Creating an Limited Liability Company (US)

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Many business owners may feel daunted by the prospect of creating a Limited Liability Company (LLC). It’s a complex process, and one that requires thorough research. Fortunately, the Genie AI team is here to help. We provide free LLC templates to ensure that anyone can draft and customize high-quality legal documents without paying a lawyer.

An LLC is an attractive option for entrepreneurs and small business owners, as it provides limited liability protection: meaning that the owners are not personally liable for any debts or obligations of the business. This protects personal assets from any liabilities that might arise in the future, offering peace of mind to those with smaller budgets or who are hoping to attract investors. Moreover, there’s great flexibility when it comes to managing and owning an LLC: members can have differing roles and responsibilities based on agreed terms, while profits from the business are not subject to double taxation.

It’s easy enough to set up an LLC in the US with our comprehensive guidance and template library - just read on below! Although not legally required by most states, we also recommend forming an Operating Agreement between all members of your LLC which outlines how your company will run - such as voting rights, policymaking procedures etc. Without needing a Genie AI account you can access our template library today for free! Ultimately our guides allow anyone looking to form their own Limited Liability Company peace-of-mind in knowing they won’t be held personally liable for any liabilities their business may incur - while providing them with all the necessary information on how they should go about setting up said company correctly.

Definitions (feel free to skip)

Limited Liability Protection: A form of legal protection that prevents an individual from being held personally liable for the debts or obligations of a business.
Registered Agent: A designated individual or business entity appointed to receive service of process notices in the event of a lawsuit against the LLC.
Articles of Organization: A document filed with the state in which the LLC will be located that officially creates the LLC.
Employer Identification Number (EIN): A unique number used to identify a business for tax purposes.
Operating Agreement: A document that outlines the roles, responsibilities, rights, and obligations of LLC members, as well as how the business will be managed and decisions made.
Tax Identification Number (TIN): A unique number used to identify an LLC for tax purposes.
Fiduciary Duty of Care: The obligation of LLC members to act in a reasonable and prudent manner when making decisions for the LLC.
Duty of Loyalty: The obligation of LLC members to act in the best interest of the LLC and not take advantage of their position for personal gain.

Contents

• The Benefits of Forming an LLC
• Requirements for Setting Up an LLC
• Choosing a Business Name
• Appointing a Registered Agent
• Drafting the Articles of Organization
• Applying for an Employer Identification Number (EIN)
• Filing the Necessary Paperwork with the State
• Creating an Operating Agreement
• Complying with Ongoing State Requirements
• Understanding Tax Implications and Obligations
• Obtaining a Tax Identification Number
• Understanding the Difference Between Federal and State Taxes
• Calculating and Paying Estimated Taxes
• Creating a Separate Bank Account
• Choosing the Right Bank
• Opening the Business Bank Account
• Protecting Your LLC with Insurance
• Understanding Your Insurance Needs
• Shopping for Insurance
• Understanding Key Insurance Terms
• Understanding Your Fiduciary Duties and Responsibilities
• Avoiding Self-Dealing
• Meeting Your Fiduciary Duty of Care
• Understanding Your Duty of Loyalty
• Maintaining Adequate Business Records
• Updating Your LLC Information as Needed

Get started

The Benefits of Forming an LLC

• Understand the advantages of forming an LLC, such as protection from personal liability, flexibility in management, and tax advantages
• Research specific regulations in your state that apply to starting an LLC
• Decide if an LLC is the right business structure for your needs
• Once you understand the benefits of an LLC and have decided it is the right business structure, you can move on to the next step of setting up your LLC.

Requirements for Setting Up an LLC

• Determine the business structure of your LLC and the state you will register in
• Select a unique business name that meets the requirements of the state you are registering in
• File your Articles of Organization with the state
• Create an Operating Agreement for your LLC
• Obtain an Employer Identification Number (EIN) from the IRS
• Obtain the necessary licenses and permits for your business

Once you have taken care of the above steps, you can move on to the next step which is Choosing a Business Name.

Choosing a Business Name

• Research any potential business names to make sure it is available and not already taken
• Check with the US Patent and Trademark Office to confirm the name is not infringing on any existing trademarks
• Consider if you would like to include a designator (e.g. LLC, Corp., etc.) with the business name
• Once you have found a name you are satisfied with, you can check it off your list and move on to the next step.

