How to Create Your Own LLC: The Ultimate Step-by-Step Guide

When it comes to setting up your LLC, most people know the basics -- file a document with a state, become an LLC, maybe get an operating agreement, etc. This guide dips much deeper and give you a step-by-step roadmap to helping you launch your business with a great legal foundation. 

But before we start, let's make sure this guide will work for you. Confirm these two points:

1. You're certain that LLC is the right choice for your business.
2. You know how you'll want your LLC to be taxed (Disregarded Entity; Partnership; S Corp; C Corp - those are your 4 choices). 

If unsure about either, first find out if an LLC, sole proprietorship, or a corporation is the best choice for your business, then come back to this guide to resume your LLC creation.

 

 

 

Finally, before we dive into each step of creating your LLC, here's what you need to know about LLCs and the basics to creating one.

What is Required to Create an LLC?

To create an LLC, the bare minimum is to file your organizing document with one state. Once you do that, your LLC is official. So then, why are there X other steps on this guide? 

It's because you always want to cover the other legal issues so that (1) you don't encounter much bigger problems in the future, (2) to establish that you actually own the LLC, and (3) to do all these steps should take than a day, so it's a great ROI of your time compared to future costs you could incur.

Step 1: Choose Your LLC's Organizing State

To form an LLC, you must choose one state as your organizing state. This is the state where you'll file your LLC organizing document (usually called Articles of Incorporation or Certificate of Formation). 

Here’s a good rule of thumb to help you: if you’ll be operating mostly in one state, you should probably form in that state. Think of it this way: if you don’t form in that state, but you still operate in there, you have to file for foreign registration anyways, i.e. filing as a foreign LLC. So you’re doubling up your fees.

What about Delaware or Wyoming?

Delaware is great if you're a tech startup looking to get investors. But 99% of businesses aren't doing that. And Wyoming, Nevada, et. al. might be good if you have TONS of personal assets or have some really serious privacy issues where you don't want anyone to know you own the LLC. When that's the case, you should probably hire a lawyer. 

Otherwise, probably form in your home state, and you can always switch it later. It's better to just get things going most of the time, though. And if you're still unsure read our guide on this topic.

Step 2: Choose a Name for Your Company

There are two pieces to choosing a company name. You have to make sure it's available in your state. And you always have to make sure it's not trademarked by someone else. We'll go over both of these.

Search Your Company Name in your Filing State

To check your state availability, perform a “business entity search” on your state government’s website (usually the Secretary of State). An easy way to find this is by searching “[your state] entity search.” Alternatively, you can call your state’s office to check your name against existing names.

Also, find out if if your state requires words or abbreviations of words for your LLC. Usually the words “limited liability company” or “limited company” -- or their abbreviations (LLC; L.L.C.; LC; L.C.) -- are required. For example, let's say your business is called XYZ. You could either register under XYZ, Limited Liability Company or XYZ, LLC. Your LLC name may not include the words “partnership,” “corporation,” or “incorporated.”

Once that's complete, do the trademark search.

 

 

Do a Trademark Search for your Company Name

Doing a trademark search is important to make sure someone else doesn't already have your company name trademarked.

Then you should probably do a Google search and a search on the USPTO website, which is called a TM Search, to see if anyone else in the country has already trademarked that name. The last thing you want is to pick your name, spend a bunch of money marketing that name, and have to change it later because someone else has trademarked it. Learn more about all this in our trademark search guide.

Fictitious Names for your LLC

Suppose your LLC's preferred name is taken, or you’re unsure what name you want for your company. In that case, an easy alternative is to name it something as simple as your legal name followed by “LLC” or another derivative (assuming that’s available).

Later, if you want to operate under a different name besides your legal name, you can file for a "Fictitious Name" (sometimes called "D/B/A" or "Assumed Name"). Once filed, you can tell other people that your LLC's name (or brand) is the new name. Here are instructions on registering for a fictitious name.

Step 3: Choose between Member or Manager-Managed LLC

Next, choose how your LLC will be managed. For single-member LLCs, it doesn't matter too much what you choose. And for that reason we usually prefer manager-managed LLCs. The reason being -- if something happens to you where you'll be temporarily out of commission, you can appoint someone as your manager to cover your LLC while you're out. 

