Forming a limited liability company, or LLC, is a great option to start a new business or officially register your side project or freelance work. An LLC protects your personal assets from legal or financial issues in your business without complicating your taxes.
Forming an LLC isn't necessarily difficult or expensive, but does take some time, effort, and patience with state bureaucracies. You'll need to choose an official name, submit a business address, and find a registered agent. This article will walk you through all the steps to file an LLC in whichever state you plan to do business.
If you have limited time or want faster results, we’ve partnered with ZenBusiness to offer Squarespace customers the option to form an LLC and skip the paperwork. ZenBusiness can help you file for an LLC in minutes so you can focus on what’s really important: building your business.
Note: This guide is available as a resource to help you get started, but this guide is not legal or tax advice. This guide is specific to U.S. audiences.
How to start an LLC
The steps for starting an LLC vary slightly by state, but the general outline is the same everywhere.
1. Choose a state in which to form an LLC
In theory, you can form your business in any state you want. But the best choice is almost always going to be the state in which you currently live.
Certain states, including Delaware, Nevada, and Wyoming, provide low taxation and other advantages to attract LLCs. This can be tempting, but before you form an LLC out of state, make sure you’re willing to travel to open a bank account and hire your employees there. You’ll most likely also have to register a foreign LLC in your home state anyway, leading to paying fees in two states.
In most cases, the hassle and cost of running multiple LLCs will cancel out the benefits of an LLC-friendly jurisdiction.
2. Pick a name for your LLC
Choosing a business name is a creative and technical task. When naming your LLC, keep these factors in mind.
The name’s availability in your state
Some states have specific rules that govern what makes a name “distinguishable” from another in its business database. In other states, the laws are a little vague. Do a business name search to find out what’s available and confirm your LLC name will likely be approved.
Your state’s naming guidelines
Most states require your name to include a business designation indicating you’re an LLC. Often there are a few accepted abbreviations of the term “limited liability company,” such as “limited co.,” “L.L.C.,” “ltd.,” or “limited liability co.”
Website domain availability
Online marketing is critical to any business. So before you commit to your LLC name, make sure that a similar domain name is also available for your business website. You don’t have to make your website name the exact same as your LLC name, though it can be convenient. Just be sure to use the same LLC name on legal and financial documents.
If your original domain is taken when you try to register your domain, our free domain name generator can help with brainstorming additional names based on a description of your business. Once you've found a name you like, registering your domain through Squarespace is quick and secure.
3. Identify a registered agent
Your LLC needs a registered agent in the state it wants to incorporate in. A registered agent is a person or business that receives legal documents on your behalf if you’re sued, subpoenaed, or otherwise contacted by a court of law. They must keep regular office hours at a physical address in the state where your LLC is formed.
Registered agents must be available to receive legal documents at all times during business hours. This means that if you serve as your own registered agent, you can’t leave your office for any reason, even to grab a coffee or take a vacation. Hiring a third-party registered agent frees you from this responsibility, giving you the freedom to focus on running your business.
There are also privacy concerns with acting as your own registered agent. If you’re served with a lawsuit, would you want it to happen in front of your customers or during a business meeting? For these reasons, a professional registered agent service is a wise choice for your LLC. Costs vary, but a third-party agent typically costs around $300 per year.
4. File the articles of organization
The articles of organization are the official registration documents for your LLC that you file with your state government. That might sound complicated, but they’re rarely more than two pages long. Some states call this a certificate of formation. You can almost always file articles of organization online.
You’ll generally need the following information to fill out articles of organization.
- Business name: The state will check to see that your name is unique and meets its requirements.
Business name: The state will check to see that your name is unique and meets its requirements.
- Business address: Usually, you need a physical location for your business and not a P.O. Box.
Business address: Usually, you need a physical location for your business and not a P.O. Box.
- Name and address of your registered agent: This address can't be a P.O. Box either. It could be an individual member or employee of your LLC, but can't be the business itself.
Name and address of your registered agent: This address can't be a P.O. Box either. It could be an individual member or employee of your LLC, but can't be the business itself.
- Names and addresses of LLC members: Most states require LLCs to list all of their members in the articles of organization. A member of an LLC is essentially an owner. If you’re the only person involved in your business, you’re the only member.
Names and addresses of LLC members: Most states require LLCs to list all of their members in the articles of organization. A member of an LLC is essentially an owner. If you’re the only person involved in your business, you’re the only member.
