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Learn How to Form an LLC

Hi! I’m Matt Horwitz, founder of LLC University®.

LLC University® is not driven by profit, but instead by our mission to empower entrepreneurs through free education.

Over the past 8 years we’ve created tutorials on how to form an LLC in every state.

 

What is the best state?

Avoid the hyped up states like Nevada, Wyoming, or Delaware. Form your LLC in your home state. This is where you’re legally doing business. Avoid double LLC filings and save yourself the headache. Exceptions are real estate investors and non-US citizens…
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How much does an LLC cost?

LLC filing fees vary depending on the state. The average filing fee is $127. The average annual report fee is $101. If you hire a registered agent, that will add to your costs. If you follow our LLC tutorials you can file the paperwork yourself and save money…
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What is a registered agent?

A registered agent is a person or company who agrees to receives “service of process” for your LLC. Service of process is legal mail. You, a friend, or family member can be your LLC’s registered agent. Or you can hire a commercial registered agent…
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What is an LLC?

An LLC is a Limited Liability Company. It is a business structure used to protect the personal assets of its owners. LLCs are a “hybrid entity”, combining the advantages of Corporations and Partnerships, without taking on their disadvantages.

An LLC can be used to run a business, or it can be used to hold assets (such as real estate, vehicles, boats, or aircraft).

Where is the best to state to form an LLC?

It is best to form your Limited Liability Company in the state where you are doing business. For most people, this is their home state. For real estate investors, you’ll need to set up your LLC in the state where the property is located since that is where you’re legally doing business.

How much does it cost to form an LLC?

The average state filing fee to form an LLC is $127. The majority of the 50 states cost between $50 to $150. To see LLC filings fees and LLC annual fees in all 50 states: LLC filing fees by state.

Expensive States to Form an LLC

There are a few states that have higher than average LLC filing fees, like Alaska ($250), Massachusetts ($500), Tennessee ($300), and Texas ($300). However, just because your state has high LLCs fees, does not mean you should form an LLC outside of your home state. Doing so will cost you even more. If you form an LLC out-of-state, you’ll be required to register that out-of-state LLC as a Foreign LLC in your home state. This will double your LLC fees.

LLC Annual Reports

Most states require LLCs to file and pay an Annual Reports (also called Annual Fee). The average LLC Annual Report in the U.S. is $101. The majority of the 50 states cost between $50 to $100 per year.

States with no LLC Annual Reports

There are few states where there is no LLC Annual Fee (although a report may be due), such as Arizona, Idaho, Minnesota, Mississippi, Missouri, New Mexico, Ohio, South Carolina, and Texas.

States with Expensive Annual LLC Fees

There are a few states with higher than average LLC Annual Report fees, like California ($800), Delaware ($300), Maryland ($300), Massachusetts ($500), Nevada ($500), Tennessee ($300), and Washington D.C. ($300).

“Hidden” LLC Fees

And, be careful, even if a state doesn’t have an Annual Fee (or they have a low fee), they may take that money from elsewhere. For example, in Connecticut, the Annual Report costs $20 each year, but Connecticut also has something called the Business Entity Tax. The Business Entity Tax is $250 every other year. Make sure to click your state above and read our entire guide in order to understand all of the costs associated with starting an LLC in your state.

LLC Registered Agent Fees

If an individual, such as you, a friend, or a family member will be your LLC’s Registered Agent, then there is no additional cost here. If you prefer not to be your LLC’s Registered Agent, and don’t want to use a friend or family member, then you can hire a Commercial Registered Agent. Industry fees range between $100 to $300 per year. The 2 companies that we recommend cost between $100-$125 a year and provide excellent customer service (links in our state guides above).

What is an LLC Registered Agent?

A Registered Agent (also referred to as a Resident Agent or Statutory Agent) is a person or company who agrees to accept legal mail and documents on behalf of your LLC. All states (except for a few exceptions) require that your LLC list a Registered Agent in your LLC Formation Documents. The purpose of a Registered Agent is to make sure there is a reliable person/company and a reliable street address (very few states accept PO Boxes) where such documents can be delivered. Most companies try to trick you into hiring them as your Registered Agent. They don’t explain that you (or anyone you know) can be your LLC’s Registered Agent.


How to Form an LLC

Forming an LLC can often feel like an overwhelming process, but it doesn’t have to be. Our mission at LLC University® is to make LLC formation as simple as can be.

