How to Create an LLC

By Fernando Berrocal

For over two decades, what has been the most popular business filing in the US? It's called Limited Liability Company (LLC). These are popular for a multitude of reasons:

  • Flexibility: There are several ways to build one and how these will be taxed.
  • Protection: Another motivation is to safeguard one's possessions. The LLC shields each member from personal liability.
  • It's Simple to Make: You may walk yourself through a step-by-step process explained.

What is a Limited Liability Company (LLC)? It’s a business entity with Limited Liability. Individuals who buy shares in a corporation own it. An LLC is a business with owners who put money into it. The "Limited Liability" aspect appeals to small business owners. Their personal belongings are protected and the amount of responsibility charged is restricted to the amount of money invested.

Manager-Managed vs. Member-Managed LLCs - The Difference: Your LLC's management structure might be either “member-managed” or “manager-managed”. When you draft and submit an LLC operating agreement, specify which one you'll employ. It is not specified, it will be governed by its members by default.

Most multi-member LLCs choose the member-managed LLC option. With this, all members are involved in the business decision-making processes. If LLC members wish to be actively involved in the activities, such as selling or supporting the production and sale of the company's products, the member-managed structure is beneficial. If an LLC has little resources and doesn’t want to sustain a management level between the business and owners, a member-managed LLC would benefit.

How Much Does an LLC Cost? The most significant expense is the registration fee for your "LLC Articles of Organization”.  State costs apply to each phase of the process.  You may set up an LLC on your own or hire an attorney. Fees for forming an LLC can be paid at:

  1. Articles of Incorporation, Business Licensing, and Permits – State
  2. Some Specialize in this Area - State Permits.
  3. Maintaining the LLC – state fee and business license fee renewals depending on state rules, there may be additional costs.

How to Form an LLC in 10 Steps:  The whole procedure of forming an LLC may be done on your own. Forming an LLC, on the other hand, is a serious business venture. Using the services of an attorney may give you more confidence.

How to Create an LLC


  1. Choose which State you want to Form your LLC:  When deciding on a state to create an LLC, there are several considerations:

  • Money Savings: Business tax rates and fees vary by state.
  • Business-Friendly Laws: Some states have a pro-business reputation. Laws tend to be more flexible and there are judges with expertise in corporate law.
  • Privacy Laws: Some states require ownership to be public, while others don't.

  1. Follow the Laws of the State: Depending on your state's requirements, you'll need to file “Articles of Organization''. Your LLC operating agreement is included. Following any state-specific rules and laws, you might start by searching for your secretary of state's website.

  1. Name Your LLC: Most people select a name for their LLC that is related to their business. This is important if a business is already up and running and the name is well-known. You might have a name yet do business under a different name.

  1. Choose a Registered Agent: A registered agent might be an individual or a business. Either form of registered agent will be able to handle any legal or government-related notices. A registered agent must have the ability to receive service of process. That's why the registered agent must have a physical location in the state where the business is licensed to operate.

How to Create an LLC


  1. Fill Out a Limited Liability Company Operating Agreement: The operating agreement defines how the company functions. It's similar to a joint venture arrangement. The structure is outlined in the operating agreement. It explains the purpose and how it is set up to function. It's crucial since it explains how the LLC is owned:

  1. By members.
  2. By a corporation or S corporation.
  3. By another LLC.

  1. Your Secretary of State will receive the Articles of Organization: The LLC's articles of formation define the members' rights and liabilities. It explains what occurs if a member of the departs, as well as what happens if the business dissolves. The basic information is required: LLC name and address, kind of business, registered agent name and address, managers, and board of directors’ names.

  1. Get an Employer Identification Number (EIN): An Employer Identification Number (EIN) is a number that identifies a business, also known as a Tax Identification Number (TIN). When the LLC files income tax returns with the Internal Revenue Service, the EIN is used.

  1. Publish an LLC Operating Agreement Notice: Two authorized publications must print the operating agreement notification. The publication must be circulated in the same county as the LLC's primary address to be authorized.

  1. Keep Your LLC Active: You must pay yearly renewal costs to keep your LLC operating, as mandated by regulatory entities. Maintain the LLC's activity by keeping the business bank account, business insurance, and any credit cards in the LLC's name. The business owner can apply for a Federal Tax ID after the LLC name is finalized.

  1. Register the Business in the Additional States (If Needed): The initial LLC can be expanded into new states. The primary LLC would always be the initial registration. Additional LLCs with the same business name are referred to as overseas LLCs.

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