If you’re looking to start an LLC for free, then you’re in the right place. We will show you exactly how to start an LLC in any US state. Limited Liability Companies (LLCs) are easy to create, it involves a few steps that include naming your LLC, getting a registered agent, filing your LLC with State, and drafting your operating agreement.
To file your LLC, you need to pay a bare minimum filing fee to the Secretary of State. The amount depends on the state you’re forming your LLC in. In many states, this fee is tax deductible. Thus if you set up an LLC yourself, it’s basically free. You can select the state from the list below to know the state fees and steps to start an LLC in that state. On this page, we have shared the step-by-step guide on how to start an LLC. It is recommended to read this article word by word, so you don’t miss any important points 🙂
On this page, you’ll learn about the following:
How to Form an LLC
Before you start planning to set up an LLC, you must know what an LLC is all about. LLC is a business structure that is a mix of both a sole proprietorship and a partnership. It comes with a bunch of advantages. There are a few more things you must know,
- You can choose a management type in your LLC. It can be member-managed or manager-managed.
- LLCs have pass-through taxation, which means LLCs do not have to pay any corporate income taxes. They only have to pay personal income taxes based on the income of each member.
- Compared to other business structures, LLCs are cheaper to form. Some states have tax deductions on the LLC filing fee (paid to the state government). Hence, it is much cheaper to form an LLC than other business structures.
- You can get rid of all the hassles of setting up your LLC if you select a professional LLC formation service. They will make things easier and better for you. (Recommended)
This is pretty much the basics of an LLC. You can read our guide on the Limited Liability Company to learn more about this type of business structure. As we move forward, here is the step-by-step guide to forming an LLC. Read the steps carefully to understand the process.
STEP 1: Select a State
The very first step to starting your LLC is to choose the state you want to start your business in. Ideally, your LLC should be located in the state where you live or where you plan to do business. Different state has different rules and regulations when it comes to forming an LLC. It is necessary to know about the fees, costs, taxation, and other policies in the state before you establish your business. If you hire a professional LLC formation service, you will get all the assistance at once without any delay.
Following is the list of states where you can form your LLC. Select the state you want to establish your LLC and get insights into the regulations, fee structure, taxation, and other information of that state. If you plan to operate your business in different states, you will have to register it as a foreign LLC in that particular state.
Delaware is one of the most desirable states to start your LLC. More than 60% of Fortune 500 companies and about 50% of public sectors have incorporated their businesses in Delaware. Apart from that, Texas, Florida, Wyoming, and California are some of the best states to start your LLC.
Kentucky is the cheapest state to form your LLC. The state filing fee is the lowest among all other states ($40). On the other side, the annual compliance fee is $15 only, which is also quite low compared to other states.
Wyoming and South Dakota are the two states that do not have any corporate income taxes. Also, there is no gross receipt tax to be paid in these two states. In Wyoming, there is no personal income tax as well.
STEP 2: Name Your LLC
In our guide, the next step is to name it. However, before you name your business/LLC, you must know whether the name is available for use or not. You should perform an LLC name search and confirm the availability of your desired name before you start your LLC. One has to visit the Secretary of State portal (link shared in state LLC formation pages) to search and register the name of your LLC. Meanwhile, here are the general LLC naming guidelines,
- The company name should include “Limited Liability Company” or abbreviations like LLC or L.L.C.
- The company name should not include words that might confuse your company name with any government agency (i.e., FBI, State Department, Treasury, etc.).
- Words like Bank, Attorney, University, College, and some others are restricted. They may require additional paperwork on top of a licensed individual like a doctor or lawyer as part of the company.
These are some of the most important points to be noted while naming your LLC. It is recommended to go through our complete guide on LLC name guidelines before you name your LLC.
LLC name search, check if the name is available, and finally reserve it for the future; all these steps require no money (other than name reservation fees) if you are setting up your LLC on your own. You can do these steps for free. On the other side, if you hire a professional, the name search service comes for free with their LLC formation package. The only difference is, hiring a professional will help you speed up the process.
