How to Start an LLC in 7 Steps (with Facts & Figures)
Table of Contents
How to Start an LLC in 7 Steps
Starting an LLC (Limited Liability Company) offers entrepreneurs a simple structure to protect personal assets while enjoying flexibility. Here’s a step-by-step guide with essential details, costs, and FAQs.
Step 1: Choose Your LLC Name
Your business name must be unique and follow your state’s rules, typically including “LLC” or “Limited Liability Company.” Ensure the name is not already in use by checking your state’s business database.
- Fact: In 2023, over 5 million businesses were registered in the U.S., with LLCs being a preferred structure for small businesses.
Step 2: Appoint a Registered Agent
A registered agent is required in every state to handle legal documents on behalf of your LLC. This can be an individual or a service company.
- Cost: A professional registered agent service typically costs between $50 and $300 annually.
Step 3: File Articles of Organization
Filing this document with your state officially registers your LLC. Each state has different requirements and fees.
- Fact: Filing fees range from $40 in Kentucky to $500 in Massachusetts.
Step 4: Create an Operating Agreement
Though not mandatory in all states, an Operating Agreement outlines the LLC’s ownership and management structure. This is crucial, especially for multi-member LLCs.
Step 5: Obtain an Employer Identification Number (EIN)
An EIN from the IRS is necessary for tax purposes and hiring employees. The process is free and can be completed online.
- Fact: According to the IRS, over 700,000 EINs were issued to new LLCs in 2022.
Step 6: Open a Business Bank Account
Separate your personal and business finances to protect your LLC status. A dedicated business account helps in tax filing and legal compliance.
Step 7: Maintain LLC Compliance
Ensure your LLC remains in good standing by paying annual fees and filing reports. Some states also require an annual franchise tax.
- Cost: Annual report fees vary from $10 to $500, depending on your state.
LLC Costs Breakdown Table:
| Expense Category | Average Cost (USD) |
|---|---|
| LLC Filing Fee | $50 – $500 |
| Registered Agent Service | $50 – $300 per year |
| Operating Agreement Drafting | $0 (DIY) to $200+ (lawyer) |
| EIN Application | Free |
| Annual Report Fee | $10 – $500 |
| Business License (if needed) | Varies by state/city |
FAQs
1. How long does it take to form an LLC?
It usually takes between 7 to 14 days, depending on your state. Some states offer expedited services for an extra fee.
2. Can I use my home address for the LLC?
Yes, but some prefer using a registered agent or virtual office to protect privacy.
3. Are LLC profits taxed?
LLCs have flexible tax options. By default, profits are taxed as personal income, but LLCs can choose to be taxed as corporations.
Starting an LLC is a great way to protect your personal assets while building your business. Keep these steps and costs in mind to ensure a smooth process from registration to operation.
Read more.. LLC vs Corporation: Choosing the Right Structure
How to Start an LLC in 7 Steps, How to Start an LLC in 7 Steps
