How To Establish An LLC Yourself - ELIZABETHSTAPLETON.COM (2024)

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If you are working for yourself or running your own business, you may hear the term LLC thrown around. Generally, as people telling you your business should be an LLC. But what is an LLC and how complicated is it establish an LLC?

First, LLC stands for Limited Liability Company; I’ll explain more in a sec. Second, it’s easy to set up an LLC yourself, you don’t have to hire a lawyer, but you certainly could if it would make you feel better.

What is an LLC?

As I already mentioned, LLC stands for limited liability company. What that means is that if somebody goes after your business, like in a lawsuit, your personal assets are protected. You won’t be held personally accountable for the company’s debts or liabilities.

So why the limited part? Well, it can vary by state, but generally unlike a corporation, if a member of the LLC dies or files for bankruptcy the LLC has to be dissolved.

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Additionally, an LLC acts differently in that it allows for flow-through taxation. Meaning the money is only taxed once. The money/income flows through to the LLC owner or member, and they pay the usual income tax and other taxes that apply.

Unlike a corporation which is taxed on its revenues then pays you and you are also taxed, resulting in double taxation.

How to Establish an LLC

If you want to establish an LLC, then your state’s Secretary of State website is going to be your best friend. Though to be honest, not all secretary of state websites are created equal. It can sometimes be tough to locate, so I’ve linked to the various state’s websites below.

But before we get to that, let me walk you through the general steps to creating an LLC.

Make Sure Your Desired Business Name is Available

Once in the Corporations section, run a search on the name you want to use for your business. If it is already being used, you are almost guaranteed to have your LLC application turned down. Though there can be some exceptions.

Find Out If You Can Apply Online or If You Have to Do So by Mail

Most states allow you to submit the documents necessary to establish an LLC online. However, you will want to find out the correct process.

While reading up on the process, you will also likely learn what documents you will need to submit to establish your LLC.

It is typically an Articles of Organization or Certificate of Organization.

Complete Your Articles of Organization

Again depending on the state, these may be called Certificate of Organization or some other name.

The Certificate of Organization usually asks for:

the name of the company,
location,
name of the owner,
and name and contact information for an agent.

It may also require you to describe your business briefly. If you are struggling with what to write as a description, you can use the corporation’s search to find similar businesses and see what they wrote.

Submit Your Articles of Organization with the Required Fee

A fee is almost always required to register an LLC.

However, the cost of the fee varies greatly by state.

Some states it may be as low as $45, others can be as high as $500. This fee is typically recurring annually so make sure you set aside this amount during the year so you can renew your registration.

Wait

Depending on the state, how long you have to wait to find out if your registration has been accepted can vary, especially if you had to submit it via snail mail. Though I’ve seen same day responses for LLC registrations submitted online.

Why Do I Always Hear About Delaware?

One of the reasons big companies register in Delaware is because Delaware offers Series LLCs which I won’t get into today. I will say that if you are a new business owner, then unless you actually live in Delaware, there is no need to establish an LLC in Delaware.

If you do register in Delaware, you will likely still be required to register as a foreign LLC in your home state. Meaning you just have to pay more in registration fees each year.

That’s It

While you can certainly hire a lawyer, as you can see, you can establish an LLC in your state without too much difficulty. Just make sure to read up on your Secretary of State’s website.

State by State

Alabama | Secretary of State Corporations Website| Filing fee = $100

Alaska | Secretary of State Corporations Website| Filing fee = $250

Arizona | Secretary of State Corporations Website | Filing fee = $50

Arkansas | Secretary of State Corporations Website| Filing fee = $45

California | Secretary of State Corporations Website | Filing fee = $70

Colorado | Secretary of State Corporations Website| Filing fee = $50

Connecticut | Secretary of State Corporations Website| Filing fee = $120

Delaware | Secretary of State Corporations Website | Filing fee = $90

Florida | Secretary of State Corporations Website | Filing fee = $120

Georgia | Secretary of State Corporations Website| Filing fee = $100

Hawaii | Secretary of State Corporations Website | Filing fee = $50

Idaho | Secretary of State Corporations Website| Filing fee = $100

Illinois | Secretary of State Corporations Website | Filing fee = $400

Indiana | Secretary of State Corporations Website| Filing fee = $100

FAQs

How do you answer the purpose of a LLC? ›

Most states do not require you to be specific about the purpose of your LLC. Instead, a statement such as "The purpose of the Limited Liability Company is to engage in any lawful activity for which a Limited Liability Company may be organized in this state" is usually sufficient.

