How to Start an LLC in the U.S?

A limited liability company (LLC) is a popular choice for small business owners seeking liability protection, management flexibility, and tax benefits. Whether you’re just starting out or looking to formalise your business, setting up an LLC can provide a solid foundation for success. In this guide, we’ll walk you through everything you need to know about LLC registration—from understanding what an LLC is, to the types of LLCs available, key benefits, step-by-step formation process, compliance requirements, and important considerations before you get started. 

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What is an LLC?

A Limited Liability Company (LLC) is a flexible business structure that combines the liability protection of a corporation with the tax benefits of a partnership or sole proprietorship. Key Features of an LLC are as follows:

1. Limited Liability Protection

LLC owners, known as members, are generally not personally liable for the company’s debts or legal obligations. This means that their personal assets are protected, and any losses are typically limited to the amount they invested in the business. 

2. Pass-Through Taxation

LLCs benefit from pass-through taxation, meaning the business itself does not pay income tax at the entity level. Instead, the company’s income or loss is passed through to the owners, who report it on their personal tax returns and pay taxes accordingly.

An LLC is a popular choice for small business owners due to its simplicity, legal protections, and tax flexibility.

Types of LLCs in the U.S. 

Here are the common types of LLCs in the U.S.:

• Single-Member LLC
• Owned by one individual or entity.
• Treated as a disregarded entity for tax purposes (taxed like a sole proprietorship).
• Multi-Member LLC
• Owned by two or more members (individuals or entities).
• Typically taxed as a partnership (pass-through taxation).

• Member-Managed LLC
• All members participate in the day-to-day management and decision-making of the business.
• The default management structure in most states.
• Manager-Managed LLC
• Members appoint one or more managers to handle daily operations.
• Managers can be members or outside managers.
• Members typically have less involvement in daily management.
• Professional LLC (PLLC)
• Formed by licensed professionals (e.g., doctors, lawyers, architects) in states that require professional licensing.
• Designed to provide professional services and maintain liability protections.

• Series LLC
• A unique form where one LLC (the “parent”) contains multiple “series” or cells, each with its own assets, members, and liabilities.
• Not available in every state.
• Useful for separating assets or businesses under one umbrella.
• Domestic LLC
• An LLC is formed and operates in the state where it was created.
• Foreign LLC
• An LLC registered to do business in a state other than the one where it was originally formed.

Where to Register an LLC in the U.S.?

In the United States, LLC registration is handled at the state level, typically through the Secretary of State’s office or a similar business filing agency.

Benefits of Forming a Limited Liability Company (LLC)

Creating a Limited Liability Company (LLC) offers several key advantages compared to operating as a sole proprietorship, general partnership, or even a corporation. These benefits make the LLC an attractive choice for many entrepreneurs and small business owners. 

1. Limited Liability Protection

LLC members (owners) are protected from personal liability for business debts and legal obligations. This means creditors typically cannot pursue members’ personal assets, such as homes or bank accounts, to satisfy business liabilities.

Note: An LLC can lose its liability protection through “piercing the corporate veil,” typically due to commingling personal and business funds or failing to follow legal formalities.

2. Flexible Ownership Structure

LLCs offer great flexibility in ownership:

• Members can be individuals, partnerships, trusts, or corporations.
• There is no limit to the number of members.
• In contrast, S corporations have strict ownership rules and a 100-shareholder limit.

3. Versatile Management Options

LLCs can choose between two management structures:

• Member-Managed: Owners handle day-to-day operations directly.
• Manager-Managed: Designated managers (who may or may not be members) run the business, similar to a corporation’s board and officers.

4. Pass-Through Taxation

LLCs benefit from pass-through taxation, where business income is not taxed at the entity level. Instead:

• Profits and losses are reported on the members’ personal tax returns.
• This avoids the double taxation that affects C corporations (where both the corporation and shareholders pay taxes).

5. Enhanced Credibility

Forming an LLC may increase your business’s professional image. Clients, vendors, and lenders often view LLCs as more legitimate and trustworthy than sole proprietorships or partnerships.

6. Fewer Compliance Requirements

Compared to corporations, LLCs generally face:

• Less stringent state-imposed reporting and recordkeeping requirements
• Fewer formalities, such as mandatory board meetings or corporate minutes
• This streamlined compliance makes LLCs easier and more cost-effective to maintain.

