proprietorships allow you to have employees, but the owners are personally liable to creditors if there are unpaid debts. For more information, you can go through our complete guide on the difference between an LLC and a Partnership.
What are the differences between an LLC and an S-Corp?
The difference between LLC and S-Corp is simple. In short, An LLC is a type of business entity, while an S corporation is a tax classification. Small business owners choosing between an LLC or S-Corp can be simple or complex, depending on the circumstances. For more information, please read our article on LLC vs S-Corp.
What is the difference between LLC and LLP?
It is certainly the strategy of LLP to set up a separate company for each business project. Meanwhile, LLC deals with various projects through one company. Therefore, you can say the main difference between LLC and LLP is that LLP manages multiple companies, while LLC manages one or more projects. For more details, you can see LLC vs LLP in detail here.
How an LLC is taxed?
LLCs are taxed as pass-through entities. This means that the LLC does not pay corporate tax on profits, and distributions from the LLC are not taxed. Instead, the money “passes through” the company to be taxed on your personal return, similar to partnerships or S Corporations. For more information, you can read our complete article on how LLCs are taxed.
How do I pay myself in an LLC?
The IRS requires that you pay yourself a “reasonable salary” for the work you are doing. This can be either a “guaranteed payment” or an “accounting of earned income”. If you choose the “accounting method” then you are required to pay yourself a salary based on the profits of the LLC. The advantage of this method is that it allows you to take distributions, as well.
How much does it cost to start an LLC?
The total cost to start an LLC will vary based on your situation and where you’re starting the business. The most common expense is filing fees with your state. Other costs might include a DBA filing fee, accounting fees, and legal expenses. For more information, you can read our complete article on LLC cost by state.
Is it mandatory to have a registered agent for an LLC?
A registered agent is required for each LLC, and the role can be filled by acting as your own agent, appointing an LLC member, or hiring an individual or company.
Who can be a member of an LLC?
The members of an LLC can include individuals, corporations, and other LLCs. Since an LLC is a pass-through entity, “tax matters partners” can be members of the LLC, as well.
Are there any restrictions on who can be a member of an LLC?
Generally, anyone can be a member of an LLC. There are no citizenship or residency restrictions.
What are my payment options to file the Articles of Organization online?
You can pay for your Articles of Organization online with a credit card. You can also mail the respective authority a check or money order made payable to the LLC Formation Agent.
What is the effective date on an LLC?
The effective date on an LLC will be determined by your state or formation entity. The website of the authority you used to file the articles of organization should have more information.
What if the LLC name is already in use?
You can check the availability of the business name by going through your state’s filing website. If you cannot file the articles of organization because the name is already in use, then go back to the beginning and use a different name.
Can I print and mail my application and payment?
If you want to avoid filing online, there’s a printed form and payment option for your application. You can also download the Articles of Organization for Florida Limited Liability Company (PDF) if printing isn’t an option or available in PDF format on our website!
How to make sure the LLC is formed properly?
There are several things you can do to make sure that your LLC is formed properly. The first thing you should do is contact the filing authority and see if there are any problems with your articles of organization. If you are unable to contact them, then send an email to the filing authority’s customer service.
What if my filing is rejected?
If your filing is rejected, then you will need to contact the authority and see why. You can always ask about the application requirements and double-check to make sure everything is correct.
How do I correct a rejected filing?
The state filing authority will indicate why your filings are rejected. If you need to make any changes to the articles of organization, then you can resubmit your filing.
What are the most common reasons for an LLC to be rejected?
There are several common mistakes that can cause an LLC filing to be rejected. The most common reasons for a filing to be rejected are using the incorrect business name, the wrong LLC form, or missing information (such as a DBA).
If I filed my LLC in the wrong state, what do I need to do?
In case you think your filing is in the wrong state, then contact your formation agent for more information. If everything else checks out, but you are still filing in the wrong state, then you will need to file in the right state. You can contact our online help team if you have more questions about this process.
How do I terminate an LLC?
To terminate an LLC you will need to file a certificate of dissolution with your state. For more information, visit our article on the difference between Jurisdiction vs. State law.
What key terms should I know before creating your LLC?
It is important to be aware of a few key concepts when starting out. These may include what an LLC entails, how it works and why you may want one in the first place. Let’s take look at some of the points together now.
- What is an LLC?
- What is an EIN?
- What is an Operating Agreement
- LLC vs DBA
- Cost to start an LLC
- What is an LLC Articles of Organization
- What is a Registered Agent?
- How LLCs are Taxed
From where I can get more information on LLC?
There are several places you can go to for more information about LLCs. You should contact your formation entity or attorney to get started. You can also go through our free comprehensive guide on LLC.
Alfie Wilson, Esq., is a legal content writer with expertise in business formation, criminal law, veterans disability, family law, DUI law, personal injury, animal welfare, and legal writing. He holds a J.D. from Emory University School of Law and has experience in appellate advocacy and regulatory matters. Alfie’s passion lies in breaking down complex legal topics for a non-lawyer audience. He currently writes for law firms and non-profits on various issues and resides in Arlington, Virginia.