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When it comes to Name Search, TailorBrands help you to know if your chosen name is available or not. If it is not available, then you will be notified immediately. So, it will be easier to check name availability by clicking a few times with TailorBrands.
Reserve Your Business Name
Name reservation is recommended if you’re not registering your LLC immediately. LLC names can be reserved for up to 3 months, depending on the state rules. Within this time, you can register your LLC under the reserved name. If you fail to do so, then the name might be available to use by other LLCs. A reservation fee is required to pay along with the name reservation form submission. In most states, it is not mandatory to reserve an LLC name if you register your LLC right away.
Doing Business As (DBA) or Trade Name
“Doing Business As (DBA)” or Trade Name, or Fictitious Name, is a sort of assumed LLC name. DBA’s name is different from your legal name. It is used as a trading name under which you can conduct your business. Instead of reserving your LLC name beforehand, you can file a DBA as well. You can get the DBA filing form from the Secretary of State’s online portal. Depending on the state, the filing fee varies. DBA filing would also be helpful for you if you change your LLC name in the future. You can read our guide on how to file a DBA to know more about this.
If your desirable name is not available in the state or taken by some other entity, then think of another name according to the naming guidelines. You can add additional words or numbers to your desired names and use them. You can check if your desirable or ‘fictitious name’ is available or not from the SOS website.
Yes, you can change your LLC name in the future. However, the process is a bit complicated, and LLCs have to pay a state fee to change the name. To change the LLC name legally, one has to go through several steps, from searching for a new name available to filing the amendments. It is wise to go for DBA filing instead of changing the name legally. Hiring an LLC formation service will make this part easy for you as they will do the needful on your behalf.
STEP 3: Choose a Registered Agent
A registered agent is a person or an organization who receives legal documents on your company’s behalf. The official documents would include official correspondences like state filing notices and legal summons. Anyone aged above 18 years and has the right to conduct business in the state can be a registered agent. This person has to have a physical street address in the state. You can be your LLC’s registered agent as well if you fulfill the eligibility requirements.
However, it is always recommended to hire a professional registered agent service. As your own registered agent, you will have to share your personal address for all legal and public communication. This may harm your privacy, especially if you’re conducting your business from home. Hence, it is better to hire a professional service that can take care of all your legal and state-related papers along with your privacy. You can use their address for official activities. We reviewed some of the best LLC services here, and all of them provide registered agent service as an add-on with their LLC setup packages.
Note that availing services of professional registered agents would be your best option since you will be sure that whoever is handling your legal affairs knows their stuff well. Besides, if you are only looking for registered agent service, not the entire LLC formation package, you can go for this standalone registered agent service.
You can be your own registered agent if you are a resident of the state where you are forming your LLC. However, it is recommended to get a professional Registered Agent to handle your LLC’s paperwork. Remember being your own registered agent means you may have to share your home address and make it public.
The cost of having a registered agent service depends on which state you are forming your LLC in and, moreover, which registered agent service you are hiring. The cost can go up to $300. ZenBusiness offers a standalone registered agent service at $99 (It’s quite good).
STEP 4: File LLC Formation Documents
LLC formation documents are the most vital while forming an LLC. These documents are commonly called the Certificate of Formation. Depending on the state, the same document is called by different names, such as Articles of Organization or a Certificate of Organization.
You need to fill in the form (online or in PDF) and send it to the Secretary of State after paying the state fee. Depending on the state, the filing fee varies. The state filing fee starts from $40 (Kentucky filing fee) and can go up to $500 (Massachusetts filing fee). Read our guide on the cost of LLC to know how much you have to spend on forming an LLC in different states. You can file the Certificate of Formation via mail, online, fax, email, or by phone, depending on the state rules.
Even if you are setting up your LLC for free (DIY), you must pay this fee to the Secretary of State to register your business. But, if you buy a formation package from experienced service providers, you can get everything done without any complications. Another reason for hiring a professional is they can speed up your process.
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There are different methods of filing your LLC formation documents. One can file their LLC documents via postal mail, in-person visit to the Secretary of State’s office, online submission, email, and fax. Depending on the state rule, you can file your LLC documents via any of these methods.
