Do you want to start a business and you are considering forming an LLC? If YES, here are requirements and process involved in forming an LLC in 2021. A Limited Liability Company (LLC) is one business formation strategy that has a huge benefit on startup businesses especially those looking towards expanding in the future. An LLC is seen as a business structure whereby the owners are not personally liable for the company’s debts or liabilities.

While forming an LLC when starting a business comes with a lot of merits, a lot of entrepreneurs find it to be much of a hassle. With a clear understanding of LLC requirements and the help of maybe a corporate lawyer or business analyst, you can protect your assets while maintaining full control over your business.

An LLC can be a single-owner business, a partnership, or a multi-member structure. In addition, the members can be individuals, corporations, other LLC’s, or foreign entities. There is no limitation to the number of members in an LLC, very much unlike the sole proprietorship.

If you want to form your business as an LLC in the United States, there are certain requirements you have to keep in mind. Having these things at hand would help make the journey go smoother for you. Without much ado, these are the requirements you will need to form an LLC in USA.

Select the State You Want to Register an LLC

1. Alabama | 2. Alaska | 3. Arizona

4. Arkansas | 5. California | 6. Colorado

7. Connecticut | 8. Delaware

9. District of Columbia | 10. Florida

11. Georgia, 12. Hawaii | 13. Idaho

14. Illinois | 15. Indiana | 16. Iowa

17. Kansas | 18. Kentucky | 19. Louisiana

20. Maine | 21. Maryland | 22. Massachusetts

23. Michigan | 24. Minnesota | 25. Mississippi

26. Missouri | 27. Montana | 28. Nebraska

29. Nevada | 30. New Hampshire

31. New Jersey | 32. New Mexico | 33. New York

34. North Carolina | 35. North Dakota | 36. Ohio

37. Oklahoma | 38. Oregon | 39. Pennsylvania

40. Rhode Island | 41. South Carolina

42. South Dakota | 43. Tennessee | 44. Texas

45. Utah | 46. Vermont | 47. Virginia

48. Washington | 49. West Virginia

50. Wisconsin | 51. Wyoming

What are the Requirements Needed to Form an LLC in 2021?

1. Business Name

Business name is essentially the name people know your business by. Different from your dba – which is the legal name you register for your business, this is the name you will use to advertise and sell your products and services. Your LLC must have a name that is unique and is not the same or confusingly similar to another business.

In addition, the name must contain the term ‘LLC’ or ‘Limited Liability Company’. The use of ‘Inc.’ or ‘Incorporated’ in the name of an LLC is generally prohibited. Finally, there are generally prohibitions on the use of financial names, such as ‘Bank’, ‘Insurance’, or ‘Trust’. Each state has a unique set of name requirements that you need to follow when filing for an LLC. So you need to do your research to know what is allowed in your state of residence.

2. Registered Agent

A registered agent is typically the person who will receive official papers and legal documents on behalf of your business. The documents in question include renewal notices from the state and any documents related to lawsuits. It is required by law that a registered agent must be located in the state where your LLC is registered and he or she must have a physical street address.

Some states require a registered agent to be a point of contact for all official paperwork. In many cases, this registered agent must be a physical resident of the state you are forming your LLC in. The agent does not need to be an owner or employee of the LLC. Know that anybody can provide registered agent services for your LLC provided that the person meets up with the terms.

3. Operating Agreement

An operating agreement is a key document used by LLCs because it outlines the business’ financial and functional decisions including rules, regulations and provisions. The purpose of the document is to govern the internal operations of a business in a way that suits the specific needs of the business owners.

The Operating Agreement is not required by most states, but it’s highly suggested, particularly for multi-member LLCs. While the Articles of Operation outlines your business’ basic information, the Operating Agreement defines your business’ key financial and functional decisions.

In fact, it’s best to have the Agreement worked out before you file any forms with the state. That way, you won’t have an upset partner pulling out at the last moment, or be unable to add a new member that you wanted to include. The Operating Agreement spells out a number of very important details, including management structure, investment of additional capital, division of profits, and what happens to the LLC if a member leaves or passes away.

This written agreement will be needed by courts, investors, banks, and creditors as you operate your business. While Operating Agreements are not an LLC reporting requirement, they are highly recommended.

