How to Start an LLC for $0 (2023 Guide)

Are you interested in starting an LLC for $0 in 2023? You’ve come to the right place! In this article, we will guide you through the process of establishing an LLC in any US state, providing you with all the essential information and steps to get started.

Limited Liability Companies (LLCs) are easy to create and offer numerous benefits for business owners. By following our comprehensive, step-by-step guide, you’ll be well on your way to setting up your LLC for $0. To ensure you don’t miss any important points, we recommend reading this article word by word.

To cater to your specific state requirements, simply select your state from the list provided below, and you’ll find detailed information on state fees and the steps to start an LLC in that particular state. While our guide covers the DIY approach to forming an LLC, we also understand that some individuals may prefer the convenience and expertise of professional assistance. With this in mind, we provide information on reliable paid LLC formation services for those who would like additional support. Regardless of your choice, our article will equip you with the knowledge and resources needed for successful business ownership. So, dive into our step-by-step guide on how to start an LLC for $0 in 2023 🙂

How to Form an LLC

Before you start planning to set up an LLC for $0, you must know even when there is no additional fee to form your LLC, there can be State fees for formation, annual reports, and other mandatory taxes. Now, let’s know what an LLC is all about. LLC is a business structure that is a mix of both a sole proprietorship and a partnership. It comes with a bunch of advantages. There are a few more things you must know,

• For an LLC, members’ personal assets are not affected by business debts. However, in some cases, if the LLC is sued for business debts, courts might pierce the corporate veil and use the owner’s personal assets to meet their corporate liabilities.
• You can choose a management type in your LLC. It can be member-managed or manager-managed.
• LLCs have pass-through taxation, which means LLCs do not have to pay any corporate income taxes. They only have to pay personal income taxes based on the income of each member.
• Compared to other business structures, LLCs are cheaper to form. Some states have tax deductions on the LLC filing fee (paid to the state government). Hence, it is much cheaper to form an LLC than other business structures.
• You can eliminate all the hassles of setting up your LLC if you select a professional LLC formation service. They will make things easier and better for you. (Recommended)

This is pretty much the basics of an LLC. You can read our guide on the Limited Liability Company to learn more about this type of business structure. As we move forward, here is the step-by-step guide to forming an LLC. Read the basic steps carefully to understand the process.

STEP 1: Select a State

The very first step to starting your LLC is to choose the state you want to start your business in. Ideally, your LLC should be located in the state where you live or where you plan to do business. Different state has different rules and regulations when it comes to forming an LLC. It is necessary to know about the fees, costs, taxation, and other policies in the state before you establish your business. If you hire a professional LLC formation service, you will get all the assistance at once without any delay.

Following is the list of states where you can form your LLC. Select the state you want to establish your LLC and get insights into the regulations, fee structure, taxation, and other information of that state. If you plan to operate your business in different states, you will have to register it as a foreign LLC in that particular state.

STEP 2: Name Your LLC

In our guide, the next step is to name it. However, before you name your business/LLC, you must know whether the name is available for use or not. You should perform an LLC name search and confirm the availability of your desired name before you start your LLC. One has to visit the Secretary of State portal (link shared in state LLC formation pages) to search and register the name of your LLC. Meanwhile, here are the general LLC naming guidelines,

• The company name should include “Limited Liability Company” or abbreviations like LLC or L.L.C.
• The company name should not include words that might confuse your company name with any government agency (i.e., FBI, State Department, Treasury, etc.).
• Words like Bank, Attorney, University, College, and some others are restricted. They may require additional paperwork on top of a licensed individual like a doctor or lawyer as part of the company.

These are some of the most important points to be noted while naming your LLC. It is recommended to go through our complete guide on LLC name guidelines before you name your LLC. Every state has a minimum business name reservation fee. This fee is mandatory to pay when you reserve your LLC name.

LLC name search, check if the name is available, and finally reserve it for the future; all these steps require no money (other than name reservation fees) if you are setting up your LLC on your own. You can do these steps for free. On the other side, if you hire a professional, the name search service comes for free with their LLC formation package. The only difference is, hiring a professional will help you speed up the process.

When it comes to Name Search, ZenBusiness helps you to know if your chosen name is available or not. If it is not available, then you will be notified immediately. So, it will be easier to check name availability by clicking a few times with ZenBusiness.