Appointing a Registered Agent

• Research and select a registered agent in your state – this can be a person or a business entity
• The registered agent must be available at a physical address in the state to accept legal documents
• Fill out the required documents to formally appoint the registered agent
• File the documents with your state’s Secretary of State
• Once the documents are accepted and approved, you’ll know that you’ve successfully appointed a registered agent and can move on to the next step.

Drafting the Articles of Organization

• Research and review the LLC laws of your state
• Draft the Articles of Organization, which includes the following information:
• Business name
• Name and address of the Registered Agent
• Name and address of the LLC organizers
• The purpose of the LLC
• The duration of your LLC’s existence
• The number of members of the LLC
• Sign the Articles of Organization in front of a notary public
• File the Articles of Organization with the secretary of state
• Pay the filing fee

You will know you can check this off the list and move on to the next step when you have completed the above steps and have received a confirmation from the secretary of state.

Applying for an Employer Identification Number (EIN)

• Visit the IRS website to apply for an EIN.
• Fill out the application with the required information.
• Submit the application.
• Check your email for a confirmation that the EIN has been issued.
• Record the EIN for future reference.
• Once you have received the EIN, you can move on to filing the necessary paperwork with the state.

Filing the Necessary Paperwork with the State

• Obtain the Articles of Organization form and any other necessary documents from the Secretary of State in the state where you plan to establish the LLC
• Complete the forms and submit them along with the required filing fee to the Secretary of State
• Wait for the Secretary of State to approve the filing and return the completed forms
• You will know when you can check this off your list when you receive the completed forms from the Secretary of State.

Creating an Operating Agreement

• Designate a registered agent who will receive legal papers on behalf of the LLC
• Write an operating agreement that outlines the ownership, management, and distribution of profits
• Have each member of the LLC sign the agreement
• File the operating agreement with the Secretary of State or other designated state office
• Ensure that the operating agreement is in compliance with state laws
• You can check this off your list once the operating agreement is filed with the Secretary of State or other designated state office.

Complying with Ongoing State Requirements

• Familiarize yourself with the ongoing state requirements of forming an LLC.
• Obtain an employer identification number (EIN) from the IRS and use it to open a business bank account.
• Make sure you’re in compliance with local business registration, licensing, and zoning requirements.
• File for an LLC with the Secretary of State and pay the required fees.
• File annual reports, maintain a registered agent, and pay any fees associated with those tasks.
• You will know it is completed when you have fulfilled all the requirements and the company is legally registered with the state.

Understanding Tax Implications and Obligations

• Determine what type of business entity you are creating (sole proprietorship, LLC, S-Corp, etc.)
• Research the types of taxes you need to pay based on the type of entity you choose
• Consider hiring an accountant or tax specialist to help you understand the tax implications of your business
• Research any state or local taxes that may be applicable
• Understand the filing and payment requirements of the IRS and other applicable tax authorities
• Understand the filing requirements for the state

When you can check this off your list: When you have a good understanding of the types of taxes you will have to pay, the filing and payment requirements of the IRS, and any other applicable tax authorities.

Obtaining a Tax Identification Number

• Visit the IRS website and select “Apply For An Employer Identification Number”
• Enter the required information, such as business name, address, and contact information
• Submit the form and wait for the IRS to process your application
• Once your application is approved, the IRS will send you a letter containing your new Tax Identification Number
• You can then check this step off your list and move on to the next step, Understanding the Difference Between Federal and State Taxes

Understanding the Difference Between Federal and State Taxes

• Understand the differences between federal and state taxes:
• Federal taxes: These are taxes collected by the federal government and are used to fund national programs, such as defense, Medicare, and Social Security.
• State taxes: These are taxes collected by the state government and are used to fund local programs, such as education and infrastructure.
• Determine which taxes you need to pay:
• Federal taxes: Most businesses will need to pay federal income taxes.
• State taxes: Depending on your business’s location, you may also need to pay state income taxes, sales taxes, property taxes, and other taxes.
• Get familiar with the tax forms and deadlines:
• Federal taxes: Businesses must file a quarterly estimated tax form, as well as the annual federal income tax return.
• State taxes: Each state has its own tax forms and deadlines.

You’ll know you can check this off your list and move on to the next step when you have a good understanding of the differences between federal and state taxes, and have determined which taxes you need to pay.