The steps to forming an LLC are:

  1. Name your LLC
  2. Select an LLC Registered Agent
  3. File Articles of Organization with the Secretary of State
  4. Complete an LLC Operating Agreement
  5. Obtain an EIN from the IRS, also called a Federal Tax ID Number
  6. Open an LLC bank account
  7. File your LLC’s Annual Report (if applicable)

The information below is a general overview on how to form an LLC.

Step 1: Choose an LLC Name

The first step to forming an LLC is to come up with an LLC name that is unique and distinguishable. This is often referred to as having an LLC name that is “distinguishable upon the records”. This means that no other business registered in the state has the same (or deceptively similar) name.

You can do an LLC name search on the Secretary of State website.

Your LLC name must also end with the proper designator. That means your LLC name must end with “LLC”, “L.L.C.”, or “Limited Liability Company”. These are the usually allowable designators in most states, however, some states will also allow you to use “LTD”, “LC”, “L.C.”, “Limited Liability Co.”, “Ltd. Liability Company” or “Ltd. Liability Co.”.

Tip: Most filers choose the designator “LLC”. It’s the shortest and easiest to recognize.

Your LLC name cannot imply that is a different type of business. And your LLC name cannot include any non-LLC designators. For example, your LLC cannot have the following words or abbreviations: Corporation, Corp., Inc., Incorporated, Limited Partnership, LP, L.P., or Trust.

Step 2: LLC Registered Agent

Before filing your LLC paperwork with the Secretary of State, you need to decide who will be your LLC’s Registered Agent.

Registered Agent is a person or company who agrees to accept legal mail (called “Service of Process”) on behalf of your LLC in case your business is sued.

In many states, the Secretary of State’s office will also send other mail and correspondence to your LLC’s Registered Agent.

In most states, the Registered Agent for your LLC must have a physical street address located in the same state as your LLC. And if your LLC’s Registered Agent will be an individual person, that person must be at least 18 years old and must be a resident of that same state.

Although the occurrence is rare, a Registered Agent should generally be available during normal business hours (9am – 5pm) in case Service of Process arrives. Service of Process can include the delivery of legal documents, such as complaints, summons, and subpoenas.

An LLC Registered Agent is key component to how the court and legal systems work. By requiring LLCs to have, and maintain, a Registered Agent on file, the delivery of legal mail and court documents can be tracked and confirmed. You can think of this as being similar to how Certified Mail works.

Can I be my LLC’s Registered Agent?

Yes, you can be your LLC’s Registered Agent, as long as you have a street address located in the state.

However, you actually have 3 options when forming an LLC:

  • Option 1: You can be your LLC’s Registered Agent.
  • Option 2: A friend or family member can be your LLC’s Registered Agent.
  • Option 3: You can hire a Registered Agent company, more formally known as a Commercial Registered Agent.

What’s the best Registered Agent option to choose?

For most people forming an LLC in their home state, they are often the Registered Agent for their LLC. However, you could also use a friend or family member.

If you don’t have an address in the state where you’re forming an LLC, then you’ll want to consider hiring a Commercial Registered Agent.

And, even if you do have an address in the state, you may prefer to keep your address off of public records. If that’s the case, then we recommend hiring a Commercial Registered Agent.

(You can find our Registered Agent recommendations here: LLC Registered Agent)

Once you decide who will be the Registered Agent for your LLC, you’re then ready to file your LLC paperwork with the Secretary of State.

Step 3: File LLC Articles of Organization

In most states, the LLC filing paperwork is known as the Articles of Organization. However, some states refer to the filing documents as the Certificate of Organization or the Certificate of Formation.

(You can find all 50 state LLC state forms here: LLC filing forms by state)

Along with the Articles of Organization, you also need to pay an LLC filing fee. The filing fee is a one-time payment made to the state which, along with your Articles of Organization, officially creates your LLC.

The forms vary by state, but usually your LLC Articles of Organization will include:

Most states will allow you to form your LLC online, but some state still only have the option of forming your LLC with a paper form. If you form your LLC online, you’ll enter all the information on the state’s website and pay the LLC filing fee with a debit or credit card. If your form your LLC by mail, you’ll complete the paper form and pay the LLC filing fee with a check or money order.

LLC Approval: Some state will approve an LLC filing instantly (if filed online), while other states can take 4 to 5 weeks for approval. Most states will send you back a stamped an approved copy of your Articles of Organization as your LLC’s official approval.

