How to Start an LLC: Step-by-Step Guide

The number of entrepreneurs choosing to start limited liability companies (LLCs) continues to grow each year. A few years ago, the process of setting up an LLC was both time-consuming and challenging, but fortunately, things have become much simpler. Now, you can get your company up and running in no time as long as you know the steps to take.

Wondering how to get your business LLC? Read on for our comprehensive guide on how to do your own LLC in 2024 and the key details to watch for.

Step 1: Choose a Business Name

So, how to start an LLC? To begin the list of steps to setting up an LLC, let’s focus on picking the name of your company. The first thing to keep in mind is that the name should not only be memorable and relevant to your business, but it must also meet your state’s legal requirements.

Firstly, when selecting a name, you should always check whether it has already been taken. For this, you can use specialized business directories in relevant states.

Secondly, you’ll also need to avoid restrictions on some words you can use in the name. This includes terms referring to the field of your business, such as “bank” or “insurance” without special approval. If you want the name to include such references, they must be approved separately, as they typically require additional regulatory review.

Step 2: Select the state for LLC formation

Depending on how you want your business to operate, you can choose to register your LLC in your home state, in another state, or even in multiple states.

Certain states are particularly favorable for LLC formation. Delaware, for example, offers flexible corporate laws, which is why many LLCs are formed there. Also, there is no state corporate income tax for companies that operate out of state. Another benefit is that you can open a company anonymously. However, Delaware has a higher annual report fee of $300.

Nevada is another popular choice due to its strong asset protection laws, reduced taxes, and fewer restrictions on LLC management. As for the favorable tax conditions, you will also find them in South Dakota, Florida, Texas, and Wyoming.

Depending on your business needs, how much you are willing to pay, and other considerations, you can compare different states and choose the right one. Keep in mind that the documents you will have to submit in each case can vary.

Step 3: Appoint a Registered Agent

Another essential step in creating your own LLC is appointing a registered agent, sometimes referred to as a statutory agent. This is an individual who receives legal documents on behalf of your company. The way it works is that this person receives documents during business hours at a specific address and then forwards them to you.

A common question that people ask is whether it is possible to be one’s own registered agent. The answer is yes. You can serve as your own registered agent, provided you’re available to accept correspondence at a physical location during set hours. If this is not feasible, some companies offer registered agent services for an annual fee.

Step 4: Obtain an Employer Identification Number (EIN)

No guide on how to make an LLC would be complete without mentioning the EIN—employer identification number. This 9-digit number is crucial for personal finance and business asset separation.

An EIN is simply a number used to identify your tax account. You can easily obtain it from the IRS website by submitting an online application. If you enter all your information correctly, you’ll receive your EIN in just 15 minutes.

Since an EIN is essential for tax reporting, make sure you understand the specific taxes your LLC will be responsible for, such as income tax or value-added tax.

Step 5: Craft an Operating Agreement

To continue with the steps to starting an LLC, we should mention an operating agreement. While only five states—Missouri, New York, Delaware, California, New York, and Maine—require you to create an operating agreement, having this valuable document is beneficial regardless of your location.

This agreement outlines the responsibilities of each LLC member, management rights, profit distribution in case a business partner leaves, equity, and more. The agreement can be easily adjusted to fit your company’s needs. The easiest way to create one is by customizing a standard template you can find online.

Step 6: File Articles of Organization

It’s not enough to know how to set up an LLC in your state, you also need to file relevant paperwork, primarily the Articles of Organization. The purpose of this public document for setting up an LLC is to describe the potential liability, legal rights, purpose, and structure of your business.

The details included in the Articles of Organization can vary, but the basic information typically includes:

• Business name;
• Name and addresses of LLC members (owner and managers);
• Purpose of your company and start date of the company;
• Registered agent’s information;
• Operating structure;
• Expected duration of your LLC.

The document should be signed by the business owners and is typically filed with the Secretary of State, depending on your location. This filing creates a public record that formally establishes the existence of your company.

It’s worth noting that some states require additional documentation when forming a limited liability company. These may include, but are not limited to:

• Operating agreement;
• Permits and licenses for specific business types;
• Insurance policies.

There can also be other requirements depending on the state. For instance, in New York, Nebraska, and Arizona, you must publish a notice in a local newspaper about the formation of an LLC prior to submitting the Articles of Organization. For this reason, it’s essential to check your state’s specific requirements when exploring how to open an LLC.

Costs and Fees Involved in Starting an LLC

Now that we’ve covered the main steps to getting an LLC, an important question remains: what are the costs associated with the process? The exact amounts can vary significantly based on the state and the choices you make. When forming an LLC, remember that you’ll need to budget for both startup and ongoing maintenance fees.

The basic fees for creating a limited liability company include the following:

Filing Fees

The filing fee for starting an LLC varies by state, typically ranging from $35 and up to $500. For instance, as of September 2024, Montana has the lowest filing fee at just $35, while Massachusetts has one of the highest at $500. The fees for most states are between $100 and $200.

If you decide to hire an attorney or seek help from third-party registration services, expect additional costs, starting at around $100 and potentially reaching several thousand dollars, depending on the complexity of your setup.

Registered Agent Fees

Unless you choose to serve as your own registered agent, you’ll have to pay for this service. The exact cost depends on the service provider, but the prices generally range between $100 and $300 a year.

Annual Report Fees

You should also remember that filing an annual report and paying an associated fee is required in most states. The fees can vary greatly, ranging from $10 to $800. At the same time, some states require you to submit an annual report but don’t charge any fee. These states include: Minnesota, Missouri, Mississippi, New Mexico, Ohio, Idaho, Arizona, South Carolina (with some exceptions), and Texas.

In contrast, the highest fees for annual reports are found in California ($800), Delaware ($300), and Tennessee ($300).