Calculating and Paying Estimated Taxes

• Determine which quarters you need to pay estimated taxes for by counting from the beginning of the fiscal year
• Calculate the estimated tax amount you’ll owe by taking your total taxable income and subtracting any credits or deductions, then multiplying the result by the current tax rate
• Gather the necessary forms you’ll need to file estimated taxes, including Form 1040-ES and the relevant state form
• Fill out the forms, including any applicable information about your LLC
• Submit your estimated taxes to the IRS and state government by the due date
• Keep a record of your payment in case you’re audited

You’ll know you can check this off your list and move on to the next step when you’ve submitted your estimated taxes to the IRS and state government and have a record of your payment.

Creating a Separate Bank Account

• Research and compare the features offered by different banks
• Look for features like: online access, mobile check deposit, and low fees
• Consider the location of the bank and whether you prefer an online or a brick-and-mortar bank
• Open a business checking account that is separate from your personal account
• Provide the bank with your company’s EIN and articles of organization
• Have all owners of the LLC sign the signature card
• Transfer the initial deposit from your personal account to the new business account
• Use the new business account for all financial transactions related to the LLC
• Keep detailed records of all transactions in the business account
• Once you’ve opened the new business account and transferred the initial deposit, you can check this step off your list and move on to the next step.

Choosing the Right Bank

• Research what banks offer the services and products that you need for your LLC.
• Consider the fees associated with the accounts, access to online banking, customer service, and other services like payroll and credit card processing.
• Compare the different banks to see which is the best fit for your LLC.
• Once you’ve chosen a bank, you can check this off your list and move on to the next step of opening your business bank account.

Opening the Business Bank Account

• Research and compare different banks to determine which one is the best fit for your LLC
• Gather the necessary documents (such as Articles of Organization, EIN letter, and driver’s license) to open the account
• Contact the bank and fill out the appropriate paperwork
• Make a deposit to activate the account
• Once the bank has accepted the account and you have received your account information and debit card, you have successfully opened the business bank account and can move on to the next step: protecting your LLC with insurance.

Protecting Your LLC with Insurance

• Research what kind of insurance is appropriate for your LLC business
• Get quotes from several insurance companies
• Compare coverage and choose the best option for your LLC
• Purchase the required insurance for your LLC
• Keep a copy of the insurance policy on file
• When finished, you’ll have the necessary insurance for your LLC and be able to move on to the next step.

Understanding Your Insurance Needs

• Research the type of insurance your business needs, such as property and casualty, general liability and workers’ compensation
• Determine your business’s insurance needs by analyzing its potential risks
• Ask yourself questions such as: what risks do you want to insure against? What limits of insurance do you need to purchase?
• Consult with a qualified insurance broker or agent who can help you determine the right type and amount of insurance you need
• When you have a basic understanding of your business’s insurance needs, you can move on to the next step in creating an LLC: Shopping for Insurance.

Shopping for Insurance

• Research different insurance providers and compare their coverage, premiums, and customer service ratings
• Ask for quotes from several providers, and look for any discounts that may be available
• Choose an insurance provider that best meets your needs and budget
• Purchase the necessary insurance coverage
• Receive a copy of your insurance policies and save them in a safe place
• Check off the Shopping for Insurance step, and move on to the next step: Understanding Key Insurance Terms.

Understanding Key Insurance Terms

• Research different types of insurance and understand the terms associated with each type, such as general liability insurance, workers’ compensation insurance, professional liability insurance, and commercial vehicle insurance.
• Compare quotes from different insurance companies to find the best coverage for your business.
• Understand the differences between umbrella insurance, errors and omissions insurance, and other types of insurance.
• Make sure you understand the difference between comprehensive and collision coverage and other types of coverage.
• Understand the deductibles associated with different policies.

You can check this off your list when you have a good understanding of the different types of insurance and the terms associated with them.

Understanding Your Fiduciary Duties and Responsibilities

• Understand the legal responsibilities and duties associated with LLCs, such as fiduciary duty, duty of care, duty of loyalty, and duty to disclose/report
• Learn the differences between officer duties and shareholder duties
• Identify potential conflicts of interest and how to avoid them
• Research state laws regarding fiduciary duties for LLCs
• When you feel confident you understand the duties and responsibilities of running an LLC, you can check this off your list and move on to the next step.