Important Considerations Before Forming an LLC

While a Limited Liability Company (LLC) offers many advantages, it's important to understand potential drawbacks before choosing this structure. In many cases, the benefits outweigh the limitations, but thoughtful consideration is key to making the right choice for your business.

1. Higher Formation and Maintenance Costs

Compared to sole proprietorships and general partnerships, LLCs are typically more expensive to establish and maintain. Common costs include:

• Formation Fees: Required by most states when initially registering the LLC.
• Ongoing Fees: Many states charge annual report fees, franchise taxes, or other maintenance-related charges.

Tip: Check with your state’s Secretary of State office to understand the specific requirements and fees in your jurisdiction. 

2. Ongoing Compliance Requirements

LLCs are subject to certain federal and state compliance responsibilities. These may include:

• Maintaining a registered agent within the state.
• Filing an annual or biennial report with the state.

Federal reporting obligations, such as updating beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN) under anti-money laundering rules.

Failure to meet these obligations can result in penalties or administrative dissolution of the LLC.

3. Less Flexible Ownership Transfer

Transferring ownership in an LLC is generally more complex than in a corporation:

• Corporations issue shares that can typically be sold or transferred more freely (unless restricted by a shareholder agreement).
• LLCs usually require approval from all members to admit a new member or to change existing ownership percentages—unless the operating agreement provides otherwise.

This can make LLCs less appealing to investors or more difficult to scale through equity-based growth.

Documents Required for LLC Registration

To form an LLC, several key documents must be prepared and submitted to the state.

• Articles of Organization (Certificate of Formation or Certificate of Organization)
• Operating Agreement (internal document, not always required to be filed)
• Registered Agent Consent Form (in some states)
• Certificate of Publication (required in some states)
• Filing Fee Payment (varies by state)
• EIN (Employer Identification Number) application (filed with the IRS after formation)
• Business licenses and permits (depending on industry and location)

How to Start an LLC?

Forming a Limited Liability Company (LLC) is typically simpler than incorporating a business, but there are still key administrative steps and compliance requirements. While the specific process may vary by state, the following are the general steps to set up an LLC:

Step 1: Choose a State for Formation

You can legally form an LLC in any U.S. state, regardless of where you live or operate. However, most business owners form their LLC in the state where they plan to conduct business to avoid added costs and paperwork.

• Forming an LLC in a different state (e.g., Delaware or Nevada for tax or privacy benefits) may require you to register as a foreign LLC in your home state, adding extra fees and compliance obligations.
• LLC fees, taxes, and legal requirements vary widely by state, so it's important to review your state's specific rules before proceeding.

Unless there is a strategic benefit, forming your LLC in your home state is often the most cost-effective and straightforward approach.

Step 2: Choose a Name for Your LLC

Choosing the right name is a critical step in forming your LLC. Your business name must be "distinguishable on the record", meaning it cannot be the same as—or too similar to—an existing business name already registered with your state’s Secretary of State.

This is especially important for sole proprietors who may already be using a DBA (Doing Business As) or trade name. If you want to use that same name for your new LLC, you must first ensure it's available for use as a legal entity name.

Tips for Choosing and Securing Your LLC Name:

• Conduct a Name Availability Search: Use your state’s business name database (usually found on the Secretary of State’s website) to check whether your desired name is already in use.
• Name Reservation (Optional): If you're not yet ready to file your formation documents, many states allow you to reserve a business name for a limited time by paying a small fee. This ensures that your preferred name won't be taken by someone else while you complete your LLC setup.
• Trademark Search: To avoid potential legal issues, perform a trademark search (via the U.S. Patent and Trademark Office) to ensure the name isn't already trademarked by another business. This protects you from infringing on someone else’s intellectual property.

Remember: Most states also require that your LLC name include an approved designator, such as "Limited Liability Company," "LLC," or "L.L.C." at the end of the name. 

Selecting a unique and legally compliant name lays a strong foundation for your business’s brand and legal identity.

Step 3: Choose a Registered Agent for Your LLC

Every LLC is legally required to designate a registered agent in the state where the business is formed, or in any state where it is registered to conduct business (foreign qualification).

What is a Registered Agent?