Depending on the state, it can take up to 10 working days or more to form an LLC. In some states, it takes less than 24 hours to form an LLC if you file it online.
The cost of filing LLC formation documents depends on which state you are forming your LLC in. The state filing fee can start from $50 and go up to $500. It depends on the state.
STEP 5: Create an LLC Operating Agreement
The LLC operating agreement is not mandatory, but it is encouraged. This legal document outlines the organizational structure and roles of members in your LLC. The operating agreement is a formal agreement between the members of the LLC. Take note that you should have already decided if your LLC is member-managed or manager-managed.
Here are the six main sections of an operating agreement:
- Capital Contributions
- Management and Voting
- Membership Changes
An operating agreement is a document that most states do not require to file officially with the Secretary of State. However, this is one of the most important documents for an LLC. Hence, having an Operating Agreement is always recommended. You can draft your operating agreement on your own. You can also hire a professional. If you hire a good LLC formation service, they will take care of your operating agreement as well.
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It is not always necessary to file an operating agreement. In some states, there is no mandatory rule to file an operating agreement. However, it is recommended to file an operating agreement as it is a legal document that records all the important information about your LLC.
To draft your operating agreement you need to mention some important details about your LLC. Such as the ownership, management, dissolution, voting, and some more details, You can read our guide on Operating Agreement to learn more about it.
STEP 6: Get an EIN
The Employer Identification Number (EIN) is a 9-digit number issued by the IRS. This number is required to identify the type of business structure for general tax purposes. It’s like a Social Security number (SSN) for your LLC. The EIN is vital when you plan to hire employees or open a business bank account. It is also known as Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN).
To obtain the EIN, one has to fill up the form (online or by mail) and send it to IRS. For online filing, you need the EIN Assistant. If you do not have an SSN, still, you can get your EIN by filling up the form and submit to IRS before you proceed to apply for the EIN.
- Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
- Fax: (855) 641-6935 | Fee: Free
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You can get your EIN by applying through the IRS official website. This is the fastest way to get your EIN. There is no fee charged to get EIN through IRS.
Yes, EIN and the Tax ID (federal) are the same things. LLCs need to obtain EIN or the Federal Tax ID to pay their annual taxes, get business licenses, open business bank accounts, and hire employees.
EIN is needed when you file and pay your business taxes. Every LLC needs to obtain EIN for not only paying taxes, but opening a business bank account, hiring employees, and so on. Read the need for EIN to know why EIN is important!
Congratulation, you are now done with all the necessary steps to form your LLC. If you do it yourself, it should take you a long time to properly understand and do all the procedural steps.
However, if you use TailorBrands, it should be way faster. You will always have a live chat option as well as phone support with experts for any help you need. Their worry-free service will make things easier for you.
After Starting an LLC
Apart from those main steps, there are more things to do after starting an LLC for a business owner. You’ll have to deal with your assets and taxes depending on the management structure. Here are other important things to address when starting an LLC.
- Set Up Business Accounting: It is vital to have a business accountant who will help you take advantage of tax benefits. It will save you and your business tons of money in taxes annually.
- Get Licenses and Permits: You need to check if your business will require any business licenses or permits so that you can stay compliant. Licensing requirements would vary per state and county or city laws.
- Separate Personal Assets From Business: Your LLC offers limited liability protection. It is vital to use dedicated business banking and credit accounts to avoid mixing them with your personal accounts. Otherwise, your personal assets (your home, car, and other valuables) would be at risk if your LLC gets sued.
- Understand Your LLC’s Federal Tax Options: LLCs get taxed as pass-through entities. It means all of the business’s profit goes through the LLC member’s tax returns. The member pays self-employment taxes and income tax on their share of business income after tax. Meanwhile, LLCs can also be taxed as S corporations (S corps) or C corporations (C corps). The former allows LLC members to be taxed as employees. It reduces the tax burden in certain circumstances.
- Register Your LLC for State Taxes: There are several taxes that you might need depending on the nature and location of your business.
- Get Business Insurance: Generally, businesses with employees must get workers’ compensation insurance. Meanwhile, general liability insurance is not a legal requirement, but it is highly recommended to protect your business assets from lawsuits.
