Want to know the easiest way to start an LLC in 2022? Here's everything you need to know on how to set up an LLC whether you're just starting out your business or have no money.
If you’re a small business owner, a freelancer, or you're just starting out your business enterprise, an LLC may be the perfect fit for taking on some risk and owning a company. LLCs provide a business structure that combines the benefits of corporations and sole proprietorships in the form of liability protection and pass-through taxation.
In short, you receive some forms of protection offered to corporations, as well as lower taxes experienced by partnerships and sole proprietorships.
What is an LLC
A Limited Liability Company or an LLC is a U.S. business structure that provides a limited liability protection similar to corporations while also providing the flexibility of a sole proprietorship or partnership.
LLCs are popular because they provide an easier way of starting and growing a business with fewer regulatory requirements than other business entity types. With an LLC, you can easily run the day-to-day operations of your business without having to worry about legal issues.
Who should form an LLC
LLCs are especially popular among small sole proprietors who want to limit their personal liability as much as they can. If you have a small business and you’re running as a sole proprietor or in a partnership, forming an LLC may be of interest to you.
You can create an LLC for any type of business. Real Estate, freelance writing, etc. However, for professionals, some states may require you to create a Professional LLC (PLLC).
An LLC can be formed with any business size, whether you’re a single owner or with multiple co-owners.
What is needed to start an LLC
Different states may have different requirements for forming an LLC. However, the most common requirements are the following:
- Business name
- Detailed account of how the business will be managed
- Business address
- Name and address of the registered agent
- Payment of fees
When to start an LLC
- If you’re at the point of starting a business, consider forming an LLC
- For sole proprietors: If you’re in a sole proprietorship business and you’re seeing that your business may take on some risk of liabilities in the future, you should consider starting an LLC
- If you’re a small business corporation that wants to avoid getting into double-taxation issues as your business grows, converting into an LLC is an attractive choice
Starting your LLC
Here’s a step-by-step guide to starting an LLC in 2022:
1. Name your LLC
Different states have different rules for naming LLCs. Most states have two basic requirements:
- Must be a unique name, meaning it should not have the same name as another registered LLC company in your state
- Your business LLC name should end with an LLC designator, like an abbreviation of “LLC” or “LC”
- Should not have phrases or words that may confuse it as an entity of the government like “IRS,” “Police Department,” etc.
- Should not have protected words like “hospital,” “bank” or “college” unless you have a reason
If you’re not planning on starting your LLC in the near future, you can reserve your company’s LLC name for a short period of time until you begin filing the legal requirements.
2. Choose a registered agent
LLCs require a registered agent. The registered agent is an individual or business entity who takes care of the legal documents for a business such as:
- Receiving tax forms
- Notice of lawsuits
- Government documents for your business
Consider your registered agent as your middle person who communicates papers and legal documents with the state.
3. File articles of organization
You must submit articles of formation with your state's corporate filing office, which is usually the Secretary of State, in order to form your LLC. Certain states (including Delaware, Mississippi, New Hampshire, New Jersey, and Washington) use the phrase “certificate of formation.”
The document can also be called a “certificate of organization” in two additional states such as Massachusetts and Pennsylvania.
The articles of organization can typically be filed online or by downloading a form from your Secretary of State's website. Provide your LLC name, address, and phone number as well as other basic information like how it will operate internally.
This includes who is responsible for managing certain tasks among others things. The average filing fee ranges from $100 – $200 depending upon where you live in America.
4. Form your management structure: Decide on member vs. manager management
LLCs usually assign managers within their members but they can also opt for other people outside their organization to manage the LLC. This may be similar to a corporation’s board of directors. You can either be the one managing your LLC or you are one of the members.
Either way, everyone has a voice in how things will be run in the LLC. The managers vote on key issues such as taking out loans and purchasing real estate- so they can keep watch over what is happening with their investment.
5. Create an LLC operating agreement
Despite being a non-requirement for most states, you should still create an operating agreement for your LLC. The operating agreement defines how your LLC will be managed and run. It also designs the ownership split and how its owners can be added or removed.
If someone files a lawsuit against your LLC or its owners, this document can also aid you in getting out of it. For example, it can protect the LLC from being accountable for personal debts.
Without an operating agreement, the laws of the state will govern how your LLC operates. And this means it could end up making the LLC liable to owners’ debts.
6. Comply with tax and regulatory requirements
The next step is complying with your state’s tax requirements and other regulatory aspects. These include the following:
You don’t need to apply for an EIN if you are not planning to hire employees or if you’re a single-member LLC. With that, you may use your Social Security number of your LLC for paying federal taxes.
