Start an LLC

Follow these steps on how to start an LLC:

1. Name your LLC

Now that you’ve decided you want to form an LLC (definition), it’s time to bring your dream to life with its own name — and yes, it must be unique. When naming your LLC, you must choose something completely different from any other limited liability companies in your state.

The rules as to how different your LLC’s name must be from others vary state by state. Although sometimes all it takes is switching up the punctuation or changing a word from singular to plural to qualify, it’s usually a smoother process when the names are more distinct. However, one component that is always required is the inclusion of “limited liability company” or an abbreviation of it at the end of the business name. The acceptable abbreviations also vary by state.

How to Get an LLC with a Unique Name

It’s important to do your research to check if your desired business name is available. Google is helpful, as is checking around on social media, but you will also want to complete a business database search on your Secretary of State website.

Your LLC name needs to be different from other LLCs, and it also cannot be previously trademarked. There are two kinds of trademarks to be aware of: federal and state. Visit the U.S. Patent and Trademark Office (USPTO) and search your business name or logo to make sure it hasn’t been federally trademarked.

Determining whether your desired business name already has a state trademark is trickier because many states don’t have a search engine for checking existing trademarks. Fortunately, the USPTO has a page linking to the office overseeing trademarks in each state. You can get started by contacting the appropriate office in your state.

Trademarking Names for LLCs

Once you’ve determined that it’s available to use, you have the option of registering your own trademark. A state trademark is less expensive and much less complicated to get; however, it does restrict your trademark benefits to the state it’s recognized in.

On the other hand, federal trademarks are more costly and can take longer to get, but you can use your trademark nationwide, and there is much more protection provided for your company. Federal trademarks also allow for the ® symbol, whereas state trademarks only allow TM (trademark) or SM (service mark). Trademarking your LLC can keep other businesses from using the same name or anything too similar.

Registering a DBA Name

There is also an option to add a DBA name (“doing business as”) to LLCs. A DBA is just another name to call your business and can be very useful if your LLC offers multiple products or services. It can help differentiate between their specific business concerns.

Each state has different regulations when it comes to naming an LLC. You will often find that certain words are prohibited, including those that are considered profane or obscene or that may mislead people about the nature of the business. Some words are restricted in most states, such as “bank” and other forms of the word (“banking” and “banker”), “engineering,” “insurance,” and “savings.” In some states, business owners who wish to use words such as these must have a certain license and/or fill out additional paperwork.

You’ve spent time coming up with a name for your limited liability company and researching its availability — now you can think about securing it. Most states will allow you to reserve your desired name for a fee so that you don’t have to worry about someone else nabbing it before you can officially launch your business. Check with your state on the requirements to reserve your business name. Then, go one step further and reserve a domain name for your company website, so you have that set up and ready to go as soon as your business can launch.

2. Choose a Registered Agent

A registered agent essentially acts as the liaison between a Limited Liability Company and the state it’s registered in. This third-party individual or business entity acts as a point of contact on behalf of the business and receives things like tax forms and legal documents, government correspondences, and notices of a lawsuit.

You can be your own registered agent so long as you have a physical street address in the state in which your Limited Liability Company is filed (P.O. boxes aren’t allowed); however, hiring an outside registered agent service has its benefits.

It allows you to have more privacy and flexibility and can decrease the added stress that can come with being your own agent. Using a third-party registered agent service, such as the one offered at ZenBusiness, ensures that you are compliant with the law, always protected, and strategically organized.

3. File the Certificate of Formation / Articles of Organization in your State

The official name for the paperwork filed to register your business depends on which state you are filing it in. Generally, the document is referred to as the Articles of Organization, but some states refer to it as a Certificate of Formation or Certificate of Organization. Regardless of what it’s called, the concept is the same: It is used to establish state recognition of the LLC and outline the details of its members.

Filing Requirements for LLCs

Check your Secretary of State’s website to see the filing requirements, as these also vary state by state. You’ll always need basic information about the LLC and its members, including the LLC name and mailing address and the registered agent’s name and address. You might also be asked to state the purpose of the LLC and list any current LLC members and/or managers.

A few parts of the form might be unfamiliar to someone who is just entering the business world. You may be asked whether your LLC is member-managed or manager-managed. In a member-managed LLC, the members take it upon themselves to handle day-to-day operations and decide who’s responsible for what. In a manager-managed LLC, one or more supervisors are chosen by the members to be in charge.

You will also need to list the location of operations, which should be the place in which members work together. If the business is operated from a private home, list your home address. If mail is not deliverable to the place of work, make sure to include a USPS-verified mailing address.

The final, and most important, step is having an organizer of the LLC sign the form. Then, you are all set to submit it. In most states, this can be done online or by mail. Any instructions for submitting the signed form and payment can be found on your Secretary of State’s website.

4. Create an Operating Agreement

Although LLC Operating Agreements are not required in every state, it’s a smart business move to have one. This legally binding document provides clear and concise definitions of all ownership terms and rules or management decisions. An operating agreement protects owners’ personal assets and outlines ownership percentages, responsibilities, voting power, and a succession plan if an owner decides to leave the business.

Having an Operating Agreement can prevent any miscommunication and resolve any conflicts between members. It is not required by law to file an LLC Operating Agreement with the Secretary of State, so once all parties have agreed upon the terms and signed it, it’s advisable to keep the document safe and secure with other important paperwork.

Create an LLC Operating Agreement Online

Utilizing an Operating Agreement template can set you up for success regarding having the right business structure and format for this important document. ZenBusiness offers various plan options that include a customizable LLC Operating Agreement template at a very reasonable price.

