The limited liability company (LLC) is a distinct business entity that offers an alternative to partnerships and corporations by combining the partnership advantage of pass-through taxation with the corporate advantage of limited liability.
As with incorporating a business, LLCs are created by filing the appropriate documents with the state. There are three primary steps in the formation process: securing the business name, filing the necessary documentation, and paying the necessary state filing fees.
When forming an LLC, business owners must first ensure that their desired company name is available for use in the state where they plan to form. Names for corporations and LLCs are evaluated on a state-by-state basis. If the desired name for the LLC is already in use in that state, the LLC will not be allowed to form in that state using that name. Also, the desired company name must not be deceptively similar to a name already in use in that state, or be misleading in terms of the actual business purpose of your LLC.
Most states offer preliminary state name availability searches, often for a fee. While these searches typically will show whether an exact match for the desired name already exists, they may not show that another name exists that is too similar. The ultimate decision whether or not the desired business name will be allowed rests with the Secretary of State.
The second step is to file the necessary documentation, typically called the articles of organization or certificate of organization, with the appropriate state agency in the state of formation. This is most often the Secretary of State's office.
Lastly, the required state fees to form an LLC in that state must be paid. Each state imposes filing fees on corporations and LLCs. The fees to form an LLC vary by state, and range from under $100 to over $500.
How to Form?
There are three primary ways in which business owners can form an LLC with the state: do it themselves, use an incorporation service provider, or use an attorney or accountant.
If business owners wish to form their LLC themselves, they should understand the requirements for LLCs in the intended state of formation. Business owners can typically learn about each state's statutes for LLCs on the Secretary of State's web site. In addition to being familiar with the requirements, they will also need to check the availability of the desired business name(s), prepare and file the articles of organization, pay the necessary state fees, and undertake all communication with the necessary state agencies.
Another option is to use an incorporation service provider, which is a company specializing in helping business owners form corporations, LLCs, and nonprofits. Many incorporation service providers form businesses in any state and in Washington D.C. When placing an order with an incorporation service provider, business owners submit the necessary information for their businesses to the provider, and the provider undertakes all the steps necessary to form the LLC. Service providers typically allow for both online and phone ordering, and often have customer service teams to answer questions and provide general information on the formation process. Incorporation service providers typically charge a service fee in addition to the required state filing fees. These fees vary by provider, and may also vary by your intended state of formation. Service fees typically range from under $100 to $200 for LLC formation.
Attorneys and some accountants may also complete all the necessary formation steps for business owners. One element attorneys can provide that is not available with the other two options, is legal advice. Likewise, accountants can provide financial and/or tax advice. When using an attorney or accountant to form an LLC, business owners should expect to pay the hourly fee of the attorney or accountant in addition to the state filing fees. Professional service fees for attorneys and accountants vary greatly.
How Long Does the Process Take?
States vary on how much time they need to review, approve, and return the completed articles of organization. Standard processing often runs 4-6 weeks. Most states allow the filing process to be expedited for an additional charge. Expedited filings typically take about 7-10 business days. Fees to expedite the filing vary by state as well.
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