But if you are planning to expand in the future or if you’re a multiple-member LLC, you definitely should obtain an IRS Employer Identification Number (EIN). You may apply online for your EIN by completing an online EIN application.
- Business licenses
When starting a new business, it's important to remember that your state may need you to process business licenses and other important requirements in order for the LLC to operate legally. Permits or registrations may be needed depending on where it's located – so make sure that these requirements are met before launching.
- Sales and employer taxes
If you will be selling goods and collecting sales tax, or if you have employees, you will need to register with the appropriate state taxing authority. You can find more information on LLC tax registration rules in this guide: LLC Tax and Annual Filings Requirements: 50 State Guide.
7. File annual reports
In most states, LLCs are required to file an annual report. This report usually costs money, and the fees can be significant. For example, it can be as high as $800 per year in California.
8. Out-of-state LLC registration
If you want to do business in a state that is different from the state where your LLC was formed, then you need to register your LLC in that state. You will also need to appoint a registered agent for the service of the process.
How to start an LLC online (Easiest way)
LLC online filing services simplify the process of starting an LLC. The service provider you choose will do all of the paperwork and procedural steps to start a limited liability company for you. Imagine taking off all the burdensome tasks of filing and getting the legal documents right, you’ll also be able to save time and money if ever you make mistakes the first time.
Using an LLC filing service online can also accelerate the process of getting an EIN for your company.
Where to start an LLC: Filing options online
There are tons of filing options online where you can get your LLC formation done without paying high attorney fees. Here are some of the best LLC filing options you can check out:
- Incfile – RECOMMENDED
How to Set Up an LLC Online
Watch this video: https://www.youtube.com/watch?v=dATSEwuBV84
Here’s how you can set up an LLC online through Incfile:
- Go to Incfile LLC Registration.
- Select the State where you would like to form your LLC.
- Select the package that works best for you. ( We highly recommend the Gold package as Incfile takes care of all the necessary requirements you need to seamlessly form your LLC).
- Fill up your Contact Information and Mailing Address.
- Select your State Filing Time. You have an option to select the 4-week filing time or their expedited filing option with only 5 days to file everything.
- Fill up your Company information (LLC Name, Designator, Business Type, Number of Members, Business Purpose).
- Choose your Management Method – either Member Managed or One Manager Managed.
- Fill up your Company Address Information – you can either choose a Professional Business Address & Virtual Mail Service provided by Incfile ($29/month) or you can use your own address.
- Enter in the Members and their individual ownerships.
- Set up your EIN number or Tax number creation.
- Select your Physical Street Address – you’ll have the option to choose the physical address assigned by Incfile for privacy purposes.
- Select your Principal Business Activity.
- Set up your Business Banking Account.
- You’ll be offered a free Consultation or tax strategy.
- Upon filling up everything, you’ll be asked to provide your payment information to pay for their services.
What does it cost to set up an LLC?
There are many different fees and costs associated with this process, so it's important to be aware of them all before you make any decisions.
Let’s break down all of the different costs associated with starting an LLC, so you can make the best decision for your business.
State filing fees cover both the legal services and the filing fee itself. For legal services, you may expect to pay around $50 depending on the state. An additional $50 to $800 accounts for the filing fee and is usually where the bulk of LLC startup costs will go to.
You may want to hire an attorney or seek help from legal services to reduce the possibility of improper filing, leading to more fees and wasted time.
Articles of organization costs:
Another thing you'll need to do when starting an LLC is to file the Articles of Organization with your state. The cost of the filing fee will vary depending on your state, but it's typically around $100. You'll also need to pay annual fees to keep your LLC registered, which will vary depending on your state as well.
Company bank account costs:
Another cost you'll need to consider is the cost of setting up a company bank account. This can be a bit pricey, as most banks will charge you between $50 and $100 to open an account. You'll also need to factor in the cost of business insurance, which is typically a few hundred dollars per year.
LLC maintenance fees:
Last but not least, you'll need to pay ongoing LLC maintenance fees. These fees go towards things like keeping your LLC registered with your state and making sure that your paperwork is up to date. The cost of these fees will vary depending on your state, but they typically range from $50 to $200 per year.
The typical taxes paid by LLCs as part of their maintenance costs are:
- Franchise Tax
- Annual Report Fees
LLCs can be taxed in many different ways, depending on the state. In some cases, they may have to pay a yearly tax that is often called franchise fees. The franchise tax is usually a flat tax but can change according to what your annual earnings are.
This is a report that includes the name, address, and ownership of the LLC. The annual report fee varies depending on the state.