- LLC’s purpose: A purpose statement should briefly describe the business activities your LLC will engage in. Keep it clear enough to communicate what your business does but not so specific that it limits your ability to expand in the future. For example: “To provide consulting services in the fields of marketing, management, and strategy.”
LLC’s purpose: A purpose statement should briefly describe the business activities your LLC will engage in. Keep it clear enough to communicate what your business does but not so specific that it limits your ability to expand in the future. For example: “To provide consulting services in the fields of marketing, management, and strategy.”
- Chosen management structure: If you choose to hire one or more managers to oversee the business for you, you may need to indicate it in your articles of organization and potentially name those managers.
Chosen management structure: If you choose to hire one or more managers to oversee the business for you, you may need to indicate it in your articles of organization and potentially name those managers.
- Name and address of the incorporator(s): Whoever is filling out the articles of organization needs to identify themselves, provide an address, and sign, saying they are legally authorized to start the business they’re forming.
Name and address of the incorporator(s): Whoever is filling out the articles of organization needs to identify themselves, provide an address, and sign, saying they are legally authorized to start the business they’re forming.
You can learn more and register your LLC through ZenBusiness.
5. Create an operating agreement
An LLC’s flexibility is one of its main advantages. Once formed, you decide how to run the business, so it’s wise to draft and sign an operating agreement to reduce the chances of confusion or disputes among members.
- For single-member LLCs: An operating agreement can shore up your limited liability by explicitly separating your business and personal affairs. It also shows potential customers and partners you’re serious about the details.
For single-member LLCs: An operating agreement can shore up your limited liability by explicitly separating your business and personal affairs. It also shows potential customers and partners you’re serious about the details.
- For multi-member LLCs: An operating agreement is even more important. It answers questions like: How will each LLC member be paid? How is ownership divided? Who is responsible for what? How will decisions be made?
For multi-member LLCs: An operating agreement is even more important. It answers questions like: How will each LLC member be paid? How is ownership divided? Who is responsible for what? How will decisions be made?
You don’t want these questions decided by verbal or handshake agreements. An operating agreement can help formalize rules and responsibilities to reduce risks in the future.
6. Obtain an employer identification number
As soon as your LLC is formed, it’s time to get your Employer Identification Number (EIN) from the IRS. An EIN is required for paying federal taxes and used in many critical business operations, including:
- Hiring employees (you’ll need to register for federal payroll taxes)
Hiring employees (you’ll need to register for federal payroll taxes)
- Securing business licenses and permits from state and federal agencies
Securing business licenses and permits from state and federal agencies
- Registering to pay state taxes
Registering to pay state taxes
- Banking as a business, including applying for loans and credit cards
Banking as a business, including applying for loans and credit cards
7. Open a business bank account
The point of an LLC is to separate your business and personal affairs. So you'll want to get a bank account for your LLC shortly after filing, whether that's with a traditional bank or a tool like Squarespace Balance.
A business account is more than a legal precaution. It helps for tracking expenses, which could lower your taxes, and generally makes your business finances simpler to manage.
To open a bank account for your LLC, you’ll probably need the following documents.
- Proof that your business exists: You can likely use your articles of organization or operating agreement. Requirements vary by bank and by state.
Proof that your business exists: You can likely use your articles of organization or operating agreement. Requirements vary by bank and by state.
- Proof of business address: A piece of mail or a lease agreement may be required.
Proof of business address: A piece of mail or a lease agreement may be required.
- Personal identification: A state ID or passport for you and anyone else authorized on the account should do. You may also have to open the account in person.
Personal identification: A state ID or passport for you and anyone else authorized on the account should do. You may also have to open the account in person.
- EIN: The Employer Identification Number will also be required.
EIN: The Employer Identification Number will also be required.
8. Keep your LLC in good standing
Most states require businesses to provide an annual report (some require it every two years) to keep state records up to date on your LLC’s basic information. If you fail to file your annual report, your business could be administratively dissolved.
Depending on the state, annual reports are usually due either by the end of the anniversary month of your incorporation or in the first four months of each year.
Check the website of your state’s tax office to confirm you’re paying the correct taxes and that you’ve acquired the licenses and permits you need to do business legally.
Benefits of a limited liability company
LLCs offer a uniquely powerful business structure. The biggest benefit lies in protecting your personal assets—your finances and property—from your business liabilities. But there are also tax and flexibility benefits to consider.
