What is an LLC? Definition + Guide (2024)
Posted: Mon Dec 23, 2024 9:17 am
A Limited Liability Company offers tax benefits and some personal liability protection; find out exactly what an LLC is.
What is an LLC?
On this page
What is an LLC?
How to form an LLC
How are SRLs taxed?
Advantages of an LLC
Disadvantages of an LLC
How do LLCs compare to other types of business entities?
Final thoughts
Frequently asked questions about what an LLC is
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Whether you are starting a new business or reorganizing an existing one, canada whatsapp numbers you may want to form a limited liability company (LLC), a common type of business entity in the United States.
For many small businesses , forming an LLC is a big step toward transforming a side hustle into a formal business. Even solopreneurs can benefit from changing their business structure from a sole proprietorship to an LLC.
State law governs the formation and operation of LLCs, so before you incorporate an online business in your state, you'll want to learn the details of how this structure works, as well as the advantages and disadvantages that come with it.
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Note : Some of the processes and sections in this article are based on laws and procedures relating to the United States, and are not directly applicable in the context of other countries.
What is an LLC?
An LLC is a business structure that establishes a company as a separate entity, providing liability protection for the business owner. This means that the owners cannot be held financially responsible for debts or judgments against the business as a result of legal action.
Additionally, LLC owners enjoy certain tax advantages compared to other business structures.
An LLC can be formed by one or more owners. Each owner is a “member.” If there is only one member, your business is considered a single-member LLC . If more than one person has a membership interest, you have a multi-member LLC.
How to form an LLC
The process for forming an LLC varies from state to state, but generally follows these six steps. Be sure to consult the guidance of the government agency that manages business entities in your state, such as the Secretary of State or the Department of Commerce.
1. Choose a name for your LLC
Your name must be unique in your state, so check an online business name database before choosing. The business name must also end with “LLC,” your business entity type. Once you choose a name for your LLC , no other business can use that exact name in your state.
2. Choose a registered agent
An LLC's registered agent is a person responsible for receiving official notices, including bills for annual fees or lawsuits. Your registered agent can be one of the members of the LLC, or a third party. Your state should have a list of private registered agents, if you prefer to hire one.
If you choose to use professional services, they typically offer more benefits, such as compliance monitoring and notifications to ensure your LLC remains in good standing.
Here are some registered agent services you can use:
Northwest Registered Agent
Rocket Lawyer
ZenBusiness
3. File your articles of incorporation with your state
Once you have a name and a registered agent, you'll need to file your articles of incorporation. Some states call this paperwork something else, such as a "certificate of incorporation." Forms should be available on your state's website.
Some considerations when submitting documentation:
Filing Fees: The filing fee for articles of incorporation varies by state and can range from $50 to several hundred dollars.
Online or paper filing: Depending on the state, you may have the option to file online or by mail. Review your state's guidelines and follow the instructions carefully.
Processing Time: Processing time can vary widely, depending on the state and time of year, from a few days to several weeks.
What is an LLC?
On this page
What is an LLC?
How to form an LLC
How are SRLs taxed?
Advantages of an LLC
Disadvantages of an LLC
How do LLCs compare to other types of business entities?
Final thoughts
Frequently asked questions about what an LLC is
Start your online business today.
For free.
Free trial
Whether you are starting a new business or reorganizing an existing one, canada whatsapp numbers you may want to form a limited liability company (LLC), a common type of business entity in the United States.
For many small businesses , forming an LLC is a big step toward transforming a side hustle into a formal business. Even solopreneurs can benefit from changing their business structure from a sole proprietorship to an LLC.
State law governs the formation and operation of LLCs, so before you incorporate an online business in your state, you'll want to learn the details of how this structure works, as well as the advantages and disadvantages that come with it.
Click here to start selling online right now with Shopify
Note : Some of the processes and sections in this article are based on laws and procedures relating to the United States, and are not directly applicable in the context of other countries.
What is an LLC?
An LLC is a business structure that establishes a company as a separate entity, providing liability protection for the business owner. This means that the owners cannot be held financially responsible for debts or judgments against the business as a result of legal action.
Additionally, LLC owners enjoy certain tax advantages compared to other business structures.
An LLC can be formed by one or more owners. Each owner is a “member.” If there is only one member, your business is considered a single-member LLC . If more than one person has a membership interest, you have a multi-member LLC.
How to form an LLC
The process for forming an LLC varies from state to state, but generally follows these six steps. Be sure to consult the guidance of the government agency that manages business entities in your state, such as the Secretary of State or the Department of Commerce.
1. Choose a name for your LLC
Your name must be unique in your state, so check an online business name database before choosing. The business name must also end with “LLC,” your business entity type. Once you choose a name for your LLC , no other business can use that exact name in your state.
2. Choose a registered agent
An LLC's registered agent is a person responsible for receiving official notices, including bills for annual fees or lawsuits. Your registered agent can be one of the members of the LLC, or a third party. Your state should have a list of private registered agents, if you prefer to hire one.
If you choose to use professional services, they typically offer more benefits, such as compliance monitoring and notifications to ensure your LLC remains in good standing.
Here are some registered agent services you can use:
Northwest Registered Agent
Rocket Lawyer
ZenBusiness
3. File your articles of incorporation with your state
Once you have a name and a registered agent, you'll need to file your articles of incorporation. Some states call this paperwork something else, such as a "certificate of incorporation." Forms should be available on your state's website.
Some considerations when submitting documentation:
Filing Fees: The filing fee for articles of incorporation varies by state and can range from $50 to several hundred dollars.
Online or paper filing: Depending on the state, you may have the option to file online or by mail. Review your state's guidelines and follow the instructions carefully.
Processing Time: Processing time can vary widely, depending on the state and time of year, from a few days to several weeks.