What Is a Limited Liability Company?
A Limited Liability Company (LLC) is a business structure in the United States that protects its owners (called “members”) from being personally liable for company debts and obligations. It combines the flexibility of a sole proprietorship or partnership with the limited liability of a corporation.
How Is a Limited Liability Company Formed?
Here are the key steps to forming an LLC:
1. Choose Your State
LLCs are formed at the state level. You must decide where you want to register your LLC—usually the state where your business operates.
2. Pick a Unique Business Name
Your LLC name must be distinguishable and comply with your state’s naming rules. It must typically include “LLC” or “Limited Liability Company.”
3. Appoint a Registered Agent
A registered agent is required to receive legal documents and official notices on behalf of the LLC.
4. File Articles of Organization
This is the official document submitted to your state’s business filing agency (often the Secretary of State) to legally form the LLC.
5. Create an Operating Agreement
Though not always required, an LLC operating agreement outlines the ownership and management structure. It’s highly recommended for internal clarity.
6. Get an EIN (Employer Identification Number)
Apply for an EIN from the IRS to open a business bank account, hire employees, and file taxes.
7. Comply With State Requirements
Depending on your state, you may need to publish a notice in a local newspaper or file additional reports.
Conclusion
So, how is a limited liability company formed? It starts with choosing a state, registering your name, filing formation documents, and setting up your legal and financial framework.
Forming an LLC is a straightforward process—but getting it right the first time ensures long-term protection and credibility.