Step 4: Create an LLC Operating Agreement

An LLC Operating Agreement is the governing document for your LLC. It spells out who the LLC owners (“Members”) are, how much of the LLC they own, how the LLC is managed, how profits are split, and more.

(related article: who can be LLC Members?)

You can think of LLC Operating Agreement as being the “owner’s manual” for your LLC.

Or, another way to think of it is: If your LLC’s Articles of Organization is the document that creates your LLC, then the Operating Agreement is the document that governs it.

An LLC Operating Agreement is an “internal document”, meaning, the Operating Agreement doesn’t need to be sent to the state, the IRS, or any other government agency. It’s simply an agreement between the LLC Members.

as the “owner’s manual”  of how the LLC is managed, how taxes are paid, how profits are distributed, and much more. It’s essentially a contract between the owners (called “members”). Even if you have a single-member LLC (1 owner), it is best practice to have an Operating Agreement for your LLC.

It’s important to have an Operating Agreement for your LLC. It will provide written instructions for how to disputes and arguments among the LLC Members.

Having an Operating Agreement for your LLC can also help ensure your personal liability protection. This is a very important document to have if you ever end up in court.

And this goes for a Single-Member LLC and a Multi-Member LLC. No matter how many Members your LLC has, it’s best practice to have an LLC Operating Agreement.

You can download our free Operating Agreement here: LLC Operating Agreement.

Step 5: Get an EIN from the IRS

After your LLC is approved, you can also obtain your EIN from the IRS. The IRS does not charge any money for this. Getting an EIN for your LLC is completely free ($0).

EIN stands for Employer Identification Number. And even though you likely won’t have employees, you’ll still need to obtain an EIN in order to file taxes with the IRS, open an LLC bank account, handle payroll (if applicable), obtain credit cards, and get business financing.

An EIN is also called a Federal Employer Identification Number (FEIN) or Federal Tax ID Number. No need to get too confused though… they all mean the same thing.

An EIN is like your LLC’s “social security number”. The IRS uses it to identify your LLC for taxation and reporting purposes.

You can apply for an EIN 3 different ways. You can apply online, by fax, or by mail. Online is the fastest (10-15 minute approval), fax is next (4 business day), followed by mail (4-6 weeks).

You can only apply for an EIN online if you have a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).

If you don’t have an SSN or ITIN, don’t worry. You can still get an EIN for your LLC. You’ll just need to complete the paper form called Form SS-4 and mail or fax it to the IRS. On line 7b, where it asks for “SSN, ITIN, or EIN”, just write “Foreign”. It will be approved.

Step 6: LLC Bank Account

After your LLC is approved and you’ve received your EIN from the IRS, you can then open a separate bank account for your LLC. This is important step in asset protection, as you’ll want to keep your personally finances and your business finances separate.

You’ll need to bring your driver’s license, your LLC approval, and your LLC’s EIN issued by the IRS.

Most banks have minimum balance requirements for LLC bank accounts (example: $500 balance required at all times), and some banks even charge monthly “maintenance fees” for LLC bank accounts ($10 to $20 per month). If you call around and shop rates though, you’ll likely be able to find a bank which does not charge monthly fees for LLCs.

For tips on finding a good LLC bank account, please see this article: opening an LLC bank account.

Step 7: LLC Annual Report

Most states require LLCs to file an Annual Report (and pay a fee) in order to keep the LLC in compliance and in good standing.

The LLC Annual Report is usually called just that, an “Annual Report”, however, there are many different names used, depending on the state where you formed your LLC. For example, the filing may also be called Annual Fee, Annual Statement, Statement of Information, Periodic Report, Biennial Statement, or Decennial Report.

There is usually a penalty if you do not file your LLC’s Annual Report on time. And if you continue to ignore the LLC Annual Report requirement, most states states will administratively dissolve (shut down) your LLC.

The Annual Report form is usually pretty simple and is a way for the Secretary of State to ensure they have your LLC’s most up-to-date contact information.

You can find all state LLC annual fees here: LLC annual fees by state.

Get started forming your LLC:

Click on any of our free LLC state guides above.

Meet the LLC University® Team

Matt Co-Founder LLC University

Matt Horwitz
Shelley Co-Founder LLC University

Shelley Losito
 
LLC University® is a team of legal professionals and business formation experts who are passionate about empowering entrepreneurs.
We got fed up with the lack of transparency in the LLC industry, so we decided to create free online courses that teach people how to form LLCs in all 50 states.
Since 2010, LLC University® has been teaching people how to form LLCs and protect their personal assets. Click here to learn more about us.