A registered agent (also called an agent for service of process) is an individual or company authorised to receive important legal and government documents on behalf of the LLC. These may include:

Legal notices, such as summons and complaints, in the event of a lawsuit

• Annual report reminders or business status updates from the Secretary of State
• Tax documents from the state’s revenue or taxation department
• Court documents, such as subpoenas or wage garnishment orders

Who Can Be a Registered Agent?

• You (the LLC owner) can serve as your own registered agent.
• You can also appoint another individual or a professional registered agent service.

The agent must:

• Have a physical street address (not a P.O. Box) in the state where the LLC is registered.
• Be available during normal business hours to receive official documents.

Why Consider Using a Registered Agent Service?

While appointing yourself is allowed, many business owners prefer using a professional registered agent service for the following reasons:

• Compliance assurance: Professionals are always available during business hours to receive documents.
• Privacy: Keeps your personal or business address off public records.
• Peace of mind: Ensures that sensitive legal or tax documents are handled promptly and properly.
• Multistate presence: Allows businesses operating in multiple states to meet each state's registered agent requirements.· 

Choosing a reliable registered agent helps your LLC stay in good legal standing and avoid missing critical deadlines or legal notices.

Selecting the right registered agent is not just a legal formality—it's a safeguard for your business’s continuity and reputation. 

Step 4: Prepare Your LLC Operating Agreement

An Operating Agreement is a foundational document for any LLC. While not all states legally require one, nearly all strongly recommend it, and having a written Operating Agreement is considered a best practice.

An LLC Operating Agreement is a binding agreement between the members (owners) and the LLC itself. It outlines how the business will be governed and operated. Even in states that allow oral agreements, a written version is essential for legal clarity and internal structure.

Why You Need One—Even for a Single-Member LLC

• Establishes your LLC’s independent legal status, reinforcing limited liability protection and helping prevent piercing the corporate veil.
• Clarifies what should happen in specific scenarios, such as:
• If you're unable to manage the business
• If you want to sell the business or bring in a new owner
• Allows you to override default state laws that may not align with your preferences for how the LLC should operate.

Key Reasons for Multi-Member LLCs

For LLCs with more than one member, a well-crafted Operating Agreement is especially critical. It helps prevent misunderstandings and disputes by clearly defining roles and expectations. Important provisions often include:

• Ownership percentages and capital contributions
• Member roles and decision-making authority
• Voting rights and requirements
• Allocation of profits, losses, and distributions
• Rules for transferring or selling membership interests
• Procedures for adding new members
• Dissolution procedures

Tip: It’s highly recommended to have an attorney review your Operating Agreement to ensure it covers all legal and operational bases specific to your business and state laws.

Step 5: File Your LLC’s Articles of Organisation

To officially establish your LLC, you must file a formal document—commonly called the Articles of Organisation—with the appropriate state agency, typically the Secretary of State. This filing makes your LLC legally recognised and authorised to do business.

Articles of Organisation may go by different names depending on the state, such as:

• Certificate of Organisation
• Certificate of Formation

Regardless of the name, it serves the same purpose: to register your LLC with the state.

Key Information Typically Required

Each state has its own version of the form, but most ask for similar details, including:

• LLC name and principal business address
• Purpose of the business
• Registered agent’s name and physical address
• Management structure (member-managed or manager-managed)
• Effective start date (optional in some states)

Note: Most states provide a standard form on their official website, and it is usually filed online or by mail. Filing fees vary by state.

Signing and Submitting the Form

• The person submitting the Articles (often called the organiser) must sign the form.
• The organiser does not need to be a member or manager of the LLC.
• Some states also require the registered agent’s consent to serve in that role.

After Filing: Certificate of Formation

Once the Articles are approved, the state will issue an official certificate or confirmation. This document serves as proof of the LLC’s legal existence and is often required to:

• Open a business bank account
• Apply for an Employer Identification Number (EIN)
• Secure licenses and permits
• Special Note on Publication Requirements

In some states (such as New York or Arizona), you may be required to:

• Publish a notice of LLC formation in one or more local newspapers.
• File a Certificate of Publication with the state once the notice has run for the required period. Always check your state’s specific rules to ensure compliance with publication and filing requirements.
• Filing your Articles of Organisation is the crucial legal step that transforms your business from an idea into a formal entity recognised by the state.

Step 6: File a Beneficial Ownership Information (BOI) Report

As of 2024, most LLCs are required to file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

The BOI report is designed to increase transparency in business ownership and prevent financial crimes like money laundering and tax evasion. It provides details about the individuals who own or control the LLC. 

