The process for how to start an LLC depends on your state of formation.

But in every case, you must know that a limited liability company does not exist until the processing for its formation has been fully completed and processed by the state agency responsible for forming LLCs.

The only way to know if one has been completed is when the state shows the existence of your LLC in its records. It is important that you not engage in any business until the LLC is formed as formation is a prerequisite to gaining the benefit of limited liability protection provided by the legal entity.

Now, how to start an LLC. Each state has its own set of rules and requirements which must go into a filing made to the state. First, there are name rules which govern what kind of name you can give your LLC. You can look these up in the laws or just call your state agency and have them check whether your desired name is acceptable.

Second, there is a registered agent requirement. Every LLC is required to have a registered agent appointed. Each state has its own set of registered agent rules. These can be found in the state’s LLC laws.

Third, there will be a set of disclosure requirements which vary from state to state. Some states require very little information while others have some onerous disclosures. For example, Texas requires that all members and their addresses be listed for member managed Texas LLC entities. These requirements are found in the organization provisions of the LLC laws.

Fourth, you need to determine processing times and the proper filing fee. Always, always, always understand the processing times for your filing. In states like California and Delaware, a normal filing will take more than 6 weeks! This is not acceptable for most people who want to start an LLC for a business.

The good news is that those states as well as most other states offer an expedited process for additional fees in which your LLC can be formed in a week or even a day if the proper fee is paid.

As step 4, determine what processing time you need and the fees to be paid. Also, make sure you find out exactly who you need to write the check out to. This can prevent your filing from being rejected and delayed.

Fifth, prepare and submit your filing. Once processed, your LLC has been formed and started.

At this point you have a shell LLC. So, you need to provide it with its own rules and create members and a management structure. This is typically done with a written LLC Operating Agreement.

Finally, you will want to obtain federal and state tax ID numbers for your new LLC.

Because there are so many variations and intricacies imposed by each state, the best approach is to hire a reputable LLC filing service to handle it for you.

The LLC Expert offers LLC formation services in some states (go to our Form an LLC page.

The LLC Expert also recommends one of the largest LLC formation providers- a company that handles this for many of the large corporate law firms and corporate legal departments in the country. CLICK HERE TO GET $15 OFF.

There is no one national body of LLC law.  The LLC (also known as a limited liability company) is a creature of state law.

Each state passes its own set of legal provisions that govern the formation, governance, operation and dissolution of this kind of legal entity.

Having said this, most states started with a standard set of LLC provisions which is called a uniform statute.  They then amended and added to it to make a state specific body of law that the legislature felt was proper.

Because of this, the procedures and other provisions that apply to an LLC vary by state.  Some are more onerous than others.  Some provide more privacy than others.  Some impose more fees than others.

As with any law, the differences are the result of what the government feels is important, providing trade offs between constituencies and political considerations.

While there are variations in formation and administrative procedural requirements, one thing common in most state LLC laws is that the law, with some limited exceptions, allows the members or managers of a ttp to define their own set of governance procedures, limitations and rules.

If you want to review the LLC laws in your state, you will likely find it by googling [your state] limited liability company act.  Some states have named their laws something different (like California where the LLC law is known as Beverly Killea Limited Liability Company Act) but this google search will work for most states.

Many people get confused about whether a limited liability company is required to have a limited life because back before 1997, the tax rules required that one have a limited life as part of a test for having a single layer of pass through taxation.

As a result, many of the LLC statutes passed provisions that required that an LLC have a life limited to a term of years.  For most of them, the members could always vote to renew the term but this was a necessary additional step.

However, once the IRS adopted the check the box regulations in 1997 which took away the complicated and hard to apply test they had imposed, there was no longer a need to limited the life of limited liability companies under state laws.

Most states have since amended their statutes to get rid of the limited life requirement.  However, if the members so desire, an LLC still has the option of limiting its life if it makes sense for that particular business.  An example might be a special purpose entity set up to accomplish a certain purpose that would be completed after so many years.

In summary, the LLC is very similar to a corporation in that it can have a perpetual life and does not have any limitations on how long or short of an existence it can have.

The answer to this question is always “YES.”  While the LLC laws of every state may not mandate one in order to have a valid LLC, a limited liability company without an operating agreement is like a country without any laws or regulations.

Without an LLC agreement, the entity may exist but it does not have a personality. There is not one place to show who owns it. . . who can manage it. . . and what it can and cannot do. So, from a practical perspective, an LLC cannot function without an LLC operating agreement.

In addition, it elevates its risk of being disregarded as a separate legal entity in the event of a lawsuit.  What this means is that if you are the owner, you are subjecting yourself to being personally liable for business debts, obligations and problems.  You run the risk of losing the liability protection that an LLC was meant to provide you.

This risk is called piercing the LLC veil and it is something a court of law can do if the LLC owners and managers act as if the legal entity does not exist.  This is another reason, every limited liability company should have a proper operating agreement.

In summary, an LLC operating agreement provides all the fundamental rules and regulations for an LLC business, it reduces the risk of uncertainty and misunderstandings between owners and managers of an LLC, and it buttresses the protection afforded by an LLC.

It is important that you adopt a proper and completed LLC operating agreement for your business.  If your business is complicated such as having more than one class of ownership, having professional investors or having members who are subject to conditions and obligations- you should seek the advice of a lawyer to help you prepare you final document.

On the other hand, if your LLC does not have complication, you can start off with a professional LLC Operating Agreement and use it as a starting point to customize it for your business.

If you are a single member, you can get a professional single member llc operating agreement.  A single member LLC does not require nearly as much procedure in its document, but it is even more important for it to adopt an LLC agreement as single member limited liability companies are subject to a higher risk of veil piercing.

One of the biggest benefits of running a business through a limited liability company is the automatic qualification of pass through taxation. Unlike an S corporation which requires that certain conditions be met and maintained in order to get pass through taxation, an LLC automatically provides this.

Why is this better than other tax options?

Well, it is not better in all cases. Some businesses are better off with corporate taxation and the ultimate decision depends on each case, but in most small business cases, pass through taxation wins out.

Here are some fundamental basic attributes:

1. Profits made by the business are passed through to the owners so the LLC itself does not pay taxes on profits. This avoids the double taxation of the corporate tax structure and often allows owners to keep more profits.

2. Losses are passed through. Generally, if a business generates losses in a year, those losses pass through to the owners and if the owners have other income, they can benefit from having the losses offset other income in the current year. There are some limitations so check with your accountant.

3. Contributions can generally be made by the members to the LLC at any time without tax consequences.

4. The LLC files an informational tax return but pays no income tax, instead items of gain, loss and other tax attributes are passed through to the members. With a single member LLC, there is no return at all and all tax reporting is done on the individual’s personal return.

5. Pass through taxation through an LLC also presents some opportunities for tax planning among members. This is an incredibly complex area and you should consult with your tax attorney or accountant, but one of the reasons the wealthy use LLCs so often is because of the tax flexibility offered.