2024 is one of the best years ever to start an LLC, and you can create yours in only a few steps.
Ready to start your business? Plans start at $0 + filing fees.
by Connor Beaulieu
Connor is a content strategist, journalist, and legal writer living and working in Chicago. Over the past decade, he'.
Legally reviewed by Allison DeSantis, J.D.
Allison is the Director of Product Counsel at LegalZoom, advising and providing leadership to internal teams on the d.
Updated on: July 29, 2024 · 22 min read
In 2023 alone, American entrepreneurs started a record-breaking 5.5 million small businesses—the lion's share of which were LLCs. This year, experts believe that the upward trajectory will continue, in large part because of how painless it has become to create and register an LLC.
Instead of the overly complex, painfully slow process from decades past, starting an LLC in 2024 comes down to seven simple steps (and a few extra notes to keep in mind).
Limited liability companies, or LLCs, provide business owners with personal liability protection, lower startup costs, and greater flexibility for management and taxes compared to other business structures, making them an attractive choice for many small business owners.
Chief among these benefits, however, is just how quickly and easily one person can start an LLC. In general, filing for an LLC online can be done in an afternoon, and getting approval can take as little as a couple of business days (depending on the state).
Simple as the process may be, however, learning the seven legally required steps of how to start an LLC helps ensure that your new business starts without a hitch.
More often than not, your business' name will be the first thing a prospective customer interacts with—and the first chance you have to hook their interest. A unique, memorable, and evocative name can set you apart from competitors, build a strong foundation for future branding efforts, and set your business up for success overall.
But it's not just about branding—your LLC's name also needs to meet specific legal requirements, many of which vary by state and the nature of your new company. Though we strongly suggest researching the specific requirements of the state in which you'll be doing business, most states require that your business' name must:
Keep in mind that most states allow you to reserve a name temporarily, even if you aren't yet ready to create your LLC. Simply submit your state's name reservation form and the required filing fee to reserve a name.
An LLC's registered agent (also known as a resident agent or statutory agent) must receive legal documents, such as lawsuits and subpoenas, on behalf of your LLC and then deliver them promptly to the appropriate person within your business.
Every state has its own requirements for who can serve as a registered agent, but typically, the registered agent services must be either a state resident over the age of 18 who has a physical address in the state (known as the "registered office''), or a company authorized to provide registered agent services in the state.
In most states, you can act as your own registered agent, designate an employee or other individual as an agent, or hire a registered agent service. This last option may be necessary if:
Although you technically only need to decide between two options when choosing the structure of your LLC, it's important to give the decision the time and thought it deserves. Choosing the right option for your LLC can streamline daily operations, clarify legal and work responsibilities, and significantly improve your business' chances for success overall.
A written operating agreement is one of the most important documents for any LLC. In it, you and any partners you may have will outline your LLC's operational and financial guidelines, details about the business' structure, ownership interests, and how profits will be divided.
Even in states where such an agreement isn't legally required, it is strongly advised that you take the time to draft a thorough, fair operating agreement that fully explains to each member what to expect from the LLC going forward. By doing so, you can:
Although it's entirely possible for owners of a single-member LLC to create their own operating agreement, it's typically best to consult a qualified business attorney when dealing with multi-member LLCs. While this may add a small amount to your LLC's startup cost, it will likely save you time, money, and conflict in the long run.
After you've pinned down a name, registered agent, and thorough operating agreement, it's time to move on to everyone's favorite step: paperwork. Specifically, you'll need to file your LLC's formation paperwork, which may be referred to as "articles of organization," "articles of incorporation," "certificate of information," or "Statement of Information."
Regardless of what they're called in your state, an LLC's articles of organization contain information such as:
At this stage, many business owners opt for an online service in order to streamline the LLC formation process and ensure that all documents are correctly submitted. Doing so can add an extra layer of protection to the process, remove confusion, and free up more of your time to handle the other necessary parts of starting a business.
Whether you choose to do the paperwork yourself or with the help of professionals, however, most states allow you to file your LLC's articles of organization online. Filing fees vary by state but usually range from $50 to $200.