Limited liability
The best way to understand limited liability is to imagine that, by some misfortune, your business is involved in a lawsuit or ends up in serious debt. In this situation, how much money could you potentially owe?
Without limited liability, which sole proprietorships don’t have, everything you own could be vulnerable, including your house, your car, and your savings. But as a member of an LLC, assuming you’ve followed the law, the most you should be able to lose is your initial investment in the business.
Separating your personal assets from those of your LLC can dramatically reduce your financial risk. This is the main reason entrepreneurs choose to incorporate.
Flexible management
LLCs give you room to run your business the way that works best for you, without a required board of directors, annual shareholder meetings, or stock to issue. Almost anyone can be a member, including individuals, partnerships, corporations, other LLCs, and trusts. That includes non-U.S. residents, too.
Other business structures come with more built-in rules. C corporations require a board of directors and answer to shareholders. S corporations limit who's allowed to hold shares in the business at all. If you're still weighing your options, compare the different types of business structures to find the right fit for your situation.
Disadvantages of a limited liability company
An LLC is a winning solution for many small businesses, but it’s not everyone’s best choice. There are some potential restrictions to limited liability and tax impacts to keep in mind.
Limits of limited liability
Forming an LLC alone doesn’t guarantee limited liability. In the course of business, you may enter into contracts that require you to sign away these protections. And if you violate the law or aren’t careful to separate your personal and business affairs, your limited liability could be nullified in a legal or debt proceeding.
Self-employment taxes
LLCs don’t pay corporate tax, but your income from your business will be subject to self-employment tax. Self-employed individuals in the U.S. pay their full share of Medicare and social security taxes and must file quarterly estimated payments.
Some LLCs reduce this tax burden by filing for S corporation status instead. If this might apply to your business, talk to a tax professional to see whether it's the right move for you.
LLC ownership transferability
Once an LLC’s members are listed in its articles of organization, removing those owners or adding new ones can be an arduous process. Your operating agreement can include language to make this process easier if you anticipate the business changing hands in the future.
Should you use an LLC formation service?
You can do all the steps to form an LLC on your own, but many business owners find it’s not worth the time or headache when there are affordable digital tools available. Instead, a formation service can save you substantial time, money, and trouble.
Forming an LLC doesn't have to mean weeks of paperwork and second-guessing yourself. Through Squarespace's partnership with ZenBusiness, you can get your business officially registered quickly, accurately, and without the hassle. See LLC Formation by ZenBusiness for the latest details on packages and pricing.
All of your documents are stored securely and accessible online whenever you need them. Beyond the initial formation, ZenBusiness stays in your corner handling registered agent services, annual report filing, and ongoing compliance so your business stays in good standing long after the paperwork is done.
Existing Squarespace users can start an LLC with ZenBusiness today.
Frequently asked questions
How much does it cost to form an LLC?
State filing fees for an LLC generally range from about $35 to $500, with most totaling less than $300, depending on your state and business structure, according to SBA.gov.
What’s the difference between an LLC and a sole proprietorship?
Sole proprietorships have no legal separation between their single owner and that person’s personal assets. LLCs can have any number of members, and those members enjoy limited liability, which separates their personal affairs from those of the business.
What is a registered agent and do I need one?
A registered agent receives legal documents on behalf of your LLC and must be located in the state where you register. According to the , you'll need a registered agent before you file if your business is an LLC, corporation, partnership, or nonprofit corporation.
When should I start an LLC?
Form your LLC before you sign contracts, hire employees, or take on real financial risk, since liability protection only covers actions taken after your LLC exists. If your business carries little financial risk today, it's also fine to wait until you have steady income to form one.
Do I need a lawyer to start an LLC?
No, you don't need a lawyer to start an LLC. An attorney can help with complex formation questions, but many people file the paperwork themselves or use a formation service like ZenBusiness.
Can Squarespace help me form an LLC?
Yes, Squarespace has partnered with ZenBusiness so you can file your LLC without leaving your dashboard, for an additional fee.
What's the difference between an LLC and a corporation?
An LLC is owned by members, while a corporation is owned by shareholders who hold stock. LLCs are taxed as "pass-through" entities by default, while corporations pay corporate tax unless they elect S corporation status.
The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions, seek the counsel of a licensed professional. The ZenBusiness platform and all filing documentation are currently available in English only.