4. Articles of Organization

The first step to filing your LLC application form is filling out an Articles of Organization form. This is a legal document that is filed with the state in which you are forming your LLC. There are many names for this form – Certificate of Organization or Certificate of Formation, for instance.

Every state has its own form that must be completed in order to create an LLC. Some states may also have a Limited Liability Company Application to fill out. You just need to know what your state requires and the type of form you need to fill. The Articles of Organization sets forth the basic information of your business. Generally, states have minimal requirements for filling the Articles:

  1. LLC’s name
  2. LLC’s purpose (“to engage in any lawful activity under state law for a limited liability company”)
  3. principal and mailing address of the LLC
  4. duration of the LLC
  5. name and address of your LLC’s registered agent (the entity who is authorized on the corporation’s behalf to accept delivery of certain legal documents)
  6. the management structure (i.e. single manager, more than one manager, all LLC members as managers).

Beyond these minimal requirements, some states may require to list the members of the LLC and the initial contribution of the LLC, as well as a limitation of liability clause.

5. Business Licenses and Permits

Depending on what type of business you are forming, you will need a variety of business licenses to operate in your state. You may need a general business license, tax registrations, health permits, zoning or land-use permits, and state-issued occupational licenses. Getting everything in order can be overwhelming.

6. EIN

An Employer Identification Number (EIN) is a unique identification number that is assigned to a business entity so that it can easily be identified by the Internal Revenue Service (IRS). It is commonly used by employers for the purpose of reporting taxes.

The EIN is a unique nine-digit number issued by the IRS and includes information about which state in which the corporation is registered. The EIN is also known as a Federal Tax Identification Number. When it is used to identify a corporation for tax purposes, it is commonly referred to as a Tax Identification Number (TIN)

7. Statement of Information Form

As part of LLC formation documents, some states require a Statement of Information form to be filed with the state along with your Articles of Organization. California calls this form LLC-12 or form LLC-12r. This form is a simple statement of your company name, who the partners are, and what the business address is.

8. Tax Forms

LLC tax form 1065 is the form that is used to file a tax return on partnership income. This form is filed along with your other income tax documents. Partnerships and LLCs do not pay separate taxes, but pass through all profits and losses to the partners.

Tax form 1099 is a form that other companies may issue to your LLC if they did business with you and paid you over $600. This form would be part of you and your partners’ income tax filing. An LLC tax extension form, such as Form 7004, is used to file for more time to fill out your LLC taxes. This would give you five months extra for your partnership to finish their tax documents.

In a single-member LLC, you wouldn’t need to file a LLC tax extension in addition to a personal extension. In a partnership, however, separate forms for a business extension and personal extension are needed. In addition, make sure your partners are filing extensions too – it doesn’t work out well when you extend but your partner files.

Tax form 8832 is a form that an LLC would use if your partnership decides to elect a different tax standard. One of the great benefits of an LLC is that your group can choose to be taxed as a corporation, partnership, or disregarded entity. You can find more information about all of these tax forms on the IRS website.

9. US Bank Account

Opening a Business Bank account for your company can be done once you’ve formed the LLC, and received your EIN. Due to US money laundering laws, banks are required to know their clients. This will mean you will need to travel to the US, and obtain visas to do so. If you have ever opened a personal bank account in the U.S., you might be able to open a business account remotely. Additionally, depending on the nature of your business, you may be able to get by with a service like PayPal.

10. Physical US Mailing Address

To complete your LLC registration in the United States, you need to get a mailing address. One way to get a mailing address in the US is to establish a physical office in the state you’re going to form and do business in, if this is required for your business.

This is also necessary to open a bank account in that state. One way to get a mailing address in the US is to establish a physical office in the state you’re going to form and do business in, if this is required for your business. However, if you do not need to open a physical office in the US, you will still need a US mailing address in your LLC’s state.

Some services, like Earth Class Mail, can set you up with a real US Mailing address, which is required to register for a US bank account and is useful for other services. They also receive mail on your company’s behalf to scan and deliver to you online, and forward packages out of the country.

Frequently Asked Questions

  1. What Is The Organizational Structure Of An LLC?

An LLC is a type of business entity that is organized according to state law. It consists of “members,” who are the owners of the business, and “managers,” who conduct the day-to-day business operations. Members are similar to shareholders in a corporation, and managers are similar to corporate officers.