Reserve Your Business Name

Name reservation is recommended if you’re not registering your LLC immediately. LLC names can be reserved for up to 3 months, depending on the state rules. Within this time, you can register your LLC under the reserved name. If you fail to do so, then the name might be available to use by other LLCs. A reservation fee is required to pay along with the name reservation form submission. In most states, it is not mandatory to reserve an LLC name if you register your LLC right away.

Doing Business As (DBA) or Trade Name

“Doing Business As (DBA)” or Trade Name, or Fictitious Name, is a sort of assumed LLC name. DBA’s name is different from your legal name. It is used as a trading name under which you can conduct your business. Instead of reserving your LLC name beforehand, you can file a DBA as well. You can get the DBA filing form from the Secretary of State’s online portal. Depending on the state, the filing fee varies. DBA filing would also be helpful for you if you change your LLC name in the future. You can read our guide on how to file a DBA to know more about this.

STEP 3: Choose a Registered Agent

A registered agent (known as an agent for service of process, statutory agent, or resident agent) is a person or an organization who receives legal documents on your company’s behalf. The official documents would include official correspondences like state filing notices and legal summons. Anyone aged above 18 years and has the right to conduct business in the state can be a registered agent. This person has to have a physical street address in the state. You can be your LLC’s registered agent as well if you fulfill the eligibility requirements.

However, it is always recommended to hire a professional registered agent service. As your own registered agent, you will have to share your personal address for all legal and public communication. This may harm your privacy, especially if you’re conducting your business from home. Hence, it is better to hire a professional service to take care of all your legal and state-related papers and privacy. You can use their address for official activities. We reviewed some of the best LLC services here, and all of them provide registered agent service as an add-on with their LLC setup packages.

Note that availing services of professional registered agents would be your best option since you will be sure that whoever is handling your legal affairs knows their stuff well. Besides, if you are only looking for registered agent service, not the entire LLC formation package, you can go for this standalone registered agent service.

STEP 4: File LLC Formation Documents

LLC formation documents are the most vital while forming an LLC. These documents are commonly called the Certificate of Formation. Depending on the state, the same document is called by different names, such as Articles of Organization or a Certificate of Organization.

You need to fill in the form (online or in PDF) and send it to the Secretary of State after paying the state fee. Depending on the state, the filing fee varies. The state filing fee starts from $40 (Kentucky filing fee) and can go up to $500 (Massachusetts filing fee). Read our guide on the cost of LLC to know how much you have to spend on forming an LLC in different states. You can file the Certificate of Formation via mail, online, fax, email, or by phone, depending on the state rules.

Even if you are setting up your LLC for free (DIY), you must pay this fee to the Secretary of State to register your business. But, if you buy a formation package from experienced service providers, you can get everything done without any complications. Another reason for hiring a professional is they can speed up your process.

STEP 5: Create an LLC Operating Agreement

The LLC operating agreement is not mandatory, but it is encouraged. This legal document outlines the organizational structure and roles of members in your LLC. The operating agreement is a formal agreement between the members of the LLC. Take note that you should have already decided if your LLC is member-managed or manager-managed.

Here are the six main sections of an operating agreement:

• Capital Contributions
• Dissolution
• Distributions
• Management and Voting
• Membership Changes
• Organization

An operating agreement is a document that most states do not require to file officially with the Secretary of State. However, this is one of the most important documents for an LLC. Hence, having an Operating Agreement is always recommended. You can draft your operating agreement on your own. You can also hire a professional. If you hire a good LLC formation service, they will take care of your operating agreement as well.

STEP 6: Get an EIN

The Employer Identification Number (EIN) is a 9-digit number issued by the IRS. This number is required to identify the type of business structure for general tax purposes. It’s like a Social Security number (SSN) for your LLC. The EIN is vital when you plan to hire employees or open a business bank account. It is also known as Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN).

To obtain the EIN, one has to fill up the form (online or by mail) and send it to IRS. For online filing, you need the EIN Assistant. If you do not have an SSN, still, you can get your EIN by filling up the form and submit to IRS before you proceed to apply for the EIN.

• Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
• Fax: (855) 641-6935 | Fee: Free

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Congratulation, you are now done with all the necessary steps to form your Limited Liability Company. If you do it yourself, it should take you a long time to understand and do all the steps properly.

However, if you use ZenBusiness, it should be way faster. You will always have a live chat option and phone support with experts for any help you need. Their worry-free service will make things easier for you.