Some states process LLC articles of organization instantly, while others take a few days to weeks (with some charging an extra fee for expedited processing). After your LLC paperwork is approved, you'll receive a certificate of formation from the state confirming that your limited liability company officially exists. At this point, you can congratulate yourself as a new business owner, announce the formation of your LLC, and move on to the crucial next steps of running a business.
Once your LLC is official, you can apply for an employer identification number (EIN) from the Internal Revenue Service. The EIN is a nine-digit number that identifies your business for federal tax purposes—similar to an individual's Social Security number.
While single-member LLCs without employees can technically use the member's Social Security number in place of an EIN, many financial institutions ask for an EIN when opening a business bank account. Additionally, using an EIN in place of your Social Security number can help protect your private information, so it may be better even within single-member setups.
For any LLC with more than one member or any employees whatsoever, an EIN is required by federal law for hiring employees, filing taxes, and even applying for business licenses. You can get an employer identification number at no cost on the IRS website. Once you have an EIN, you can set up a business bank account to handle your LLC's income and expenses.
Depending on the type of business you have and where it's located, you may need one or more licenses or permits to operate legally. Here's an overview of some of the more common ones:
Industry trade associations and local and state government offices are great resources for determining the types of licenses and permits your business may need. Alternatively, working with a business advisor can help ensure that you have everything you need to get your business up and running.
Soon after your LLC is officially created, there are some time-sensitive tasks that need attention. While these things aren't technically required to create an LLC, many are necessary to legally operate that LLC, such as filing for the correct permits. Others, such as brushing up on LLC-specific tax law, can save you money and hassle when done correctly.
Tax law is complicated, and it doesn't get any simpler when you start an LLC. Often, properly handling business taxes is one of the biggest challenges a new LLC will face, and improperly handling them can lead to issues such as:
From a tax standpoint, LLCs are unique because the IRS does not have a specific LLC tax classification. By default, the IRS classifies one-member LLCs as sole proprietorships or “disregarded entities," whereas multi-member LLCs are classified as partnerships. That said, LLCs can choose to ignore the default classification and instead file as either an S corp or C corp, with each having its own benefits:
When considering tax implications for your LLC, it's essential to consult with a tax professional or accountant to determine the most advantageous tax structure for your specific situation. By understanding the various tax options available to LLCs, you can make informed decisions to help your business thrive.
Once your newly created LLC is up and running, the last thing you need is legal trouble due to non-compliance or overlooked regulations. In order to remain in good standing with state and federal guidelines, make sure to:
By maintaining compliance and good standing, you protect your personal assets, ensure the legal operation of your business, and reinforce your credibility with clients, customers, and partners—all of which ensure your LLC's long-term success.
When you first get an LLC in your home state, you establish what’s known as a “state of formation” or “domestic state,” which is essentially your business’ home base. If you intend to expand into other states later on, however, you’ll need to file as a foreign LLC within those states.
In this context, “expansion” refers to having an office space, store, or employees in another state, and failing to properly register your limited liability company can lead to hefty fines and penalties later on.
To file your LLC in another state, follow these steps:
Depending on your specific needs and circumstances, certain types of LLCs may offer greater benefits than others. Here's a quick breakdown of the eight main types of LLC.
A domestic LLC is an LLC that operates within the state in which it was initially created. This is, by far, the most common form of LLC, and is generally the simplest to create and maintain.
Contrary to what the name might imply, a foreign LLC does not operate in another country. Instead, an LLC is designated as "foreign" when it does business in a state other than the one in which it was created. For example, if an LLC is formed in Wisconsin but wants to expand and do business in California, it needs to register as a foreign LLC in California.
A relatively niche type of LLC, professional LLCs were specifically designed with certain licensed professionals in mind. These PLLCs include people such as doctors, accountants, or lawyers, and generally include specific laws about what types of people can be made members.
Although not available in every state, restricted LLCs are a special type of LLC that can provide significant benefits for estate planning. Specifically, restricted LLCs cannot distribute profits to their members for a set period, generally 10 years. Instead, such profits must be reinvested into the LLC itself. In addition to ensuring an LLC’s growth, this also protects members from tax liabilities until the distribution period has elapsed.
For individuals who want to create an LLC without sacrificing personal privacy, some states allow the formation of anonymous LLCs. Usually, anonymous LLCs designate a "nominee manager" to serve as the LLC's public representation without having any real power or authority over the LLC's operations and funds.