  1. When Should A Business Become An LLC?

You should make your business an LLC;

  • When you have gotten your business off the ground and have found your first paying customer.
  • When you want to avoid putting your personal assets at risk.
  • When you have multiple owners and/or partners in the business.
  1. How Do You Make Your Business An LLC?
  • Step 1: Choose a State in Which to Form Your LLC
  • Step 2: Choose a Name for Your LLC
  • Step 3: Choose a Registered Agent
  • Step 4: Prepare an LLC Operating Agreement
  • Step 5: File Your LLC with Your State
  • Step 6: Obtain an EIN
  • Step 7: Open a Business Bank Account
  • Step 8: Register to Do Business in Other States (If Necessary)
  1. What Are The Benefits Of Becoming An LLC?

Probably the most obvious benefit to forming an LLC is protecting your personal assets by limiting the liability to the resources of the business itself. In most cases, the LLC will protect your personal assets from claims against the business, including lawsuits.

  1. What Should You Include In An LLC Operating Agreement?

An LLC operating agreement is a key document used by LLCs because it outlines the business’ financial and functional decisions including rules, regulations and provisions. The purpose of the document is to govern the internal operations of the business in a way that suits the specific needs of the business owners.

Basically, an LLC operating agreement should include;

  • Percent of Ownership/How You’ll Distribute Profits
  • Your LLC’s Management Structure/Members’ Roles And Responsibilities
  • How You’ll Make Decisions
  • What Happens If A Member Wants Out
  1. What Is The Processing Time To Form Your LLC?

Basically, the time to process your corporation or LLC formation varies by state with routine processing taking 4 – 6 weeks or even more in the slowest states. Expedited Processing will reduce that time to about 10 business days or less with the exception of just a few states.

  1. How Do You File An Amendment For An LLC?
  • Check your state law
  • Refer to your forming documents
  • Identify what you need to change and what you need to change it
  • Find out whether you need to report your changes
  • Submit within the required timeframe
  • Provide the appropriate information and documentation
  • Submit your paperwork
  1. What Is The Difference Between A DBA And An LLC?

The biggest difference between a DBA and an LLC is liability protection. Under a DBA, there is no distinction between the business owner and the business. On the other hand, an LLC provides limited liability protection. The business owners’ personal property remains completely separate from the business.

  1. Should You Use An LLC Formation Service?

It depends on what you want and if you have the money.

  1. What Types Of Businesses Should Choose An LLC?

Almost all types of businesses can be limited liability companies. Typically, the only exception is a professional partnership, such as a law firm or doctor’s office.

  1. Is An LLC Best For Small Businesses?

An LLC is often an appropriate choice for small businesses because it offers reasonable liability protection with a minimal amount of paperwork and regulatory burden. Consider the pros and cons of each structure — and if you aren’t sure, it’s best to start with a simpler sole proprietorship or partnership structure.

  1. Why Form An LLC Instead Of A Sole Proprietorship?

One of the key benefits of an LLC versus the sole proprietorship is that a member’s liability is limited to the amount of their investment in the LLC. Therefore, a member is not personally liable for the debts of the LLC. A sole proprietor would be liable for the debts incurred by the business.

  1. What Are The Maintenance Requirements Of An LLC?
  • Annual Renewal
  • Make available Company Records
  • Regular Meetings
  • Minutes
  • Miscellaneous
  1. What’s The Difference Between An LLC And An LLP?

The major difference between an LLC and an LLP is their Partnership Agreement. Another difference between the two entities is the process for determining the management structure. An LLC may have only one member, while an LLP must have at least two partners. An LLC is managed according to its operating agreement which is created by the members.

  1. What Is An LLC And Why Do You Need One?

An LLC stands for “limited liability company.” An LLC is one type of legal entity that can be formed to own and operate a business. LLCs are very popular because they provide the same limited liability as a corporation, but are easier and cheaper to form and run.

The reason why you would need an LLC is that, if you have business partners or employees, an LLC protects you from personal liability for your co-owners’ or employees’ actions. An LLC gives you a structure for operating your business, including making decisions, dividing profits and losses, and dealing with new or departing owners.

  1. How Much Does It Cost To Form An LLC?

The main cost of forming a limited liability company (LLC) is the state filing fee. This fee ranges between $40 and $500, depending on your state.