Is It Expensive to Start an LLC?
Overall, the cost of starting and maintaining an LLC can range anywhere from a few hundred dollars to a few thousand dollars per year. But this is a small price to pay for the legal protection and peace of mind that an LLC can provide.
Below is an estimate of how much you’d expect to pay for your LLC depending on the state.
|State||Startup Cost||Maintenance Costs|
|Alabama||$200+||Annual Privilege License|
|Arizona||$50 + Publishing Requirement||No yearly fees|
|Arkansas||$50||$150 per year|
|California||$70||$20 Biennially + Annual Franchise Tax|
|Colorado||$50||$10 per year|
|Connecticut||$120||$20 per year|
|Delaware||$90||$300 Annual Franchise Tax|
|District of Columbia||$220||$300 Biennially + Annual Franchise Tax|
|Florida||$125||$138.75 per year|
|Georgia||$100||$50 per year|
|Hawaii||$50||$15 per year|
|Idaho||$100||No Annual Fee|
|Illinois||$150||$250 – $300 per year|
|Iowa||$50||$30 – $45 Biennially|
|Kansas||$160||$50 – $55 per year|
|Kentucky||$40||$15 – $30 Annually + Annual Entity Tax|
|Louisiana||$100||$30 per year|
|Maine||$175||$85 per year|
|Maryland||$100||$300 per year|
|Massachusetts||$500||$500 per year|
|Michigan||$50||$25 per year|
|Minnesota||$155||Annual Partnership Tax|
|Mississippi||$50||No Yearly Fee|
|Missouri||$50||No Yearly Fee|
|Montana||$70||$20 per year|
|Nebraska||$100 + Publishing Requirement||$10 – $13 Biennially|
|Nevada||$75||$125 per year|
|New Hampshire||$100||$100 Annual + Annual Enterprise Tax|
|New Jersey||$125||$50 per year|
|New Mexico||$50||No Annual Fee|
|New York||$200 + Publishing Requirement||$9 Biennial + Annual Filing Fee|
|North Carolina||$125||$200 per year|
|North Dakota||$135||$50 per year|
|Ohio||$99||Annual Commercial Activity Tax|
|Oklahoma||$100||$25 per year|
|Oregon||$100||$100 per year|
|Pennsylvania||$125 + Publishing Requirement||No Annual Fee|
|Rhode Island||$150||$50 per year|
|South Carolina||$110||No Annual Fee|
|South Dakota||$150||$50 per year|
|Tennessee||$300 Minimum||Annual Franchise & Excise Tax|
|Utah||$70||$20 per year|
|Vermont||$125||$35 per year|
|Virginia||$100||$50 per year|
|Washington||$180 – $200||$60 per year|
|West Virginia||$100||$25 per year|
|Wisconsin||$130 – $170||$25 per year|
|Wyoming||$100 – $102||$50 or 0.02% value of assets per year|
Can you start an LLC with bad credit?
If you have a bad personal credit score, then it may be more suitable to form a separate legal entity such as an LLC or corporation. This allows you to separate your personal tax identification number from your business’.
What you want to do is use your LLC business to open a company bank account and start building credit for your business. Whether you have great personal credit or not, business credit allows you to protect your individual assets from debts and liabilities.
How to Start an LLC Bank Account
You will need to open an LLC bank account under your LLC name and operating agreement. Consider the following documents needed:
- Business tax ID
- Date when your business was formed
- Country and state where it was legally formed
- Country and state of primary business operation
- Legal business name and DBA (“doing business as”) name if applicable
- Personal information about the business owner and controlling manager.
1. Is it better to start an LLC or a corporation?
There are many advantages and disadvantages of starting an LLC business or corporation. While LLCs are easier and less costly to operate, there are certain advantages that a corporation can provide your business. Deciding which business structure to consider depends on how you weigh the pros and cons for both.
|Advantages of an LLC||Disadvantages of an LLC|
|1. Simpler and easier to operate than corporations.
2.LLCs offer more flexibility than corporations in terms of management and ownership structure.
3.LLCs provide limited liability protection for their owners, meaning that the owners are not personally liable for the debts and obligations of the LLC.
4.LLCs are taxed as pass-through entities, meaning that the LLC itself is not taxed on its income. Instead, the owners of the LLC are taxed on their share of the LLC's income.
|1.LLCs may be subject to self-employment taxes on the income of their owners.|
|Pros of Corporations||Cons of Corporations|
|1. Corporations offer more structure and are better suited for larger businesses.