Step 4: Appoint your Registered Agent

Do you have a registered agent picked out? The agent will be the person who accepts court documents (e.g. you get sued) on your behalf. If you're a single-member LLC, you have a stable business address, and you formed in your home state, it's probably easiest to just have yourself be the registered agent. 

But, if you're forming in a different state where you don't have a physical address, it's easiest to just pay $70-$100/year to a company like Northwest Registered Agent or Alliance Virtual Offices. They'll be your agent and use their physical address.

 

 

Step 5: Prepare your Articles of Organization (or "Certificate of Formation")

The Articles of Organization is a legal document that you file with a state to establish your legal existence. It includes basic information about your LLC and how you’ll manage it. A company doesn’t have legal authority to conduct business unless the articles are filed.

You will need to file this document with the Secretary of State's office in the state where you are registering your LLC. For example, if I chose Missouri as my organizing state and I lived in Illinois, I would like the Articles in Missouri. But in that situation, I would also need to register as a foreign entity in Illinois. But if I chose Missouri as my organizing state and I lived in Missouri, then I'd only need to file my articles in Missouri -- no additional documents beyond that (unless I did business in other states). 

 

 

Step 6: Prepare Your LLC Operating Agreement

>An operating agreement is a document that outlines who owns what in the company and specifies how the company will operate. You should have one even if you're a single-member LLC (in many states, it's legally required). Think of it this way -- how else can you prove you own the LLC? The Articles of Organization don't indicate the owner.

>An operating agreement will typically address member rights and duties, terms of profit allocation, and transfer of LLC interests, among others. Aside from being the basis of major business decisions, members can also refer to this agreement to address or prevent conflict within the organization.

You can also use our single-member LLC or multi-member LLC operating agreement templates.

>After you fill it out, sign it, and store it away. You don't need to file it anywhere.

Step 7: Get Your Employer Identification Number from the IRS

An Employer Identification Number (EIN) is required if you plan to hire employees or have multiple members in your LLC. Even when that's not the case, many single-member LLCs will still get one. 

 

 

Why would a single-member LLC ever get an EIN?

Great question! It's because banks will often require one. Also when you do business with other companies, often they'll ask you for a W-9 so they know how to report the money they're paying you to the IRS. 

You can obtain an EIN from the IRS. An EIN is also required for certain tax filings, such as payroll taxes. To obtain an EIN, file for one online. 

Step 8: Get the Appropriate Licenses and Permits Needed

If you haven't already, find out what licenses and permits you might need for your LLC. It depends on your location, what you do, and timing. The four most common licenses and permits are Business Licenses, Seller's Permits, Public Safety Permits, and Specialty Licenses.

When do you need those? In general, you need a health permit if you’re selling food or drinks. Are you renovating or building your space? Probably need a building permit. Where’s your business located? In a commercial zone? Sometimes you might need a zoning permit or an exception. Depending on your product, you might need environmental permits. And chances are you know if you need a professional or occupational license, but still make sure you get one—one common example is a physical therapist.

Do you need a business license? Maybe. Sometimes even if you’re operating out of your home, you still need to get a business license. But that’s my point—you need a license quite often, so make sure you’re in compliance with the government. 

What happens if you don’t comply? Depends on what license or permit you didn’t have. Sometimes, the government will shut your business down. Other times, you’ll be issued a small fine. 

The best place to start to find out what you need is your city hall. And if you're still unsure, check out this resource for more help with licenses and permits.

Step 9: Complete These Remaining LLC Tasks When You Have Time

There are other legalities to think about, but you don't necessarily have to do them in the very beginning (you have to run a business, after all). Read on to learn more.

File your Initial LLC Report

In just a few states, LLCs need to file an initial report from anywhere between 30-180 days of formation. Your state will usually email or send you a letter when this is required.

Specifically, Alaska, California, Nevada, and Washington require this. But, check your State Guide for further guidance, and search "[State] LLC initial report requirements" in case new laws have passed recently.

Setup a Business Bank Account

It's smart to set up a separate bank account for your LLC. This is for tons of reasons, including making your accounting life easier. But especially if you want to protect your own savings account and retirement. Mixing your personal transactions with your business ones makes it a ton easier for greedy plaintiffs to sue you personally, in the event you actually get sued. It’s part of a concept called “piercing the corporate veil.” That basically means that if the company runs into legal trouble and can’t pay a debt or judgment, the person pursuing the money can enforce that debt against you personally.

