What Is An LLC?
Learn what an LLC is, how it is structured, what to prepare before forming one, and the steps involved in building your business.
Form Your LLC! →What Is An LLC?
A Limited Liability Company, commonly known as an LLC, is a business structure that can provide its owners with limited liability protection while allowing flexibility in management and taxation.
LLCs can have one or multiple members and can allow different management structures.
Depending on the circumstances and tax classification, business profits and losses may pass through to the owners for federal income tax purposes.
LLCs generally involve fewer formalities than corporations, although the specific requirements vary by state.
An LLC can provide a flexible business structure for entrepreneurs, investors, professionals, and other business owners.
Your state determines the rules for forming and maintaining an LLC, so understanding the requirements where you form your business is important.
The Benefits Of An LLC
LLCs can provide several structural and administrative advantages depending on the business and its circumstances.
Limited Liability
An LLC can separate the business's obligations from the personal assets of its owners, subject to applicable law.
Flexible Management
LLCs may generally be organized as member-managed or manager-managed, depending on state law and the company's governing documents.
Pass-Through Taxation
Many LLCs receive pass-through tax treatment by default, although tax treatment depends on the LLC's classification and elections.
Ownership Structure
LLCs can have one or multiple owners, depending on the business structure.
Flexible Duration
LLC duration requirements vary by state, and many LLCs can continue until dissolved under applicable law.
Fewer Formalities
LLCs generally have fewer formalities than corporations, although ongoing requirements still apply.
Types Of LLCs
LLCs can be organized in different ways based on the number of owners, management structure, business purpose, and applicable state law. Click each item below to learn more.
Single-Member LLC
A single-member LLC has one owner, referred to as a member. It can provide a simple structure for an individual operating a business, subject to the applicable state requirements.
Multi-Member LLC
A multi-member LLC has two or more owners, or members. The members share ownership according to the company's governing documents.
Member-Managed LLC
In a member-managed LLC, the members participate in managing the company's business and day-to-day operations, subject to the operating agreement and applicable state law.
Manager-Managed LLC
In a manager-managed LLC, the members appoint one or more managers to handle the company's day-to-day operations and management responsibilities.
Professional LLC (PLLC)
Some states allow professional limited liability companies for certain licensed professionals, such as doctors, accountants, attorneys, or architects. State eligibility requirements apply.
Low-Profit LLC (L3C)
An L3C is a specialized LLC structure recognized in certain jurisdictions and designed for organizations with a socially beneficial purpose.
Series LLC
A series LLC structure can allow certain businesses to establish separate series within one LLC. Availability and legal treatment vary by state.
Foreign LLC
A foreign LLC is generally an LLC formed in one state that registers to conduct business in another state. Registration requirements vary by jurisdiction.
To Streamline Your Formation Process, Gather These Items First
Having the basic information ready can make the LLC formation process easier to navigate.
Before You Begin
- Name of Your LLC
- Physical or commercial business address
- Name and address of your Registered Agent
- NAICS Code
- Purpose of Your Business
- Business phone number
- Determine whether the LLC will be member-managed or manager-managed
- Names and addresses of members or managers
- Know your state's LLC filing cost
Have These Items Ready
- Business Name Availability: Make sure the name is available in the state where you plan to form.
- Physical Address: Have the required business address information available.
- Registered Agent: Know who will serve as your registered agent and where required notices will be received.
- Business Classification: Know the primary activity of your business so you can identify the appropriate NAICS code.
Registered Agent
What Is A Registered Agent?
A registered agent is a person or entity designated to receive legal documents, service of process, and certain official correspondence on behalf of an LLC.
Registered agent requirements vary by state, including requirements concerning the registered office and availability.
Why Is A Registered Agent Important?
The registered agent provides an official point of contact for receiving certain legal and government documents.
Understanding Your NAICS Code
NAICS stands for the North American Industry Classification System. NAICS codes are used to classify businesses according to their primary industry or economic activity.
What Is A NAICS Code?
A NAICS code is a classification code associated with a business's industry. Businesses may use NAICS information when interacting with government agencies, lenders, researchers, and other organizations.
When Might You Need A NAICS Code?
- Government contracts and bids
- Business and market research
- Industry reporting and surveys
- Business classification
Purpose Of Your Business
An LLC's purpose statement describes the reason the company is being established and the business activities it intends to conduct.
The exact requirements for an LLC purpose statement vary by state. Some states may accept a broad statement while others may require more specific information.
General Purpose Statement Example
"The purpose of the company is to operate and conduct all lawful business activities permitted under the laws of the state where the LLC is organized."
Business-Specific Purpose
A business may also describe the specific products or services it intends to provide. The appropriate wording depends on the business and the requirements of the state.
Member-Managed Or Manager-Managed?
One important organizational decision is determining who will have authority to manage the LLC.
Member-Managed LLC
In a member-managed LLC, the members participate in the management and operation of the company.
Manager-Managed LLC
In a manager-managed LLC, one or more managers are designated to handle the company's management and day-to-day operations.
Names And Addresses Of Members And Managers
Depending on the state and the type of LLC, you may need to provide names, addresses, and other information concerning the members or managers of the company. The exact information required varies by state.
Duration Of The LLC
Some states ask for the expected duration of an LLC. Many businesses choose a perpetual duration, while other businesses may specify an end date when permitted.
Know Your State's LLC Filing Fee
Each state establishes its own LLC formation fees. Costs can vary significantly by jurisdiction and may change over time.
Who Needs An LLC?
Whether an LLC is appropriate depends on the business owner's circumstances, goals, industry, and applicable law.
Entrepreneurs may consider an LLC when establishing a separate legal business structure.
Real estate investors sometimes use LLCs for ownership and organizational purposes, subject to legal and tax considerations.
Small and growing businesses may choose an LLC because of its flexible organizational structure.
Ready To Form Your LLC?
DIYLLCNow membership packages are designed to guide you through the LLC formation process step by step.
Our membership packages provide step-by-step instructional videos that guide you through the Secretary of State websites for all 50 states, helping you understand where to go and what to look for as you work through the formation process.
FAQs Of An LLC
How is an LLC taxed?
How do I form an LLC?
What is an operating agreement?
What is a registered agent?
Can an LLC have a single member?
Are there ongoing compliance requirements for an LLC?
Can an LLC be owned by non-U.S. residents?
How can an LLC be dissolved?
Can an LLC convert to a different business structure?
LLC's Annual Report
An LLC annual or periodic report is a state filing that may require information about the company, such as its name, address, registered agent information, and other required details.
Filing Requirement
Some states require LLCs to file annual or periodic reports. The frequency and requirements vary by state.
Information Required
Required information may include the LLC's name, address, registered agent information, and information concerning members or managers.
Filing Deadlines
States establish their own filing deadlines. Missing a deadline can result in fees, penalties, or other consequences depending on the state.
Filing Fees
Some states charge a fee for annual or periodic reports. The amount varies by jurisdiction.
Maintaining Good Standing
Keeping required filings and fees current can help an LLC maintain its status with the state.
Build Your LLC Step By Step
DIYLLCNow membership gives you educational resources and step-by-step videos designed to help you navigate the LLC formation process in your state.
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