2. Corporations provide limited liability protection for their owners, meaning that the owners are not personally liable for the debts and obligations of the corporation.
3. Corporations are taxed as separate entities, meaning that the corporation is taxed on its income, and the owners are not taxed on their share of the corporation's income.
|1. Corporations are more complicated and expensive to operate than LLCs.
2. Corporations are less flexible than LLCs in terms of management and ownership structure.
3. Corporations may be subject to double taxation, meaning that the corporation is taxed on its income, and the owners are also taxed on their share of the corporation's income.
4. Corporations are required to hold annual shareholder meetings and keep detailed records of their financial activities.
2. Can you start an LLC without a business?
You won’t need a business license to form an LLC. However, an LLC requires registering with the state and submitting the appropriate forms. Even if you don’t need a business license for your LLC, you will be needing one to operate your LLC as a business – so better get one.
3. Can you start an LLC while on unemployment?
The short answer is yes, you can start an LLC while you are on unemployment benefits. There's currently no law that says you can't start a business while you are unemployed.
The only thing you need to worry about is how much time you have to invest in your business. You will probably have less time because you have to look for a job especially if a new one comes up. The rules vary depending on your state's labor department.
If you do make any money from your new LLC while receiving unemployment benefits, there’s a need for you to report that profit to your unemployment office. In turn, your benefits may decrease or disappear depending on the state.
4. Can I start an LLC in another state?
Yes. You can absolutely start and register an LLC business in a different state if you comply with the requirements of that state. Registering your LLC in another state makes you a foreign LLC. With this, you should file for a certificate of authority, and pay regulatory fees and taxes and franchise taxes.
5. Can I start an LLC by myself?
Yes, you can. There’s no law that requires you to form an LLC with other members.
6. How to start an LLC for real estate investing?
An LLC for real estate investing is where the investors buy and sell real estate and conduct business all while protecting them from any personal liability. You can start an LLC for real estate investing by picking out a business name, filing an “Articles of Organization”, creating an Operating Agreement and getting the necessary business licenses and permits, and paying regulatory taxes. Basically, follow the steps written in this article on how to start an LLC.
7. How to start an LLC partnership?
LLCs are similar to partnerships in that they offer the same way how to manage the business or distribute profits. However, in an LLC, the owners’ assets are protected from debts and liabilities. Starting an LLC partnership may require the following steps:
- Creating an Operating Agreement for the members’ role in the company. This again includes information on how the partners’ contributions, investments, how they make a decision, and how to add/remove partners.
- Choosing an LLC name
- Announcing through local newspapers a notice of your intent to form an LLC.
- Creating Articles of Organization with the secretary of state office.
8. How many LLCs can you own?
You can own as many LLCs as you want. A lot of entrepreneurs file for a new LLC for each startup they have.
9. What is an LLC taxed as an S Corp?
An LLC taxed as an S corp offers certain benefits of a corporation all while having a flexible income treatment. An S Corp basically lets you save money by avoiding double taxation and having Social Security and Medicare tax privileges. This means if your LLC is taxed as an S corp then you can save on taxes particularly if your business is in active trade and your employee’s payroll is too high.
Watch this video: https://www.youtube.com/watch?v=6aoKuxNXPEM
10. Do I need an LLC for a side business?
If you have a side business such as a freelancing service or a side hustle, you may structure your business as an LLC instead of being an independent contractor/sole proprietor. The reason why this might be a good option for you is that when you earn more in the future or take a partner or even decide to turn your side gig into your full-time job, you can get more tax benefits and protect your personal assets from being sued.
So, when should you consider an LLC for your side business? If you’re earning around $30,000 to $40,000 annually then it may be time to file for an LLC or S-Corp to reap its benefits.
11. Can an LLC have an owner?
In an LLC, the members have different interests based on the percentage of the contribution they have to the LLC. The LLC may be managed by Members or they can elect a Single Manage (or Multiple Managers).
12. Do I have to file a tax return for an LLC with no income?
Yes, you still need to file a tax return even if you don’t have an income for your business for a year. The requirements for filing an LLC tax return statement depend on how your LLC is taxed. Your LLC may be taxed as a corporation, an S corp, or a partnership.
Forming an LLC is one of the best decisions you can make as a startup business especially if you want to protect your personal assets. An LLC perfectly combines the pass-through taxation of a sole proprietorship or partnership and the protection of a corporation. With an LLC, the owner's personal assets can be protected from business debts and lawsuits.
We hope this article has guided you on how to start an LLC in the US in 2022. Want to learn more about starting and growing your business from experts? Subscribe to our newsletter (we promise we won’t spam you!)