It also makes your accounting and tax filing much easier.

To open a business bank account, you will need to provide your LLC's Articles of Organization and EIN. You should shop around for the best business banking options and compare fees and services.

Use Corporate Formalities for your LLC

Corporate formalities are just basically admin things you have to do to keep your LLC legal. One caveat—you don’t need to do near as many “formalities” for LLCs as you do for Corps. In fact, you technically don't need to do them at all for LLCs. But it’s a best practice to do them in certain situations.

When are corporate formalities a good idea?

Corporate formalities make sense when you have more than one LLC member. In particular, corporate resolutions. It helps memorialize important decisions you make. It's extremely rare where one member is actively trying to screw over the other member. What happens much more often is that there was a miscommunication or ambiguity about a decision. Corporate formalities help mitigate that.

Use corporate resolutions to memorialize important decisions.

Resolutions are basically documentation of decisions your company made. They’re important because they’ll say what decisions are being made and who’s voting on them. Here’s some examples: if you authorize a contract, issue new stocks, purchase equipment or property, or do other major transactions—you should do a resolution. 

File your LLC's annual report.

This being said—one formality that’s not an option is the annual or biennial report. Not all states require this, but check to see if yours does. It varies entirely from state to state, and sometimes it’s just a way for states to get an annual payment from you. But nonetheless, if you have to do them, just do them.

Own Your LLC's Intellectual Property

There are four main types of intellectual property, or IP. They are:

• Copyright
• Patent
• Trademark
• Trade Secret

You're probably not thinking about IP right now. But here's when you should start to do so -- first, your company name. If the good will of your company brand matters to you, then you'll want to learn more about trademarks. If you have confidential information you want to protect, you'll need to better understand trade secrets and possibly patents. And finally, if you write or create "creative works" (e.g. writing; photos; graphics; videos, etc.), then you'll want to better understand copyrights.

Register with State and Local Taxes

Register for state taxes with your state's Department of Revenue. This includes sales tax, income tax, and any other applicable taxes. You may also need to apply for a tax ID number or permit for specific taxes. Registering for state taxes is important to ensure that you are in compliance with state tax laws and to avoid penalties and fines. You can also use a payroll service provider like Gusto to help you get setup with this.

Get the Right Insurance

Insurance is an important consideration for any business, including LLCs. Liability insurance can protect your LLC from lawsuits and other legal claims. You may also want to consider insurance for property damage, workers' compensation, and other types of risks.

 

 

Foreign Registration Reports

You'll need to file a foreign registration report if you "do business" outside your LLC's organizing state. Just because you have customers outside the organizing state doesn't mean you "do business" there. It's more so contingent on your physical presence. If you're unsure, learn more about if you'd need to file a foreign registration report and, if so, how to do it.

Worker's Compensation

Skip this if you don’t have employees. If you do, you might need worker’s comp. It probably depends on how many employees you have and what your business is. For some states, one worker in the construction field requires worker’s comp. Or 5 workers in any field. It just depends. Google it for your state to find out.

Worker’s comp is an insurance that covers medical expenses and compensation for your employees when they get hurt on the job. It’s great b/c it can protect you from getting sued by your employee. So don’t not do it b/c it costs money—it’s legally required and can definitely benefit you.

File Publication Requirements

What’s a publication requirement? If you’re in the majority of states, don’t worry about this. However, some states, like New York, require you to publish certain info about your LLC when you form. It’s so that you put the world on notice that you formed your company. Don’t skip this step if it’s required or else you’re LLC won’t be legally proper.

Do You Need a Lawyer to Form an LLC?

The biggest question now is, "Do you need a lawyer to help you form an LLC?" For most businesses and in most cases, you don't need a lawyer to start your business. Instead, many business owners rely on Legal GPS Pro to help with legal issues. Legal GPS Pro is your All-in-One Legal Toolkit for Businesses.

Developed by top startup attorneys, Pro gives you access to 100+ expertly crafted templates including operating agreements, NDAs, and service agreements, and an interactive platform. All designed to protect your company and set it up for lasting success.