Avoiding Self-Dealing

• Make sure all decisions made are in the best interest of the LLC and its members.
• Avoid any conflict of interest, where you may personally benefit from LLC decisions.
• Do not take any action that would lead to a personal gain while acting in a fiduciary role.
• Refrain from participating in transactions where you could benefit personally.
• Never put yourself in a situation where you could use your position to gain an unfair advantage.
• Do not use LLC resources for your own personal benefit.

You’ll know when you can check this off your list and move on to the next step when you are confident that you have abided by your fiduciary duties and have avoided any self-dealing with the LLC.

Meeting Your Fiduciary Duty of Care

• Educate yourself on state and federal fiduciary duties of care to ensure you’re taking the necessary steps when forming your LLC
• Understand the legal responsibilities and liabilities associated with running a business in the US
• Familiarize yourself with the fiduciary standards of care and other legal requirements that apply to LLCs in your state
• Consult with a lawyer if you have any questions or concerns
• Research potential conflicts of interest and take steps to avoid any potential issues
• Make sure you have documented records of all decisions related to your LLC
• When you are confident that you understand your fiduciary duties and have taken steps to meet them, you will be ready to move on to the next step.

Understanding Your Duty of Loyalty

• Understand the concept of the duty of loyalty, which requires that a director, officer, or LLC member act in the best interests of the LLC
• Abstain from taking actions which could be seen to be in conflict with the LLC’s interests
• Avoid self-dealing, which is when an LLC member takes an action that will benefit them personally, such as entering into a contract or making investments
• Refrain from misusing corporate assets or information for personal gain
• Be transparent when taking any action that would benefit the LLC member and ensure that all parties involved are aware of the potential conflict of interest
• Once all of the above has been taken into account and you have ensured that you are acting in the best interests of the LLC, you can move on to the next step.

Maintaining Adequate Business Records

• Keep detailed records of all company-related activities, including bank statements, invoices, and meeting minutes.
• Set up a filing system to help you keep track of documents that you need to retain over time.
• Regularly create financial statements and reports to track the progress of your LLC.
• Have a bookkeeping system in place to keep accurate records of all transactions.

Once you have a filing system and bookkeeping system in place, and have created financial statements and reports, you will have completed this step and can move on to the next.

Updating Your LLC Information as Needed

• Monitor changes to LLC information, such as address changes, the addition or removal of members, or changes to the business purpose
• Review and update your LLC’s Operating Agreement as needed
• Notify the IRS of any changes to your LLC’s federal employer identification number (FEIN)
• Notify your state’s Secretary of State’s office of any changes to your LLC’s registered agent
• Keep your LLC’s business license up to date
• Notify your state’s taxing authority of any changes to your LLC’s address
• Keep copies of all relevant documents regarding your LLC’s changes

How you’ll know when you can check this off your list and move on to the next step:

• Once you’ve reviewed and updated your LLC information as needed, you can move on to the next step.

FAQ:

##Q: What is the difference between a Limited Liability Company (LLC) and a Corporation?
Asked by John on February 16th, 2022.
A: An LLC is a business structure that is legally separate from its owners and provides limited liability protection. This is similar to the way that corporations are treated in the eyes of the law. The main difference between an LLC and a corporation is that LLCs are simpler to set up and easier to maintain, making them more attractive for small businesses. Additionally, LLCs can have more flexible ownership structures than corporations, with fewer restrictions on the number and type of owners.

###Q: How do I form an LLC in the US?
Asked by Sarah on March 22nd, 2022.
A: Forming an LLC in the US requires filing Articles of Organization with the state in which you wish to register your business. Different states have different requirements, but typically you will need to include basic information such as the name of your business, its purpose, and the names of its members. Additionally, you will need to appoint a registered agent who will be responsible for accepting legal documents on behalf of your business. Once your Articles of Organization are accepted, you’ll receive a Certificate of Formation and your business will be officially registered with the state.

###Q: What are the tax implications of forming an LLC in the US?
Asked by Ryan on April 19th, 2022.
A: The tax implications of forming an LLC in the US will depend upon whether you choose to have your LLC taxed as a sole proprietorship, partnership, or corporation. Generally speaking, LLCs are not taxed directly by the federal government; instead, any profits or losses will pass through to the members and be taxed on their personal tax returns. However, some states require LLCs to pay additional taxes or fees depending on the size of their revenue or profits. Additionally, members may be required to pay self-employment taxes if they are actively involved in running their business.

