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LLC Formation
If you’re considering starting a business or looking for ways to protect your personal assets, you’ve probably come across the term “LLC.” But what does LLC mean, and how can it benefit you?
This page will explain, step-by-step, how to start an LLC, whether by DYI or using a professional service.
What is an LLC?
LLC, which stands for Limited Liability Company, is a popular business structure that combines the flexibility of a partnership with the liability protection of a corporation.
In simple terms, it’s a legal entity that separates your personal assets from your business’s, helping protect your personal finances in case of business-related legal troubles.
Is an LLC a Corporation?
No, an LLC is not a corporation, but it offers similar liability protection without the strict formalities of a corporation. You get the best of both worlds.
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How to Get an LLC: Formation Steps
Creating an LLC involves a few key steps, which may vary by state but generally include the following:
- Choose a Name: Select a unique and legally acceptable name for your LLC.
- File Articles of Organization: Submit this document to your state’s secretary of state office and pay formation fees.
- Appoint a Registered Agent: This person or entity receives legal documents on behalf of your LLC.
- Create an Operating Agreement: An internal document that outlines how your LLC will operate.
- Employer Identification Number (EIN): Obtain an EIN from the IRS for tax purposes.
- File the Beneficial Ownership Information Report: Starting in 2024, many LLCs must submit a BOI Report.
- Obtain Necessary Permits and Licenses: Ensure you’re compliant with local regulations.
- Comply with Ongoing Requirements: Fulfill ongoing requirements, such as filing annual reports and paying necessary taxes.
For the exact steps to create an LLC by doing it yourself (DYI) in your specific state, choose your state from the drop-down menu at the top of the page.
LLC Formation Services
Simplify LLC Formation with Professional Services
Formation of an LLC doesn’t have to be a paperwork hassle. LLC formation service companies offer a convenient solution, taking the paperwork off your hands and making the process effortless.
If you’d rather not deal with forms and filings yourself, these services are your go-to resource for a stress-free LLC setup.
Read our review of these providers to find the best LLC service that fits your needs.
How Much Does an LLC Cost?
The cost of forming an LLC can vary depending on your state and whether you hire professional services like Bizee. Typically, formation fees range from $40 to $150. (The US average is around $130.)
Some states, like Alaska ($250), Massachusetts ($500), Tennessee ($300), and Texas ($300), have higher-than-average fees. However, forming an LLC outside your home state to avoid high fees can result in additional costs, as you’ll need to register your out-of-state LLC as a Foreign LLC in your home state, effectively doubling your fees.
Registration fees, annual report fees, and other costs can add up, so it’s important to budget accordingly. Be sure to check your state’s specific requirements.
Are There Any Additional Fees Associated with Forming an LLC?
Most states require LLCs to file an Annual Report, typically costing around $100 nationwide, with fees ranging from $50 to $100 in most states.
While some states, like Arizona, Idaho, and Texas, don’t have an annual fee, they may still require a report. Additionally, certain states, such as Connecticut, may impose hidden fees like the Business Entity Tax ($250 every other year).
It’s crucial to thoroughly research all costs associated with LLC formation in your state.
What is an LLC Registered Agent, and Do I Need One?
A Registered Agent accepts legal mail and documents on behalf of your LLC. Most states require one, and it’s typically listed in your LLC formation documents.
You can act as your LLC’s Registered Agent or hire a Commercial Registered Agent, costing between $100 to $300 annually. We recommend using a professional service to maintain privacy.
How Long Does It Take to Get an LLC?
The timeline for forming an LLC can also vary by state, but it typically takes a few weeks to a few months if you apply by mail.
However, if you file online, your LLC can be approved the same day.
Some states offer expedited processing for an additional fee if you need to establish your LLC quickly.
Where Should I Form My LLC? What is the Best State to Form an LLC?
It’s best to set up your Limited Liability Company (LLC) in the state where you do business. For most people, this means their home state. Real estate investors should establish their LLCs in the state where their property is located since that’s where they’re conducting business.
LLC VS Corporation
- Flexibility: LLCs have fewer formalities and reporting requirements compared to corporations.
- Taxation: LLCs can choose between pass-through taxation or electing to be taxed as a corporation.
LLC VS Sole Proprietorship
- Liability Protection: An LLC offers limited liability, while a sole proprietorship does not separate personal and business liabilities.
- Credibility: An LLC can add a professional image to your business.
Pros and Cons of an LLC
Pros
Cons
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Conclusion
Now that you’re armed with essential knowledge about LLC formation, you’re ready to make an informed decision.
Whether you’re looking to register an LLC by doing it yourself or explore services like Northwest Registered Agent and ZenBusiness for LLC formation, we’ve got you covered.
Feel free to explore our reviews, how-to guides, and tools to kickstart your LLC journey with confidence. Remember, the right business structure can make all the difference.
