Limited Liability Company (LLC)

An LLC is a US business structure that offers the personal liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership.

LLC Topics:

  • LLC Meaning and Definition
  • Should I Form an LLC?
  • How To Form an LLC
  • LLC Taxes
  • How To Start a Business
  • LLC FAQ

You can create an LLC today with our free Form an LLC guide or with one of these trusted LLC formation services.


LLC Meaning | Limited Liability Company Definition

An LLC is a US business structure type that offers the personal liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership.

LLCs are popular because business owners can avoid the double taxation and administrative burden of a corporation while still having the benefit of personal asset protection.

LLCs can be owned by one or more people known as LLC "members". An LLC with one owner is a single-member LLC and an LLC with more than one owner is a multi-member LLC.

Watch our What is an LLC video or read our LLC guide to learn more.

Should I Form An LLC?

Forming your business as a limited liability company helps:

  • Protect your personal assets in the event of a lawsuit against your business
  • Reduce paperwork compared to corporations and other legal entity types
  • Prevent your company from double-taxation
  • Make your business appear more credible to customers and creditors

A limited liability company is just one of several business structure types. Other common examples include:

  • Sole Proprietorships
  • General Partnerships
  • Corporations

A comparison chart showing the benefits of an LLC compared to corporations, general partnerships, and sole proprietorships

How to Form an LLC

When you form your LLC, you will need to complete these steps:

  1. Name Your LLC
  2. Choose an LLC Registered Agent
  3. File Your LLCs Articles of Organization
  4. Create an LLC Operating Agreement
  5. Get an EIN

You can start an LLC yourself using our free Form an LLC guide or you can use an LLC formation service to register your LLC for you.


Step 1: Name Your LLC

You will need to provide your state with a unique name when you file your LLCs formation documents. 

Our business name generator and how to name a business guide are free tools available to entrepreneurs that need help naming their business.

Step 2: Choose an LLC Registered Agent

Your LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Articles of Organization.


Step 3: File Your LLC's Articles of Organization

The Articles of Organization, also known as Certificate of Formation or Certificate of Organization, is the document you will file to officially register an LLC with the state.


Step 4: Create an LLC Operating Agreement

An LLC Operating Agreement is a legal document that outlines the ownership and member duties of your LLC.


Step 5: Get an EIN

An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a social security number for a business. You will need to get an EIN after you form your LLC. EINs are free when you apply directly with IRS. Visit our EIN guide for instructions for getting your free EIN.           

LLC FAQ

What are the benefits of an LLC?

Some advantages of a limited liability company (LLC) include personal asset protection, reduced paperwork when compared to corporations, tax flexibility, and increased credibility with customers and creditors.

What’s the downside to an LLC?

LLC members (owners) must pay self-employment taxes, and LLCs sometimes have a harder time attracting outside investors than do corporations.

How do I create an LLC?

Creating an LLC is easy. You can start an LLC yourself by using our free How to Form an LLC guide, or you can use an LLC formation service to register your LLC for you.

How much does it cost to form an LLC?

The primary cost of forming an LLC is the state filing fee. This fee ranges from $40 to $500, depending on your state. You can read more details in our How Much Does It Cost to Form an LLC article.

How are LLCs taxed?

LLC taxation depends on if you operate a single-member or multi-member LLC as well as your LLC tax structure.

You can read our LLC tax guide for more information.

Where should I form an LLC?

While there may be benefits to forming an LLC in certain states, it’s best to form your LLC in the state where it’s located or conducts business.

Do I need a lawyer to form an LLC?

You can usually form an LLC without hiring an attorney.

How are LLC members paid?

LLC members are paid differently, depending on the LLC’s tax structure. Read our How Do I Pay Myself From My LLC article for more information.

What’s the difference between an LLC and an S corp?

An S corporation (S corp) is an Internal Revenue Service (IRS) tax classification, not a type of business entity. An LLC may choose to be taxed as an S corp or as a default LLC. Read our What Is the Difference Between an LLC and an S Corp article for more information.

Is it better to form an LLC or a DBA?

Your business's unique situation and needs will determine whether it’s better to form an LLC or a sole proprietorship with a DBA. Read our Is It Better to Form an LLC or a DBA article for more information.

What are the Articles of Organization?

The Articles of Organization is a public document used to form an LLC. In some states, it’s known as the Certificate of Organization or Certificate of Formation.

How many owners can an LLC have?

There’s generally no limit on the number of members (owners) an LLC can have unless it’s taxed as an S corp, in which case the maximum is 100.

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