How Limited Liability Company Formation Works

An llc formation, by design, is pretty straight forward.

Birds-eye View of Forming an LLC, or Limited Liability Company

To set up an llc, you file articles of llc formation or articles of organization with the state government agency in charge of corporations and limited liability companies.

This document is regularly a simple form that collects bits of information about the limited liability company (such as the name) and information about the people forming the limited liability company (their names and addresses, the contact person for the LLC, and so forth). Typically, the document can also be a type-written list of descriptive bits about the new llc (and attorneys and some document preparation services often use this "type-written" approach).

Different states have different names for the offices or agencies that process the llc formation articles, but the agency or office is usually fairly easy to locate through a web search. (Note: I do provide links to the locations of free forms in the do-it-yourself limited liability company formation kits.)

Typically, the agency or office is connected with the state's secretary of state office and is named something like "Corporation Division" or "Corporations Division." If you want to locate the web pages that describe how to form a New York llc, for example, you could Google on phrases like "New York secretary of state," "New York Corporation Division," or "New York Corporations Division."

States may also have additional limited liability company setup requirements beyond simply filing the llc formation articles. Some states, such Arizona and New York require that public notice be given in a newspaper. States such as New York require an operating agreement for the limited liability company.

Which raises an important point: It's really an excellent idea to have an operating agreement written up to describe how the llc's owners, or members, relate to each other and to the llc. Attorneys even recommend that single-member llcs should have an operating agreement because the operating agreement, if honored, improves the liability protection. This site sells sample llc operating agreements and both our do-it-yourself kits and our incorporation service include sample operating agreements.

After the state accepts your articles of llc formation and you complete any other state requirements--such as getting a business license for your new limited liability company (if that's necessary)--you're done with your llc formation.

Using a Do-it-yourself Kit for LLC Incorporation

If after reading the preceding paragraphs, you're thinking to yourself, "hey, this llc formation stuff doesn't seem too terribly complicated... maybe I could handle the process myself," you're right. The llc incorporation is not that complicated. And in many cases you can handle the llc paperwork yourself.

If you want a bit of help, note that you can also purchase one of the do-it-yourself limited liability company kits listed along the left edge of this page. Much of what I talk about in those kits is precisely what steps you take to fill in the forms. The kits, by the way, come with a money-back guarantee. Accordingly, if you buy a kit and say, "Wow, this is really not what I wanted," no problem. Send us an email at steve dot nelson @ stephenlnelson dot com or call 425-881-7350 and we'll refund your money.

Online and Expedited Incorporation Services

While I'm on the subject of llc formation and incorporation, let me make a quick tangential point. While llc formation and incorporation often takes several days and in some cases several weeks, some states provide methods for accelerating the process.

For example, some states let you file your LLC articles online. And many states let you fax the llc formation document to the appropriate state office.

You usually pay an extra fee if you fax the llc formation document. But by paying the extra fee, you expedite or accelerate the processing of your llc formation paperwork. (Some states charge you large fees--such as $1000--to immediately process your llc formation paperwork.)

Using an Online Incorporation Service

Not every small business owner has the energy or inclination for a do-it-yourself project like llc formation or incorporation. And for those people, online incorporation services sometimes provide a good option. As a generalization, an online document preparation service (which is really what these businesses are) prepares the LLC formation documents after you provide the name you want to use, a brief description of the LLC's planned activities, and contact information for the person or people forming the LLC. Fees, once you tally all the add-on charges, typically run $300 to $400 before the state fee (which can add another $100 to $200 in many locations).

If you start shopping for online incorporation services, you should note a couple of things: First, while you can find people who quote very low prices for providing you this service, the low teaser prices often don't include all the documents you need and give you very slow turnaround. When you make an apples-to-apples comparison of services, you will usually find full-meal-deal services cost several hundred dollars.

A second quick point: Some of the online services appear to make money not by preparing your incorporation documents... but rather by selling you recurring registered agent services. I don't think you need someone to be your registered agent. This is "non-job" and not something you need to pay $100 to $200 a year for in most cases.