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What is a limited liability company (LLC)?

A Limited liability company (LLC ) is a business entity that offers limited liability protection and pass-through taxation. As with corporations, the LLC legally exists as a separate entity from its owners. Therefore, owners cannot typically be held personally responsible for the business debts and liabilities.

The LLC allows for pass-through taxation, as its income is not taxed at the entity level; however, a tax return for the LLC must be completed if the LLC has more than one owner. Any LLC income or loss as shown on this return is passed through to the owner(s). The owners, also called members, must then report the income or loss on their personal tax returns and pay any necessary tax.

Who can form an LLC?

Typically, there are no residency or legal restrictions as to who can start an LLC. However, a few states impose requirements that members and/or managers must be at least 18 years of age, or the age of consent. For more information regarding the requirements of each state, view the LLC Formation Requirements page of our state guides.

Do I need an attorney to form an LLC?

No, you can prepare and file the Articles of Organization – one of the most important LLC forms needed – yourself. Be sure you understand the requirements of your intended state of incorporation. You can use BizFilings’ service to form your LLC, completed your LLC forms and save money on attorney’s fees. If you are unsure of what business type is best for you, review our Types of Business Comparison Table and/or try our Incorporation Wizard. If you still have questions, consult an attorney or accountant.

What should I name my LLC?

Choosing the name of a new company is an important decision. It is typically advisable to select a name that projects the image you want for your new company. Selecting a name that is easy for customers to remember and spell also has benefits. Legally, the name you select for your LLC must not be “deceptively similar” to any existing company in that state or must be “distinguishable on the record” of your state. It is possible that the name you select will not be available in your state of incorporation—that’s why BizFilings asks for a second choice on our LLC order form. Additionally, most states require that the name you select shows your business is an LLC by including the words “Limited Liability Company” or the abbreviation of “LLC.”

How many people are needed to form an LLC? 

There is no requirement specifying the maximum number of members (owners) an LLC can have. The IRS does allow one-member LLCs to qualify for pass-through tax treatment. Taxation of the one-member LLCs at the state level may be different.

How is a limited liability company (LLC) taxed?

Typically LLCs are taxed like partnerships, with pass-through taxation. While multi-member LLCs must file an informational tax return, single member LLCs do not. In both cases, the profits or losses are “passed-through” the business and reported on the owners’ tax returns. Any tax due is then paid by the owners at the individual tax level.

LLCs can also elect to be taxed like corporations, where the profits of the LLC are taxed at the business level. The state income tax treatment of LLC profits and losses may or may not mirror the IRS tax treatment depending on the state. For more information on your state tax obligations, visit Business Owner’s Toolkit.

LLCs are also subject to any franchise taxes imposed by the state of incorporation. A franchise tax is a tax imposed for the mere privilege of being an LLC incorporated or registered to transact business (through a process called foreign qualification) in that state. Franchise taxes are typically due annually, and the amounts differ by state. Note: California LLCs are subject to an annual minimum franchise tax of $800 per year. The first payment must be made within 3 months of forming your LLC. The state will send a bill to remind you to make this payment.

What is the organizational structure of an LLC?

An LLC is owned by its members. They are analogous to partners in a partnership or shareholders in a corporation, depending on how the LLC is managed. A member will more closely resemble shareholders if the LLC utilizes managers, because then the members will not participate in management. If the LLC does not utilize managers, then the members will closely resemble partners because they will have a direct say in company decision-making. A member’s ownership of an LLC is represented by membership interest, just as partners have interest in a partnership and shareholders have stock in a corporation.

How is an LLC managed?

An LLC may be managed by its members (owners) or by selected managers. If the LLC is to be managed by its members, it operates much like a partnership. Each member has an equal say in the company decision-making process. If the members choose, they may elect a manager or managers to act in a capacity similar to a corporation’s board of directors. These managers are in charge of the affairs of the LLC.

Member-management is the normal default rule of state law. This means that if managers are not selected in the Articles of Organization LLC forms, the members will direct the affairs of the LLC.

Should I choose a limited liability company (LLC) or an S corporation?

While the S corporation and LLC both have pass-through taxation, the S corporation lacks the flexibility of an LLC in allocating income to the owners. Additionally, an LLC may offer several classes of membership interest while an S corporation may only have one class of stock.

In terms of number of owners, any number of individuals or entities may own interests in an LLC. However, ownership interest in an S corporation is limited to no more than 100 shareholders. Also, S corporations cannot be owned by C corporations, other S corporations, many trusts, LLCs, partnerships or nonresident aliens. Finally, LLCs are allowed to have subsidiaries without restriction.

There are also differences in the handling of employment/self-employment taxes. Visit our article on LLCs versus S corporations for more information.

What is a publication requirement?

A few states require notice to be published in a newspaper that an LLC has been formed. States with this requirement for LLCs include: Arizona, Nebraska and New York. The Published Notice of Formation Service can be added to a BizFilings LLC Formation Service order in each of these states. For New York limited liability entities (LLC, LP, LLP), the New York Published Notice of Formation Service can also be purchased independently from BizFilings.

In New York, limited liability entities are required to publish notice of their formation or registration in two New York newspapers and to file proof of publication with the Department of State within 120 days. The publication is made at the county level in two newspapers. Failure to comply with the publication requirement by the deadline results in the suspension of a company’s authority to do business in the State of New York.

