What is an LLC (Limited Liability Company)?

What is an LLC (Limited Liability Company)?

What is an LLC (Limited Liability Company)?

You may have heard the term “LLC” being tossed around a lot. We love to use this term here at Incfile — it’s actually what our platform focuses on. But we understand that to most people, hearing this term might be like listening to a foreign language if you don’t have a business degree or aren’t an expert in this area.

Or perhaps you do have a general idea of what an LLC is, but you’re looking to dive deeper and really understand. Here, we’ll dive into what an LLC is, how you can form an LLC, and provide a comprehensive resource guide for you to read through. By the end of this article, you will be an LLC expert!

What Is an LLC?

So first things first: What is an LLC, and what does LLC stand for? Well, “LLC” stands for “Limited Liability Company.” A Limited Liability Company is a business entity type that is separate and distinct from a person, like a corporation. In fact, an LLC is often compared to a hybrid between a corporation and a sole proprietorship, because it allows your personal assets to remain separate from your business assets. Translation? Legally and financially, your risk is limited to the amount that is invested in the LLC — and your personal assets beyond that are protected.

The LLC has become a popular business operation structure for small business owners, startups, freelancers, and entrepreneurs alike. It allows more flexibility in operational structure than a corporation while providing the option of pass-through taxation (where you don’t have to file completely separate taxes for the business).

How to Form an LLC

Each state has different LLC rules and requirements, but there are typically seven main steps to forming an LLC, which include:

  1. Select a state and business address: Simply select the state in which you are going to form the company and conduct your business. Check your individual state filing times and state filing fees, since every state has different rules and requirements.
  2. Name your LLC: Pick a name for your business. Search your secretary of state’s business directory to ensure your company’s name is original. Your LLC cannot have the same name as another LLC in the state where you are filing.
  3. Select a Registered Agent: A Registered Agent is the person responsible for receiving all legal documents for your LLC. You will need to put their name and address on file, which usually becomes part of the public record. Your Registered Agent can be you, a business partner, a friend, etc. — or you can use a Registered Agent service like the one Incfile provides.
  4. Decide how to file — do it yourself or hire an expert: You can opt to file online with a trusted filing website (like Incfile) or hire a company formation expert. Online filing websites tend to be cheaper than hiring a dedicated business expert, and either option might be more accurate and efficient than doing all the paperwork yourself.
  5. Obtain and file the Articles of Organization: You need to obtain a copy of your state’s LLC Articles of Organization form, which you can get from your state’s secretary of state office. Filing this completed document legally creates your business; if you use Incfile’s service, we will do this on your behalf.
  6. Create an Operating Agreement: Adopting an Operating Agreement can protect members from personal liability in connection with the LLC. These documents are usually filed with the state, but they are extremely useful to have in your personal records in case an issue arises.
  7. Get a federal Employer Identification Number for your LLC: To truly create your LLC as a separate legal entity from yourself, get a Federal Employer Identification Number (FEIN or EIN). You obtain an EIN by filling out Form SS-4 – Application for Employer Identification Number online. Most filing services can also help you do this (we can).

Your Comprehensive LLC Resource Guide

Want to learn even more about LLCs? Here is a comprehensive list of nearly every article we’ve written about this topic, which includes some more specific information about certain circumstances your LLC may encounter:

With Incfile, LLC formation and management is simple. You can start your business today for as little as $0 plus state fees. Once you choose your package, there are no extra hidden fees. Have additional questions about forming an LLC or about LLCs in general? Let us know; our team will be happy to help.