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After Starting an LLC

After forming your LLC, there are still some things that you will need. The most important thing is to separate your business and personal assets. LLCs have limited liability protection that protects your personal assets from business liability. This is called a corporate veil. However, the corporate veil can be lifted or pierced by the court if the LLC is sued. In that case, the owners of the LLC become personally liable for their corporate debts. A few things like appointing a legit registered agent, having enough capital, and filing all the major documents with the state can save the LLCs from being pierced into the corporate veil.

Apart from those main steps, there are more things to do after starting an LLC for a business owner. You’ll have to deal with your assets and taxes depending on the management structure. Here are other important things to address when starting an LLC.

• Set Up Business Accounting: It is vital to have a business accountant who will help you take advantage of tax benefits. It will save you and your business tons of money in taxes annually.
• Get Licenses and Permits: You need to check if your business will require any business licenses or permits so that you can stay compliant. Licensing requirements would vary per state and county or city laws.
• Separate Personal Assets From Business: Your LLC offers limited liability protection. It is vital to use dedicated business banking and credit accounts to avoid mixing them with your personal accounts. Otherwise, your personal assets (your home, car, and other valuables) would be at risk if your LLC gets sued.
• Understand Your LLC’s Federal Tax Options: LLCs get taxed as pass-through entities. It means all of the business’s profit goes through the LLC member’s tax returns. The member pays self-employment taxes and income tax on their share of business income after tax. Meanwhile, LLCs can also be taxed as S corporations (S corps) or C corporations (C corps). The former allows LLC members to be taxed as employees. It reduces the tax burden in certain circumstances.
• Register Your LLC for State Taxes: There are several taxes that you might need depending on the nature and location of your business.
  • If you sell a physical product, you’ll register your company for sales & use tax.
  • If you have employees, then you need unemployment insurance tax and employee withholding tax.
  • You may also be required to file an annual report or biennial report.
• Get Business Insurance: Generally, businesses with employees must get workers’ compensation insurance. Meanwhile, general liability insurance is not a legal requirement, but it is highly recommended to protect your business assets from lawsuits.

LLC Formation Review

When and Why You Should Form an LLC

The right time to set up an LLC is when you want your business to grow, protect your assets and build strong customer relationships.

If you are considering starting a business, you may be wondering when and why you should form an LLC. An LLC, or limited liability company, is a business structure that combines the tax advantages of a partnership with the personal asset protection of a corporation. It is a popular choice for many small business owners, and for good reason.

An LLC offers personal asset protection, which means that if your business is sued or faces financial difficulties, your personal assets are not at risk. This is because an LLC is a separate legal entity and any debts or liabilities incurred by the business are not your responsibility. This is especially beneficial for entrepreneurs who want to limit their risk.

Additionally, an LLC allows you to take advantage of pass-through taxation. This means that instead of the business being taxed as an entity, the income is passed-through to the owners and is taxed on the individual level. This can offer significant tax savings for business owners.

Forming an LLC also gives you credibility. Customers and other businesses may be more likely to do business with you if they know you have taken the time to form a legitimate business entity. It also makes it easier to open business accounts and get funding from banks or investors.

When forming an LLC, there are a few things you should consider. First, you should carefully pick a name for your business. It must be distinguishable from other businesses and should not include certain words like Bank, Attorney, or University. You should also register with the state and obtain a federal employer identification number (EIN). It’s also a good idea to create an Operating Agreement that outlines the rules and regulations for the business.

Once you have taken the time to form an LLC, you should make sure you stay compliant with the state and federal regulations. This means filing taxes, keeping accurate financial records, and filing any necessary paperwork. It’s also important to maintain your LLC’s separate legal status by keeping personal and business assets separate.

In conclusion, forming an LLC is a great way to start a business and protect your personal assets. It offers pass-through taxation and credibility, and you must take the time to register with the state and follow the necessary regulations. If you are considering starting a business, forming an LLC is a great option.

F.A.Qs

In Conclusion

A limited liability company (LLC) takes about a week on average to form. If the business entity is filing it online, then it may take less than 24 hours. The above-mentioned simple steps will help you in your LLC filings with the state. You will get multiple filing options like by mail, online, email, or/and fax. Choose any available mode of filing, comply with regulatory requirements, and registration requirements to form your LLC in the selected state. For more information, leave a message below.