  1. What LLC Forms Are Required To Start A Limited Liability Company?
  • Internal Revenue Service (IRS) Form SS-4
  • Name reservation application
  • Articles of organization
  • Operating agreement
  • Initial and annual reports
  • Tax registrations
  • Business licenses
  1. What Can An LLCs Write Off?
  • Rental expense
  • Charitable giving
  • Tangible property
  • Professional expenses
  • Meals and entertainment
  • Independent contractors
  • Cost of goods sold
  • Car expenses and mileage
  • Office expenses, including rent, utilities, etc.
  • Office supplies, including computers, software, etc.
  • Health insurance premiums
  • Business phone bills
  • Continuing education courses
  • Parking for business-related trips
  1. Do You Need A Lawyer To Form An LLC?

You do not need an attorney to form an LLC. Most states allow LLC formation by registering the business entity on your secretary of state’s website and with the Internal Revenue Service (IRS). Once you register, you can buy or rent a building and have company bank accounts.

  1. What Are The Advantages And Disadvantages Of An LLC?

Advantages of a Limited Liability Company. Limited Liability. Tax Advantage. Flexibility of Income Distribution. Simplicity. Member Controlled.

Disadvantages of a Limited Liability Company. Difficult to Raise Capital. Confusion Across States. No Perpetual Existence.

  1. Does An LLC Need Licenses And Permits?

In most states, forming an LLC doesn’t require a business license, but you’ll need to follow your state’s procedures. An LLC requires registering with the state and filing the appropriate forms. But even though you don’t need a business license to form an LLC, you probably need one to operate the LLC as a business.

  1. Can You Switch From An LLC To A Corporation?

An LLC can switch to a corporation, but conversion might mean more paperwork and taxes. If the owners of your LLC agree, you can convert your company to a corporation. Some states have a streamlined process that allows you to easily transition your LLC to a corporation.

  1. Should Your LLC Have A Holding Company?

An LLC most certainly can be a holding company. In fact, in most cases the limited liability company is the most desirable business entity. This is due to their flexibility, pass through tax status and strong protections from personal creditors.

  1. What Is The Average Cost To Set Up An LLC?

The average cost to set up an LLC ranges between $40 and $500, depending on your state.

  1. Should I Use An LLC Formation Service Or Do It Myself?

You can do it yourself if you have the time but if you make use of professionals, it could save you lots of time and could potentially save you money.

  1. What is the cheapest way to get an LLC?

The least expensive way to form your LLC is filing the forms yourself, although it will depend on the filing fees in your state. Incorporation statements for LLCs are typically the Articles of Organization.

  1. Does an LLC provide Asset Protection?

Limited Liability Companies are outstanding asset protection vehicles. They can protect the personal assets of the company members (owners) if someone sues the business. Moreover, the LLC can protect the assets of the business when someone sues a member.

  1. What Are The Benefits Of An LLC Vs Sole Proprietorship?

One of the key benefits of an LLC versus the sole proprietorship is that a member’s liability is limited to the amount of their investment in the LLC. Therefore, a member is not personally liable for the debts of the LLC. A sole proprietor would be liable for the debts incurred by the business.

  1. What Is The Downside To An LLC?

The downside to an LLC is that profits are subject to social security and Medicare taxes. In some circumstances, owners of an LLC may end up paying more taxes than owners of a corporation. Salaries and profits of an LLC are subject to self-employment taxes, currently equal to a combined 15.3 percent.

  1. Is an LLC better for Taxes?

LLCs give business owners significantly greater federal income tax flexibility than a sole proprietorship, partnership and other popular forms of business organization. Make sure you have a financial plan in place for your small business.

  1. How Long Does Legalzoom Take To Deliver An LLC?

Depending on how fast the state processes business filings, it can generally take between a week to ten business days. In some states, once your intake information is received, the state agency often issues approval for the limited liability company within only three business days.

  1. What Kind Of Insurance Does An LLC Need?

Professional liability insurance is usually necessary for LLCs or professional limited liability companies (PLLCs), whose members are either lawyers, doctors, or other professionals required to have a license to work.

  1. How Much Does A CPA Charge To Set Up An LLC?

A certified public accountant (CPA) cannot provide legal advice, but can guide you through the paperwork and decision-making process of setting up an LLC for an average cost of $400-$900 or more, depending on location and complexity. That’s in addition to state fees and expenses.

