How to Start a Limited Liability Company in 5 Easy Steps: Updated For 2022

By  //  September 9, 2022

Share on Facebook Share on Twitter Share on LinkedIn Share on Delicious Digg This Stumble This

According to SBA estimates, more than 600,000 new businesses open each year in the US. This figure is expected to rise even more in 2022, and Limited Liability Company (LLC) is becoming popular as the base of the legal structure of this business. 

So it is important for new business owners and entrepreneurs to know the exact requirements they need to fulfill to get an LLC approval.

Setting up an LLC is a relatively simple process and will take hardly an hour to complete. But is it important that you know the exact steps, as missing any of them will create unnecessary complications and waste your time.

Note: The exact requirements vary slightly from state to state, but here are the basic five steps which you will most definitely need to know. 

Step 1: Evaluate your business name

The first step in obtaining a Limited Liability Company (LLC) is choosing a business name that complies with state law. Do not worry, as company names are usually quite flexible, but some states may have certain restrictions on using some keywords in your business name. 

Some of these prohibited words include terms like “corporation,” “incorporated,” “insurance,” “city,” and others. Another requirement is to end your company name with LLC, making it easier to understand your license type. 

If your company name complies with the requirements above, you are ready to move to the second step. 

Step 2: Obtain and fill up a copy of your state’s LLC “Articles of Organization” form

The next step in starting a Limited Liability Company (LLC) is to fill up an “Articles of Organization” form. You will find this by visiting the Directory of Secretary of State Offices’ Websites

The form usually asks basic questions about your business, like the name, purpose, and locations of your business. The form is self-explanatory and should not be very difficult to fill up. 

Step 3: Post a notice in the newspaper 

Some states require you to publish a notice in the local newspaper mentioning the purpose and intention of starting an LLC. Currently, only three states, Nebraska, Arizona, and New York, require you to post a notice, so if you reside in other states, check with your local authority, and most likely, you will be exempt from this step.

Step 4: Submit Your “Articles of Organization” Form

After you have filled your “Articles of Organization” form with the necessary details, it is time to send the form to your Secretary of State. You should also attach the appropriate filing fee for setting up your LLC. 

We recommend you double-check for actual fees and any corporate tax that may be required for setting up the LLC. An example of fees when setting up an LLC is as follows.

Filing Fee: $70

Annual Tax: $800 

Step 5: LLC Operating Agreement

After you have submitted the form and paid the fees, one other important requirement left is to get the LLC Operating Agreement. Do note that an LLC Operating Agreement is not required in every state, and in some states; you will only need it if you have other partners in your business. If you are the only owner, you most likely do not need to submit the LLC Operating Agreement. But it is always a good idea to check on the official website to be absolutely certain. 

Some important things to consider when setting up an LLC

When setting up an LLC, there are a few things that you should consider to ensure you do not get into any legal trouble down the line. 

LLC Operating Agreement: One important thing to consider when creating the LLC operating agreement is to outline the financial and management obligations and responsibilities of the LLC members. It would be best if you considered including who will be responsible for additional funding and how the profits will be distributed under the condition that someone leaves the company. Leaving these issues unaddressed can lead to future difficulties in both corporate and personal relationships. So it is always best to document it to save you in many situations. 

Seek help if you need it: The DIY approach of setting up your business LLC is definitely the best way to go. You will learn a lot of things in the process, and the steps are fairly simple. But if you think there is some confusion or do not have the time, you can always hire an attorney or seek help from popular websites like LegalZoom. 

Choose which state is best for setting up LLC: For a small business, setting up an LLC in the state you are currently residing in makes the most sense. But for medium to large businesses, there may be tax benefits in some states, so you may consider researching with your attorney which state LLC you should apply to. Delaware, Nevada, and Wyoming are popular out-of-state registrations for their lucrative tax benefits. 

But if you are just starting out and not making significant revenue, it is best to ease things off and register in the state you currently reside in.