LLC Formation Review
Time needed: 5 minutes.
To recap, here’s the step-by-step tool. Click on the steps in this list to read the full detail.
- Choose a state
The first thing you should do is choose the state where you will operate your LLC because requirements vary per state.
- Name your LLC
Next, you must choose a company name, including the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- Choose a registered agent.
In most states, it is mandatory to select a registered agent for your LLC. Get a professional Registered Agent from LLC formation services to get things done hassle-free.
- File formation documents
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it can be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement, but something encouraged when you start your LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, identifies a business entity like a social security number but for a company.
When and Why You Should Form an LLC
The right time to set up an LLC is when you want your business to grow, protect your assets and build strong customer relationships.
When and why you should form an LLC is a matter of personal choice. It is recommended for larger businesses because incorporating gives them legal protections and guidance through corporate bylaws. However, the pros and cons of both methods should be carefully considered. Most entrepreneurs will need to form an LLC before taking on liability, contracting with clients, or selling their business. Here are some reasons to form an LLC. This company name will help you distinguish yourself from other companies.
In most states, an LLC must have a registered agent. The registered agent is an individual or company that receives official LLC documents and passes them along to the owners. If you are forming an LLC with multiple members, this agent could be your business partner. It’s important to check the name to see if it is already trademarked by another company. Finally, you need to choose a registered agent. You can either choose the registered agent yourself or choose a business partner.
Many business owners forget to consider succession planning. As a sole proprietor, you might be worried about losing your business in case the owner passes away. However, there are ways to avoid such a disaster. For example, forming a single-member LLC will protect your personal assets from a succession of owners. You can use an operating agreement to specify that the buyout process will be available if you become unable to manage the business.
There are many advantages of forming an LLC. One of the most obvious is that you’ll be limited in your liability to the resources of the business. This protects your personal assets from business claims and lawsuits. Another advantage of an LLC is that you don’t have to file a separate tax return for the business. Instead, you’ll report your LLC’s income and expenses on your personal income tax return.
As an owner of an LLC, it’s important to consider the legal and tax advantages. The structure of a limited liability company protects its owners from personal liability. In the event of a lawsuit or bankruptcy, your personal assets won’t be seized in the name of the business. Therefore, it’s important to have an operating agreement for your business. However, you may decide to forgo the operating agreement if it’s not a necessity.
Besides liability protection, the tax structure of your business matters. You can choose between a C corporation, an S corporation, or an LLC. The tax structure of your business can influence your exposure to liability, your ability to grow, and how you treat your shareholders. A limited liability company is generally considered a “pass-through” entity, meaning that the profits of your business are taxed at the individual level, rather than corporate tax rates.
You can start an LLC for free. For that, you need to follow a few simple steps. First, select the state you want to set up your LLC, get an LLC name, find a registered agent, file your certificate of formation, and finally, get your EIN to start your LLC for free. Other than the state filing fees, you don’t have to bear any costs to form an LLC.
If you are a resident of the state you are willing to start your LLC, then you can file your LLC. However, it is always worth having a professional than doing it by yourself to manage legal complexities and paperwork.
The cost of an LLC depends on the state. On average, the registration fee ranges from $50 to $500, along with annual report fees.
An LLC or limited liability company protects your assets and increases your business’s credibility. These are the most affordable legal business entities in terms of formation and maintenance. However, LLCs aren’t ideal when attracting investors.
Both LLC and Sole Properitership have their advantage and disadvantages. When it comes to single-member LLC vs Sole Proprietorship, both have similar tax benefits also.
To renew your LLC, you need to file an Annual Report every year by paying a stipulated fee. If your LLC is expired, then submit a renewal form to activate the LLC operation.
A limited liability company (LLC) takes about a week on average to form. If the business entity is filing it online, then it may take less than 24 hours. The above-mentioned simple steps will help you in your LLC filings with the state. You will get multiple filing options like by mail, online, email, or/and fax. Choose any available mode of filing, comply with regulatory requirements, and registration requirements to form your LLC in the selected state. For more information, leave a message below.