Who Must File?

• Most LLCs formed or registered in the U.S. must file a BOI report, unless they meet one of the limited exemptions (e.g., large operating companies, regulated entities).
• Newly formed LLCs must also report information about the company applicant—the person who files the formation documents or directs their filing. 

What Information Is Required?

For Each Beneficial Owner (anyone who owns 25% or more or has substantial control):

• Full legal name
• Date of birth
• Residential address
• A copy of an acceptable identification document (e.g., driver’s license or passport)

For the Company Applicant (for entities formed on or after January 1, 2024):

• Same personal details as above

Deadlines to File

• LLCs formed before January 1, 2024: Must file by January 1, 2025
• LLCs formed during 2024: Must file within 90 days of formation
• LLCs formed on or after January 1, 2025: Must file within 30 days of formation

Where and How to File?

• Reports are filed electronically through FinCEN’s website.
• You may also use trusted filing services, such as BizFilings’ BOI filing solution, to simplify the process.
• Failure to file the BOI report or submitting false information can result in civil and criminal penalties.

Step 7: Obtain an EIN, Sales Tax ID, and Required Licenses

Once your LLC is officially formed, the next step is to take care of key registrations that allow you to operate legally and meet tax obligations.

1. Apply for an Employer Identification Number (EIN)

An EIN, or Employer Identification Number, is issued by the IRS and serves as your LLC’s federal tax ID. It’s required for:

•  Opening a business bank account
•  Filing federal and state tax returns
•  Hiring employees
• Applying for business licenses and permits 

You can apply for an EIN online through the IRS website at no cost.

2. Register for State Sales Tax ID

If your LLC sells goods or taxable services, you’ll likely need to register for a sales tax identification number with your state’s Department of Revenue. This allows you to:

• Collect sales tax from customers
• File and remit sales tax to the state
• Rules vary by state, so check the requirements where your business operates.

3. Register with the State Labour Department (if applicable)

If your LLC has employees—or plans to—you may also need to register with your state’s labour or employment department. This is typically required for:

• State unemployment insurance (SUI)
• Workers’ compensation
• Payroll tax reporting

4. Obtain Business Licenses and Permits

Depending on your industry and location, your LLC may need various local, state, or federal licenses or permits to operate legally. These could include:

• General business licenses
• Health permits
• Professional or occupational licenses
• Zoning or home-based business permits

Check with your city, county, and state agencies to determine the specific requirements for your business type and location.

Ensuring that your LLC has the proper identification numbers and licenses is essential for staying compliant, avoiding fines, and running your business smoothly. 

Step 5: Open a Business Bank Account

Opening a dedicated business bank account is an essential step after forming your LLC. Keeping your business finances separate from your personal finances is not only a best practice but also crucial for maintaining your LLC’s limited liability protection.

Most banks will require:

• Your LLC’s formation date
• Type of business entity (LLC)
• Names and addresses of the owners (members)
• Your LLC’s Employer Identification Number (EIN)
• A copy of your Articles of Organisation and possibly your Operating Agreement

Opening a business bank account is a simple but important step that helps protect your personal assets, keeps your finances organised, and supports the professional growth of your LLC.

Step 9: Register to Do Business in Other States (If Needed)

If your LLC plans to operate outside the state where it was originally formed, you will need to register, or “foreign qualify,” in each additional state where you conduct business. In this context, “foreign” simply means any state other than your LLC’s formation state.

Foreign qualification usually involves:

• Filing an Application for Authority with the Secretary of State or the appropriate state agency
• Providing a Certificate of Good Standing (or similar proof) from your formation state
• Appointing and maintaining a registered agent in a foreign state

Why Choose IndiaFilings for Your U.S LLC Formation?

IndiaFilings offers a seamless and reliable way to register your LLC with expert guidance every step of the way. We simplify the complex paperwork, ensure compliance with state requirements, and handle all filing fees on your behalf. Our fast, secure service saves you time and reduces costly errors, so you can focus on growing your business. With competitive pricing, ongoing support, and access to valuable business resources, IndiaFilings is your trusted partner for a smooth LLC formation experience.

Ready to start your LLC hassle-free? Get started with IndiaFilings today and launch your business easily!

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RENU SURESH Expert

Updated on: June 3rd, 2025