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How to form an LLC – the 5 basic steps
- Choose a suitable name for your company.
- File “Articles of Organization” and pay the filing fee. (The exact name can vary from state to state, but the basic idea is the same.)
- Set up an Operating Agreement.
- Publish a notice. (In some states, this step is not mandatory).
- Obtain any license and/or permit that your particular business needs in your particular state.
In many states, filing an Operating Agreement is not necessary when forming an LLC. This does not mean that you should refrain from creating an Operating Agreement. The Operating Agreement are not only useful for the members (owners) of the LLC, it will also be required by the IRS in many situations.
How to form an LLC – choosing the name
There are several rules that must be adhered to when picking a name for your LLC and each state creates its own rules regarding this. To find out the exact requirements, contact the authority in charge in your particular state, e.g. the corporations division of the secretary of state’s office. They will not only tell you how to form an LLC; they will also let you know how to find out which names that are already taken.
Here are a few examples of very common rules that will be true in most states:
- The name cannot be the same as the name of another LLC.
- The name cannot violate trademarks.
- The name must end with an LLC designator. Examples of LLC designators are “LLC”, “L.L.C.”, “Ltd. Liability Co”, “Limited Company” and “Limited Liability Company”.
- Each state has its own set of protected words that cannot be included in the name of an LLC. Examples of such protected words are Insurance, Bank and Corporation.
In most cases, separately registering the name with your state is not mandatory because when you file your Articles of Organization the name will be filed automatically. In most states you can chose to reserve your name to make sure no one picks it while you are still in the process of establishing your LLC.
How to form an LLC – Articles of Organization
The basic documentation needed to form an LLC is commonly referred to as Articles of Organization, but you may come across terms such as “Certificate of Organization” or “Certificate of Formation” as well. This may sound pompous, but it is actually quite straightforward and most people manage to prepare their own Articles of Organization at the state’s filing office without having an attorney telling them how to form an LLC. In most states, it is simply a question of filling in the blanks and checking boxes on a standard form. The exact outline will vary, but most states will require you to provide at least the following pieces of information:
- The name of the LLC
- The address of the LLC
- The name of the LLC owners (members)
- The name and address of the Registered Agent.
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