How to Establish an LLC

By Jill Lewis

An LLC, or limited liability company, is a type of business entity that appeals to business owners because it shields the LLC's members from personal liability and offers more tax advantages than a corporation. To establish an LLC, you have to comply with state regulations and submit the necessary paperwork and fees to state agencies. While every state has different rules, there are certain basic and necessary steps that all business owners should take when forming an LLC.

An LLC, or limited liability company, is a type of business entity that appeals to business owners because it shields the LLC's members from personal liability and offers more tax advantages than a corporation. To establish an LLC, you have to comply with state regulations and submit the necessary paperwork and fees to state agencies. While every state has different rules, there are certain basic and necessary steps that all business owners should take when forming an LLC.

Step 1

Pick a name. An LLC must have a unqiue name not shared by other companies in the state, and must comply with state regulations regarding the LLC designation in the name. This generally means that the name must include the words "LLC," or a similar designation. Consult with your state's Division of Corporations or similar office regarding available names, and choose the one that best suits your new business.

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Step 2

File Articles of Incorporation. An LLC must file formal paperwork, generally called "Articles of Incorporation," to establish the LLC. These forms are filed with your secretary of state's office, and contain basic information such as the name and address of the LLC, as well as the names of any LLC members. Pay the filing fee associated with the paperwork, which generally ranges from $30 to $200, depending upon your state.

Step 3

Draft an Operating Agreement. While not necessarily required by state regulations, it is good practice to draft an Operating Agreement when establishing an LLC. An Operating Agreement sets forth the duties and responsibilities of the members of the LLC, and details how the LLC is to be run. If a dispute arises for evaluation by a court, the operating agreement is controlling over a state's default LLC provisions.

Step 4

Provide notice if required by your state. Some states require that you publish notice regarding the establishment of your LLC. Check with your state's Division of Corporations or similar office regarding whether you are obligated to comply with this notice requirement.

Step 5

Obtain all necessary business licenses and permits. For your LLC to be legal, you must obtain all necessary business licenses and permits required by your state for the type of business you are running. You state's Division of Corporations of similar office can provide you with information regarding the exact business licenses and fees you will need to submit before your LLC can begin operation.

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What Makes an LLC Different Than a PLLC?

References

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