###Q: Do I need to register my LLC with the IRS?
Asked by Jessica on May 5th, 2022.
A: Yes, once your LLC has been formed with your state government, you will need to register it with the IRS. This is done by filing an Employer Identification Number (EIN) application with the IRS. Your EIN acts as a unique identifier for your business and is required for filing taxes and opening bank accounts. Additionally, depending on where you plan to operate your business, you may need to register with other state-level agencies such as your local Department of Revenue or Secretary of State.

###Q: What is required for ongoing maintenance of an LLC?
Asked by David on June 1st, 2022.
A: Ongoing maintenance for an LLC involves fulfilling certain legal obligations such as filing annual reports and keeping accurate records of income and expenses. Additionally, it’s important to ensure that all members comply with their duties as outlined in the Operating Agreement for your LLC. Depending on where you are located and what type of business you’re running, there may also be additional requirements such as obtaining licenses or permits or registering with certain government agencies. Keeping up with these requirements can help ensure that your business stays compliant with applicable laws and regulations while avoiding potential penalties or fines.

###Q: How do I protect my personal assets when forming an LLC?
Asked by Michael on July 7th, 2022.
A: One way to protect your personal assets when forming an LLC is by ensuring that all assets owned by your business are held in its own name instead of yours personally. Additionally, it’s important to create a clear separation between your personal assets and those owned by your business; this means avoiding commingling funds or using personal assets for business purposes. Finally, it’s also important to keep accurate records and remain complaint with all applicable laws and regulations; this can help ensure that any potential legal claims against your business do not extend beyond its assets and into yours personally.

###Q: What kind of insurance do I need when forming an LLC?
Asked by Maria on August 11th, 2022.
A: The specific kind of insurance you will need when forming an LLC will depend upon what type of business you plan to operate and where it is located; some businesses may be subject to additional insurance requirements due to their nature or industry sector. Generally speaking, however, most businesses will require some form of liability insurance—such as general liability insurance—in order to protect against potential claims from customers or other third parties who may suffer damages from your business activities or products/services offered therein. Depending upon where you are located and what type of business you run there may also be additional insurance requirements; consulting a qualified professional can help ensure that you remain compliant while keeping costs down as much as possible…

###Q: What other legal documents do I need when forming an LLC?
Asked by Christopher on September 18th ,2022.
A: In addition to Articles of Organization required for registering an LLC in most states, there may be other legal documents which should be created depending upon how many members make up your company or what type of industry sector you operate in; these documents could include an Operating Agreement detailing how decisions will be made within the company or Bylaws outlining internal procedures such as voting rights within the company structure just to name a few examples. Additionally, depending upon where you plan to do business or what sort of activities you plan to engage in, there may also be additional forms or documents which must be completed before beginning operations; consulting a qualified professional can help ensure that all paperwork is filed correctly while avoiding unnecessary costs associated with non-compliance…

Example dispute

Suing a Limited Liability Company

• A plaintiff may raise a lawsuit against a limited liability company (LLC) in a variety of ways. The most common is through a civil lawsuit, which may allege negligence, breach of contract, or other violations of civil law.
• If a plaintiff can prove that the LLC failed to take reasonable care in performing its duties and caused harm to the plaintiff, then the plaintiff may be able to recover damages from the LLC.
• The plaintiff must also be able to prove that the LLC was at fault for the damages, which may be done through evidence such as witness testimony, contracts, or other forms of documentation.
• The plaintiff may also be able to seek punitive damages, which are meant to punish the LLC for its actions.
• If a settlement is reached between the plaintiff and the LLC, the settlement amount can be specified in the settlement agreement.
• If the case goes to trial, the court may order the LLC to pay damages to the plaintiff, which may include actual damages, punitive damages, and/or attorney’s fees. The damages amount will be determined by the court based on the evidence presented.

Templates available (free to use)

Assignment Of Limited Liability Company Interest To Revocable Trust
Certificate Of Amendment Of Certificate Of Formation Limited Liability Company Texas
Certificate Of Correction Of Certificate Of Formation Limited Liability Company Texas
Certificate Of Formation Limited Liability Company Texas
Certificate Of Termination Limited Liability Company Texas
Limited Liability Company Agreement
Limited Liability Company Interest Purchase Agreement
Restated Certificate Of Formation Limited Liability Company Texas
Statement Of Change Of Registered Office Or Agent Limited Liability Company Texas

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