5. Apply for an EIN and Review Tax Requirements

After officially forming your LLC, you should consider registering it with the federal government by applying for an Employer Identification Number (EIN) from the IRS.

An EIN is the business equivalent of a personal Social Security number and is required if your LLC has multiple partners or employees. It’s free to apply for a Federal Tax ID Number aka EIN (Employer Identification Number) and can conveniently be done on the IRS website. When done online, the EIN is issued immediately.

The benefits of an LLC include limited liability protection for personal assets, flexible tax options, simplified paperwork compared to corporations, and increased credibility.

Limited liability protection: One of the top perks of LLCs is that it usually shields your personal assets, like your house or savings, from business debts and liabilities. If the business runs into trouble or gets sued, your personal assets generally stay safe. It’s like having a protective bubble around your personal finances.

Flexible tax options: With an LLC, you get to choose how you want your business to be taxed. By default, an LLC has “pass-through” taxation, where the business profits flow straight to your personal tax return without first being taxed at the business level (unlike most corporations). Alternatively, you can opt to be taxed as an S corporation or a C corporation, which can provide other tax benefits for certain LLCs. This flexibility lets you adapt to your financial situation.

Simplified paperwork: Compared to corporations, which can have a mountain of paperwork and formalities, LLCs keep things refreshingly simple. You won’t need to deal with things like shareholder meetings or a board of directors. This means fewer administrative headaches and more time to focus on growing your business.

Increased credibility: Having “LLC” after your business name adds a level of professionalism and credibility. Clients, partners, banks, and investors tend to take you more seriously when you’re not just a sole proprietor. It shows that you’ve gone through the process of establishing a legitimate business structure.

So, when you put all these benefits together, forming an LLC can be a savvy move for your business. It provides protection, flexibility, simplicity, and credibility.

Advantages of LLCs

1. Limited Liability: Your personal assets are generally protected from business debts and legal liabilities. If the business faces financial trouble or legal issues, your personal savings and property are usually off the hook.
2. Flexible Taxation: You have the option to choose how you want your business to be taxed. By default, an LLC has “pass-through” taxation, where the business profits flow straight to your personal tax return without first being taxed at the business level (unlike most corporations). Alternatively, you can opt to be taxed as an S corporation or a C corporation, which can provide other tax benefits for certain LLCs. 
3. Simplified Paperwork: Compared to corporations, LLCs have less administrative burden. You won’t need to deal with regular meetings, detailed record-keeping, or complex decision-making processes. This simplicity saves time and effort.
4. Credibility: Adding “LLC” to your business name can boost your credibility. It signals to clients, partners, banks, and investors that you’ve taken steps to establish a legitimate business structure, potentially enhancing trust and professionalism.

Disadvantages of LLCs

1. Limited Life: In some states, the existence of an LLC may be terminated if a member leaves or dies. It’s easier for a corporation to exist in perpetuity.
2. Self-Employment Taxes: While LLCs offer flexibility in taxation, they can also subject you to self-employment taxes. This can lead to higher tax payments compared to certain corporate structures.
3. Complexity in Multiple States: If you plan to operate in multiple states, you may face additional paperwork and fees to register your LLC in each state. This can add complexity and costs to your business operations.
4. Less-Established Structure: Compared to corporations, which have well-defined structures like boards of directors and shareholders, LLCs can be perceived as less established. This might matter when dealing with certain partners, investors, or clients.
5. Limited Investment Opportunities: If you’re looking to raise substantial capital from investors or plan to go public, an LLC structure might not be the most suitable option. Corporations often offer more favorable options for these scenarios. 

In a nutshell, forming an LLC comes with the perks of liability protection, tax flexibility, and simplicity. However, it’s important to consider potential limitations like limited life, self-employment taxes, and less-established structure. Assessing your business’s needs and goals will help you determine if an LLC is the right choice for you.

There are a few different types of LLCs, each with its own entity characteristics and purposes. Here’s a breakdown of the main types:

Single-Member LLCs (SMLLC): A single-member LLC is owned and operated by a single individual (member) or entity. It’s the simplest type and offers limited liability protection for the owner (member). Taxes are usually reported on the owner’s personal tax return. 

Multi-Member LLCs: A multi-member LLC has two or more owners (members). It’s great for businesses with multiple partners or investors. Each member’s share of profits, losses, and responsibilities is typically outlined in the operating agreement.

Series LLCs: Available only in a few states, a Series LLC can hold multiple “series” or subdivisions within one overarching entity. Each series can have its own assets, liabilities, and operations, providing some separation between them. This is useful for businesses with various ventures or properties.

Professional LLCs (PLLC): Certain licensed professionals like doctors, lawyers, accountants, and architects can form a professional LLC in some states. This structure doesn’t protect a member from malpractice claims against themselves, but it can protect them from malpractice claims against another member of the PLLC. This type of LLC is only available in certain states and for certain licensed professions.

Low-Profit Limited Liability Companies (L3C): An L3C is designed for businesses that aim to achieve a specific social or charitable goal while also making a profit. It’s a hybrid between a traditional LLC and a nonprofit, meant to encourage socially beneficial endeavors.

Foreign LLCs: This entity type applies when you form an LLC in one state but want to operate in another state. You’ll need to register your LLC as a foreign LLC in the state you want to do business in, complying with that state’s regulations. 

Remember that the availability and regulations of these types of LLCs can vary depending on the state you’re in. It’s always a good idea to consult legal and financial experts to determine the best type of LLC for your specific situation and location.