Does my LLC need a registered agent?

A registered agent is required when you start an LLC or register to transact business in another state (a process called foreign qualification). BizFilings includes Registered Agent Service with its incorporation service packages

With its Registered Agent Service BizFilings satisfies the state’s legal requirement to have an individual or company receive important legal and tax documents on behalf of your company. Our service doesn’t stop there, however. BizFilings provides a number of advantages at no additional charge to you, such as: our monthly Registered Agent Watch email, access to BizComply─our online compliance management tool, electronic Service of Process delivery, online access to your account and more.

BizFilings’ Registered Agent Service provides a number of benefits including:

  • Helping you avoid the risk of non-compliance. Compliance matters are not likely to be your area of expertise, or interest. As your compliance partner, BizFilings will help you stay in compliance with state requirements for corporations and LLCs, avoid unnecessary state penalty fees and maintain your company’s good standing in your state of incorporation and/or qualification.
  • Ensuring your privacy. When a company is served with a Service of Process, it is often delivered by local law enforcement. Most business owners do not want police officers showing up in front of customers, employees or neighbors (in the case of a home-based business), to serve them notice that their company is being sued. Having BizFilings as your registered agent service provider ensures you receive any Service of Process promptly and privately.
  • Maintaining a registered office and normal business hours. The registered agent for a business must be available during normal business hours to accept important documents as they are delivered. If you set your own hours, or you are often away from your office or home-office, having BizFilings as your registered agent ensures that you never miss these important communications.

How do I ensure my LLC always has a registered agent?

Our LLC formation service packages include six months of Registered Agent Service. As your registered agent, BizFilings fulfills your state’s legal requirement and provides ongoing compliance assistance for your business. You not only receive our Registered Agent Service for 6 months free with your incorporation package order, but you also avoid interruption of this valuable service with our convenient auto-renewal program. For $220, your Registered Agent Service will automatically be renewed to help ensure your company remains in good standing with the state. You also have the option to renew for multiple years and save over the single year price. You can renew your Registered Agent Service at two years for $320 (save $120) or three years for $420(save $240).

How do I get started setting up a limited liability company?

After you decide to form an LLC, Articles of Organization LLC forms must be filed, and state and initial fees must be paid. BizFilings’ LLC Formation Service packages handle these steps for you.

After your LLC forms are filed, it is recommended that your LLC hold an organizational meeting of the members/managers. This meeting will help to start an LLC by adopting an operating agreement, issue membership interest certificates to members, and undertake other preliminary matters such as authorizing the opening of a bank account for the LLC. View our article on Business Compliance Requirements to learn more.

What is a rush filing service?

BizFilings’ Rush Filing Service for LLCs allows you get an LLC incorporated quicker by decreasing your incorporation filing timeframe to 24 to 48 hours in certain states.Is LLC rush filing service available for every state?

No. BizFilings’ Rush Filing Service for LLCs is available in the states listed in the chart below. The turnaround time listed adjacent to each state is the time it will take us to receive verification that your LLC forms have been filed with the state, following the name approval or consent. The time frame excludes weekends and holidays. Total time for receiving your state-approved incorporation documents from the state and returning them to you may take around a week after verification.

State Turnaround Time State Turnaround Time
Alaska 24 hours Michigan 48 hours
Arkansas 24 hours Montana 24 hours
California 48 hours Nevada 48 hours
Colorado 24 hours New Jersey 24 hours
Connecticut 48 hours New Mexico 48 hours
Delaware 24 hours New York 24 hours
Florida 24 hours North Carolina 48 hours
Hawaii 48 hours Ohio 48 hours
Kansas 24 hours Texas 24 hours
Maryland 48 hours Virginia 48 hours
Massachusetts 24 hours

How soon will I receive my documents if I select rush filing service?

The 24- or 48-hour filing time is for the LLC formation only. It typically takes longer for the states to produce the filed incorporation documents. Once BizFilings receives your documents from the state, we will ship them to you via FedEx Overnight delivery. This means you should have your documents in hand anywhere from just a few days to one week after filing. We will also scan them into our Online Status Center, making them available to you before you receive your original documents to help get an LLC started as quickly as possible.

Note: some states require your signature on the incorporation documents when someone other than BizFilings is acting as registered agent. In these cases, the filing timeframe of 24 to 48 hours begins after we have received the signed documents and received any applicable prior approvals or consent.

Why should I include rush filing service with my LLC incorporation service? 

Using BizFilings’ Rush Filing Service secures your LLC’s name and filed date in as little as 24 hours. Our Rush Filing Service is particularly valuable when you need to get an LLC incorporated quickly or need proof of your LLC’s incorporation to secure a contract or to open a bank account.

What is a single member LLC?

A single-member limited liability company is a “disregarded entity” for federal tax purposes.  It still provides asset protection.  You report the income and the expenses of the business using Schedule C and carry that information over to your personal Form 1040.

What is an LLC operating agreement?

An LLC operating agreement is a contract that outlines the guidelines and details of an LLC.  The operating agreement, which is required to have in place, is written by the LLC members during the first meeting. Our Compliance Kit and Seal service provides template agreements