How to Create an LLC in 5 Steps

Written by Coursera • Updated on

Create an LLC by determining your name, appointing a registered agent, and filling out the correct forms.

[Featured image] Two partners with an LLC stand in their shared office space.

You can create a Limited Liability Company (LLC) in many states by deciding on a name, appointing a registered agent, and filing key paperwork like an article of organization and an operating agreement. Specific steps around creating LLCs may vary depending on your state’s laws.

What is an LLC?

An LLC, which stands for limited liability company, is a legal business entity that is designed to shield owners from personal losses. LLCs can be formed to run almost any type of business and can be owned by one or multiple people. They are generally considered to be more complex than sole proprietorships, and less complex than corporations.

Placeholder

Learn more about LLCs from the University of Maryland:

video-placeholder
Loading...
Get the details on the legal implications of building an LLC.

Why create an LLC?

There are several benefits to forming an LLC, including protecting your personal assets, gaining tax benefits, and increasing credibility in your business. Let’s take a closer look:

  • Protect business owners’ personal assets from the business’s debts or liabilities: One of the primary benefits of forming an LLC is keeping your personal assets separate from the business’s. This means creditors won’t be able to collect on your personal assets.

  • Tax benefits: When your business is an LLC, the business’s profits go directly to the owners without first being taxed at the federal level like they would if your business was a corporation. The owner would then pay taxes on the profits as part of their individual income tax. Keep in mind that taxation laws for LLCs differ at the state level.

  • Simplicity: Compared to corporations, LLCs typically face less paperwork and fewer organizational hoops to jump through. For example, a corporation must elect corporate officers, establish classes of shares, and form a board of directors that must meet at regular intervals to discuss business strategy. An LLC would not be required to do so.

How to Create an LLC

The exact steps to forming an LLC will vary depending on your state’s requirements. But generally, setting up your LLC will look like the following:

1. Decide on a name. 

Generally, the first thing you’ll need to do is select a name that hasn’t already been registered by another LLC in your state. You can do this by finding your state’s business search database, which is commonly found on your state’s Secretary of State’s website. (For example, here’s Georgia’s.)

Certain states might have specifications—for example, California LLCs must end with “LLC” in the title (or a similar abbreviation like “Ltd”). It’s a good idea to look up your state’s requirements as you decide on a name.

If you want to make sure the name you want is still available as you file your application, you may be able to reserve your name for a few months for a fee. 

Read more: How to Come Up With a Business Name

2. Appoint a registered agent.

Many states, including Texas, California, and Florida, require you to appoint a registered agent for your LLC. A registered agent can be a person or a business entity that accepts tax or legal documents on behalf of the business. You’ll need basic information like the name and address of the registered agent.

In many states, you can appoint yourself as the registered agent. However, if your business is large, hiring a third party might help deal with complicated paperwork. In some states, such as  New York, the Secretary of State acts as the default registered agent, but you may still choose to appoint your own.

3. File an article of organization.

Regardless of which state you’re in, you’ll need to file an article of organization in order to formally establish your LLC. This is a document that submits essential information about your LLC. You can typically find these on the website of your state’s Secretary of State. You’ll also have to pay a filing fee at this point, which typically falls between $50 and $150. 

Have basic information like your LLC’s name and address and your registered agent’s name and address ready to go.

You can generally submit your form online or through the mail.

4. File an operating agreement.

Though not required by all states, filing an operating agreement can help to determine your organization’s structure and be especially beneficial to LLCs with multiple owners. Operating agreements spell out how the organization will operate. Each owner or member of the LLC must sign the operating agreement.

Several online resources, like RocketLawyer, provide free templates for operating agreements that can get the process started for you. 

5. Tackle other related tasks.

Once you file important documents, like your article of organization and operating agreement, you’ll be eligible to complete other business-related tasks. These can include: 

  • Getting an EIN (employee identification number)

  • Obtaining a business license

  • Opening an LLC bank account

  • Getting business loans for LLCs

Getting started on your LLC

An LLC can protect you and your assets from personal liability, with the added bonus of having less paperwork than a corporation. Take the time to do your research to make sure an LLC is right for your type of business and ensure you’re set up for long-term success. 

Want to learn more about starting a business?

Check out classes on Coursera like the How to Start Your Own Business Specialization from Michigan State University, or learn about Entrepreneurship from the Wharton School of the University of Pennsylvania.

Placeholder
Placeholder

specialization

How to Start Your Own Business

How to Start A Business. In this course you will actually start a business and demystify the business creation process.

4.6

(456 ratings)

27,550 already enrolled

BEGINNER level

Average time: 8 month(s)

Learn at your own pace

Skills you'll build:

Leadership, Lean Startup, Plan, Entrepreneurship

Related articles

Written by Coursera • Updated on

This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals.

Learn without limits