Is a DBA or LLC better? ›

Forming an LLC typically involves higher initial costs due to state filing fees and potential legal expenses. While DBAs don't provide personal liability protection like LLCs do, their lower costs can be attractive for those seeking a simple way to operate under an assumed name.

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How do LLC owners make money? ›

LLC members, who are considered owners of the business, can't be on the regular payroll like regular employees. Instead, they receive their income in two main ways: by getting a share of the company's profits (known as taking a "draw") or by receiving a guaranteed payment for the services they provide to the LLC.

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What is an example of a purpose statement for an LLC? ›

Here's an example of what a general LLC purpose statement might look like: “The purpose of this limited liability company is to engage in any lawful activity for which Limited Liability Companies may be organized in this state.”

What should I put for my business purpose? ›

Your business purpose is the reason you have formed your company, boiled down to a single sentence (or two). It can be industry-specific or general enough to include ancillary and future business activities. To understand the business purpose, it is important to distinguish it from your company's vision or mission.

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What are three things that LLCs are not required to do? ›

LLCs are not required to do three things: hold annual meetings, keep minutes, or file written resolutions. When it comes to operating flexibility, Limited Liability Companies (LLCs) enjoy certain advantages over other business structures.

Should I start an LLC for my side hustle? ›

An LLC Can Protect Your Personal Assets From Liability

Most importantly, all of those areas are considered to be separate from you personally. This means if another business or individual has an issue with your side hustle, then any action they take will be against the LLC and not you and your personal assets.

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Are LLCs bad for taxes? ›

Your LLC profits are taxed at your individual income tax rates—just like when your LLC is taxed like a sole proprietorship. No double taxation and you can qualify for the qualified business income deduction.

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Should I file as sole proprietor or LLC? ›

An LLC has distinct advantages in the areas of legal protection and liability. While there are filing fees for setting up an LLC, that cost can be well worth it when compared to the thousands of dollars you could be liable for as a sole proprietor. On the other hand, it costs no money to start a sole proprietorship.

Can someone use your DBA name? ›

A DBA registration does not offer trademark protection, which means that someone else can use your business name, even in the same city as your business. If you register an LLC, you can prohibit anyone in the state from using your business name.

Should I pay myself a salary from my LLC? ›

There's no need to pay yourself as an employee. If you're a part of a multi-member LLC, you can also pay yourself by taking a draw as long as your LLC is a partnership. If it's an S corporation or C corporation, you and other LLC members will have to be paid as employees.

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Can I transfer money from my LLC to my personal account? ›

Getting paid as a single-member LLC

This means you withdraw funds from your business for personal use. This is done by simply writing yourself a business check or (if your bank allows) transferring money from your business bank account to your personal account.

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Does an owner's draw count as income? ›

For many individuals, an owner's draw is classified as income and may be subject to federal, state, local, and self-employment taxes, so it's important to plan ahead before filing taxes.

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How can you define your business's purpose? ›

To define your purpose, consider your values, vision, and mission, and craft a purpose statement that communicates why your business exists, what it stands for, and what it aims to achieve. By having a clear purpose, you can inspire and motivate your stakeholders to achieve great things together.

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What is the business purpose statement? ›

Purpose statement: An organization's reason for being (beyond making a profit) and how the products/services benefit people. It answers the questions for your customers and employees: why do we exist and what would the world lose if we didn't exist? It has an external focus and remains constant over time.

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What is the primary purpose of a business? ›

The primary purpose of a business is to maximize profits for its owners or stakeholders while maintaining corporate social responsibility.

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Does LLC purpose matter? ›

Your LLC's business purpose statement is one of the most important decisions you'll make for your company, on par with your Articles of Organization and operating agreement.

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