  1. Is Legalzoom Worth It For LLC?

LegalZoom may be a decent option to form an LLC if you: Want to work with an established brand to start your LLC. Are willing to pay extra for better premium services and features, such as an EIN and registered agent services.

  1. How Much Does An LLC Lawyer Cost?

An LLC lawyer fees range from $297 to $797.

  1. Do You Have To Pay Yourself A Salary In An LLC?

As the owner of a single-member LLC, you don’t get paid a salary or wages. Instead, you pay yourself by taking money out of the LLC’s profits as needed. That’s called an owner’s draw. You can simply write yourself a check or transfer the money from your LLC’s bank account to your personal bank account.

  1. Can Your LLC Buy A Car?

Yes, in the United States you can buy a car under a limited liability company (LLC). The company must be properly registered as an LLC and you will also need an Employer Identification Number (this can be obtained for free from the IRS).

  1. Why Elect S Corp Tax Status For Your LLC?

An S corporation isn’t a business entity like an LLC; it’s an elected tax status. LLC owners must pay self-employment taxes for all income. S-corp owners may pay less on this tax, provided they pay themselves a “reasonable salary.”

  1. Do you need an Accountant for an LLC?

Hiring a tax professional will not only help you keep your LLC in compliance with the state, but it will also give you an advisor to go to for other business questions. Whether your business turns a profit or loses money, you will still need to file tax documents every year.

  1. What Taxes Do LLC Pay?

All of the profits and losses of the LLC “pass through” the business to the LLC owners (called members), who report this information on their personal tax returns. The LLC itself does not pay federal income taxes, although some states impose an annual tax on LLCs.

  1. Can You Set Up An LLC In Canada?

The LLC form of business ownership does not exist in Canada. While it’s common for owners to set up LLCs in the United States and other countries (including the U.K., Switzerland, Chile, Colombia, Italy, Japan, and India), this is not an option for Canadian business owners.

  1. What Is The Difference Between A Trademark, Copyright And Patent?

A patent protects an invention for 20 years, but it cannot be renewed. The code of the software will be protected by a copyright, while the functional expression of the idea will be protected by a patent. The name of the company or the software will come under a trademark.

  1. Can You Run An LLC Out Of Your Home?

Yes, you can, and running your LLC out of your home can be a good alternative for the business start-up. Your business plan may call for you to eventually move your business off-site to regular business premises, but in the beginning, a home-based business may be the most viable and cost-effective option.

  1. What States Require Newspaper Publication?

There are only 3 states that require LLCs to publish a notice in the newspaper: Arizona, Nebraska and New York.

  1. Should I Incorporate In Delaware Or Illinois?

It depends on what you want but it is important to point out that Delaware’s liability laws may offer greater protections, compared to Illinois, for officers and directors. We also recommend Delaware incorporation to companies looking for outside investors or mezzanine financing, as well as for companies that are anticipating an IPO.

  1. What Does It Mean To Pierce The Corporate Veil?

“Piercing the corporate veil” refers to a situation in which courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts. Veil piercing is most common in close corporations.

  1. Should You Use A National Or Local Bank?

The choice is yours to make, but it is important to point out that Local banks must compete for customers and offer higher rates. While national banks tend to treat customers like just another account number, local banks offer more direct contact with top executives and personal attention and service.

  1. Do You Have To Pay For LLC Every Year?

Yes, and this is due to the fact that the LLC annual fee is an ongoing fee paid to the state to keep your LLC in compliance and in good standing. It’s usually paid every 1 or 2 years, depending on the state. This fee is required, regardless of your LLC’s income or activity.

  1. What If Your LLC Made No Money?

Please note that even though an inactive LLC has no income or expenses for a year, it might still be required to file a federal income tax return. LLC tax filing requirements depend on the way the LLC is taxed. An LLC may be disregarded as an entity for tax purposes, or it may be taxed as a partnership or a corporation.

  1. What Are The Disadvantages Of An S Corp?
  • Formation and ongoing expenses
  • Tax qualification obligations
  • Calendar year
  • Stock ownership restrictions
  • Closer IRS scrutiny
  • Less flexibility in allocating income and loss
  • Taxable fringe benefits.
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