Also known as "umbrella" LLCs, this type of LLC allows members to create a series of distinct business entities, which each fall under the primary LLC. Each of these business entities generally has its own members, funds, and liabilities, making it a popular type of LLC for those looking to minimize risk across different areas of their business portfolio.
An L3C is a relatively rare "hybrid" between a nonprofit and for-profit LLC structure. This type of LLC is usually created for a specific social objective but can also earn profits (within certain limitations). L3Cs are particularly attractive for those looking to obtain private investments for charitable or educational purposes.
Though rare, it's possible to form an LLC for non-profit purposes. A key distinction with this type of LLC is that they are allowed to earn a profit, but that profit must be reinvested into the company or otherwise used to further the company's charitable goals. Keep in mind that tax law can get especially complex with non-profits, so consider consulting an expert in non-profit taxation when opting for this type of LLC.
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Compared to the other various business structures, creating an LLC offers several advantages and drawbacks. Would-be business owners should weigh their own needs and goals when making the decision on what kind of structure to use.
Weighing the benefits and drawbacks of forming an LLC is essential for making an informed decision about your business structure. When making the decision for yourself, do your best to predict any potential challenges and opportunities that your new business may encounter.
As simple as seven steps may seem, working with the experts can streamline LLC formation even further. If you choose to create your limited liability company with LegalZoom, for example, the process takes only three steps:
Between the increasing availability of new technologies and tools and the growing advantages of small, agile business ideas, 2024 is shaping up to be one of the best years in recent history for small business owners.
Fortunately, the barrier to entry for entrepreneurs is lower than ever, and starting an LLC takes little more than a good idea, due diligence, and the right support system. If you've been considering starting an LLC of your own, now is the time to reserve a name, get your articles of organization, and get to work.
Beyond compliance with state regulations, you should also choose a business name with a similar available domain name, good account name options on social media, and (if you plan to expand) naming availability in other states.
In general, experts advise against mixing business and personal finances. By keeping your accounts separate, you can protect yourself and your business and avoid losing personal liability protections when tax season rolls around (or in the case of lawsuits).
In most cases, the simplest and least expensive place to start an LLC is the state where you live. If you form an LLC in another state, you'll also need to register your LLC as a foreign business entity in your state. You'll need a registered agent in both states and be responsible for filing annual reports in both states. Regardless of where you form your LLC, you'll have to pay applicable taxes in the state where you conduct business.
Owners of sole proprietorships and general partnerships have unlimited personal liability for business debts.
Partners in a general partnership can also be liable for their partners' actions. When you create an LLC, you establish a new legal entity that exists separately from its owners—an entity that can have its own money, bank accounts, and assets.
Because the LLC is a separate entity, its members are generally not personally liable for business debts or the actions of other members. They remain liable for their own negligent or intentional conduct and for any obligations for which they've signed a personal guarantee. Business insurance can further minimize liability for you and your business.
You're self-employed if your LLC is classified as a sole proprietorship or partnership. You'll report business income and expenses on your personal tax return (partnerships also file a partnership return). You'll pay income and self-employment (Medicare and Social Security) taxes on your share of business profits.
Estimated taxes should be paid quarterly to avoid fees and penalties.
The default taxation system is simple, especially for single-member LLCs, but some profitable LLCs save on self-employment taxes by electing S corp taxation.
The amount of money you need to start a new business will vary, depending on the state and type of your business. A business plan will help you estimate your expenses and how much money you'll need to get your business off the ground and keep it running.
There are a few costs related specifically to LLC formation and maintenance. You should have enough money to file formation paperwork, pay for legal and tax advice, hire a registered agent if necessary, and pay annual report filing fees and any annual franchise or operating taxes levied or required by law in your state.
In most states, LLCs are inexpensive to set up and maintain. Many attorneys recommend that small business owners form an LLC because it provides liability protection at a minimal cost. But some states are more expensive than others. If you aren't sure whether an LLC is worth it, get advice from an attorney and a tax adviser.
There are several advantages to using a professional registered agent service. Some of these advantages include:
This article is for informational purposes. This content is not legal advice, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law.
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