LLC University® Reviews & Testimonials

(here’s some recent comments we received)

Hey, I just wanted to say thank you guys for LLC University! I’ve been researching 24/7 about forming my Florida LLC and was about to pay some crazy company just to do it, but there’s a certain sense of pride when doing it by yourself. I’m working on a name for my company now, but I should be up and running soon because of the LLC University video lessons!
– Louis Quinonens

Hi! Thanks for creating such an awesome resource. I was about to spend $650 on a lawyer to do the LLC formation, but instead was able to follow your guides and saved over $400. Now I can use the lawyer to create documents that I really need to get my business off the ground.
– Mike Depalma

Awesome site! Even as a paralegal I had to brush up when filing our LLC, and you not only covered everything from A-Z, but even all of the in between things! Thanks so much :)
– Mary

The information you provided was extremely helpful. Your step-by-step instructions were easy to follow and specific, saving me time and money.
– Lou Palazzo

I cannot believe you provide this start-up guide for free. It’s exactly what I needed. I’m trying to get my business up and running as I recently lost my job. I cannot afford to pay someone else. But when I’m in a position, I will pay you forward!!!! Thank you.
– Tricia Arnold

Thank you for this information. You save me $600.00.
– Mon

Hi Matt! Thank you so much for this great source of information! It’s by far the best step-by-step guide to forming an LLC on the internet!
– Jamal

Thank you so much for all you do. I have gotten conflicting information of how to set up an LLC from folks who just wanted my money. I knew it wasn’t that hard. Your step by step instruction allowed me to set up my business from start to finish in two hours including the bank account. I just happened to stumble upon your site while researching. I am so glad I found you. I have told my friends about LLC University. Thank you again.
– L. Jones

Thank you so much Matt for showing us the LLC formation process. It is extremely user friendly and so educational. I am very happy I came across your lessons!
– Natalia

Thank you for this amazing free step-by-step guide on how to form a LLC. It was very easy to follow and navigate. I will definitely share this with my clients.
– Jared H.

Without question, the best site assistant we have located online! Streamline and easy to follow directions and links! We’ll make sure to spread the word!
– William Allen

I am beyond excited for this new venture. I just want to thank you and I want you to be prepared for all the referrals coming your way! Your service and commitment is what I value the most. Thank you very much for your patience and dedication in helping me get the ball rolling! Thank you!
– Britt Hanson

Just wanted to say thanks a million for the vids. I called legalzoom and they wanted a lot, without the NY publication filing requirement. So I decided to just do this myself.
– Brian

Dear Matt, thank you! I have learned so much and your video tutorials are so clear that it makes learning this kind of stuff fun.
– Donna McGovern

Your guide is super easy to follow and all the forms needed to file were there. Thanks you so much for breaking this down in the most simplest form. This guide makes it a breeze to form a business. Not everybody is a business major or savvy. Again, thanks you for all your hard work in putting together this informative guide.
– Hai Lu

A thank you doesn’t seem enough for all this information you have provided! But seriously, Thank You! And this almost covers everything, I mean if you were to fund the LLC’s to, then it would be complete. Joking of course!
– Herb

Your website was a godsend. Trying to figure out all that was needed to start my LLC was quickly becoming a nightmare but you guys truly made it a breeze. Thank You! Thank You!
– Tesha Adams

Just finished watching all of your videos of how to form an LLC. THANK YOU SOOOOOO MUCH, MATT! I can’t describe how much your website helped me with research. You just saved me thousands of dollars and countless hours of reading articles! I will 100% refer every person I know interested in forming an LLC here. Thank You So Much Again!
– Joshua Walker

I just want to thank you for taking the time to educate the consumer. I was so confused until I stumble upon your website. I want you to know that I consider you a blessing. You have truly made my life so much easier. I don’t have the words to express my gratitude to you. Again, thank you, thank you, thank you so very much.
– Dr. Jettie Davis

Hey Matt! I just wanted to say thanks for all of this incredible information you provide! Starting an LLC was a pretty big step for me (only 2nd to getting married! LOL) But after watching your videos, you gave me the knowledge (and honestly, the courage) to take the leap. A million THANKS and keep up the great work!
– Jared

 

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