When forming an LLC, there are a lot of pieces to juggle. Here are the basic things you need to do to complete the LLC formation process in any state:
Choose your name—Check with the agency or office that maintains business name registrations in your state, which is generally a division within the Secretary of State’s office. You may be able to reserve a name in advance of filing your official LLC formation documents with the state. You can’t choose a business name that is identical to another LLC in your state, and the name must have the designation LLC at the end. Other naming rules vary from state to state.
Decide on management structure—The two main types of LLC management structures are member-managed and manager-managed. A member-managed business is managed by one or more members of the LLC (meaning the owners). The members ensure that the day-to-day activities of the LLC are managed, such as hiring employees and making sales. A manager-managed LLC is run by one or more managers, designated by the members.
Select registered agent—You must designate a registered agent for your LLC: someone in the state where your LLC is registered who can receive any service of process (notice of lawsuit) meant for the company. The registered agent can be a member of the LLC who lives in the state, but if members can’t or don’t want to serve that role individually, you will need to designate another individual or a company that provides registered agent services.
Designate physical business address and mailing address—You may start the LLC formation process before you have a formal location for your business. That’s just one reason why it’s important to have a stable mailing address. When registering your LLC, the form may require you to list a physical business address that is not a PO box. If you don’t have a physical address yet, you may be able to use your registered agent’s address, with permission, but be aware that these addresses are available in public records.
Complete and submit Articles of Organization—Also called Certificate of Organization or Certificate of Formation, this document registers your LLC with the state and contains the information discussed above. You can find this form on your state’s Secretary of State website. You will need to complete a foreign LLC registration in any other state in which your LLC operates but is not primarily registered.
Complete Operating Agreement—The Operating Agreement is a contract among the owners of an LLC that records the ownership interests, division of profits, and decision-making structure of the company. While you do not have to file this document with any state agency, it’s important for legal reasons, as well as for the health of your business relationships, to get an agreement in writing, even if you are the sole owner of the LLC.
Plan for fees and taxes—Filing Articles of Organization or the equivalent costs a nominal fee, and mandatory periodic reporting to the state usually also has a small fee. Most states do not tax LLCs directly, collecting only filing fees from required periodic reporting and LLC formations, but California, for example, has an annual minimum tax of $800 for LLCs and a mandatory annual tax form. However, most LLCs function as pass-through entities, where the members of the LLC are ultimately responsible for paying taxes on the company’s profits and losses.