To form an LLC in your state can be relatively more convenient than doing it physically.
You can save yourself from the stress of finding papers that you need, lining up for hours to submit them, and dreading the long processing time required.
However, there are some things that you should know about filing your LLC business online over traditional paper filing over fax or mail.
This article will discuss these considerations, so read on to know more!
What is an LLC?
An LLC or limited liability company is a specific business entity, much like an S Corporation or C Corporation.
An LLC has all the personal liability protections of a corporation but with many of the same tax advantages as a sole proprietorship, partnership, or subchapter “S” corporations.
The term can be used to refer to your entire business structure, your business structure’s operating agreement, or simply the tax designation for your particular legal entity.
For federal income tax purposes, an LLC is treated as either a sole proprietorship (if only one person owns and runs the business) or a partnership (if two or more business owners run it).
Types of business entities
A general description and comparison of different types of business entities are given below.
1. Sole Proprietorship:
- A sole proprietorship is a business with only one owner, and the owner of a sole proprietorship has unlimited liability for any debts or actions filed against the business.
- Since there are no other owners, there can be no LLC taxation and thus no “pass-through” tax savings as with other forms of legal structures.
- However, the owner’s assets would not be at risk in unfortunate events such as bankruptcy or lawsuit judgments.
As you can see, this structure provides less liability protection than corporations but more protection than partnerships (discussed next), which could prove to be advantageous, depending on your level of risk tolerance.
- A partnership is similar to the aforementioned sole proprietorship, but instead, multiple owners share ownership and liability.
- As with a sole proprietorship, this form of business structure provides less protection than corporations but more protection than limited liability companies (discussed below), which could be advantageous depending on your level of risk tolerance.
- This is the most complex legal structure, as it requires filing Articles of Incorporation with the Secretary of State where the company is incorporated.
- To maintain its status as a corporation, your business will need to file an annual report and pay franchise taxes.
4. Limited Liability Company (LLC):
- An LLC is a hybrid between a partnership and corporation because, like partnerships, multiple owners share ownership and liability.
- However, like a corporation, the LLC must file an annual report and pay franchise taxes.
- Additionally, the members of an LLC have limited personal liability for wrongdoings or accidents that take place during their work. This designation is similar to that of shareholders in corporations, thus making it advantageous if you want increased protection and limited tax burdens.
How to Start an LLC for free in 5 Minutes
If you’re thinking about starting your LLC, but don’t want to spend thousands on legal fees, then you’ve come to the right place.
The easiest way that I found is by using websites like LegalZoom (not an affiliate) that offer formation services for LLCs.
You can create one in 5 minutes with free unlimited lifetime updates at $149, $249, or $349 prices depending on your needs.
For example, if you want to create multiple LLCs for business purposes or something similar, it’s great because they will cover all necessary state filings and documents.
Step 1. Where to apply for an LLC?
There are dozens of different companies you can apply to LLC, but the best ones offer excellent user-friendly service for an affordable price.
For example, LegalZoom has multiple packages with different limits.
Step 2 . How to Apply for an LLC?
To make sure you are using the right company, there are few things that you can check when searching for an application to your local state’s LLC forms.
1) For instance, the most common services include EIN (Employer Identification Number) in all their packages because the IRS requires it.
2) Additionally if you’re looking for good customer support, it’s great to have a live chat or phone support that customers can use in case they get stuck on filling out forms or something similar.
3) Another thing that can separate an excellent service from a mediocre one is how fast and accurate filing the legal papers and finalizing your LLC.
4) Typically, most reputable companies will do everything in their power to make sure that you receive your LLC certificate and EIN as quickly as possible (usually within a few days), and they can also provide you with free legal advice in case something happens in the future.
Step 3: How to choose the right company?
Finally, it’s crucial not to use the first service that pops up on your Google search because chances are; it’s not reliable for various reasons (e.g., poor customer support, lack of necessary documents like an EIN, etc.).
Ultimately, it should be noted that if you’re looking for proper forms, then it’s ideal to look for a company provided by the Secretary of State or other state agencies.
Otherwise, there is a chance that your filing could be rejected, and you would have to start over again.
Pros and cons
- Fast and easy to complete.
- No need to review the Secretary of State website for the rules and regulations associated with LLCs.
- Streamlined application process from start to finish.
- If you have a problem, it could be a hassle reaching out to a live person for help.
- The cost is typically higher than doing it yourself or hiring an attorney who can do all of this for you at a lower cost per hour.
How much does it cost?
Although the total cost of applying for an LLC can vary depending on how complicated your situation is, most services charge a flat fee that varies.
LLC Formation Helpers
This website offers excellent customer service at $299.
The LLC is formed within one business day, but you need to go through the Secretary of State website separately for filing.
This website offers simple LLC formation easy to complete within 5 minutes.
It costs $99.99 with an optional upgrade for more comprehensive use for $149.99 or $249.99
They offer free phone consultations (24/7) in addition to low flat fees ($79-$399).
However, this website does not provide any state-specific filing forms other than what is available on their FAQ page, which you must file yourself separately from the application process.
Note: Every state has its filing fees on top of the LLC formation fee.
Paperwork required to Apply for an LLC Online
Every situation is different, and we cannot answer the question “how much does it cost” because each state has its filing fee, but we can tell you that typically, there are four documents required:
I. Articles of Organization (sometimes called Certificate of Formation):
This is the form that you use to apply for your LLC, and it can be completed online through a service or by filling out the Secretary of State website directly.
Typically, you state what kind of business entity you are (e.g., corporation, partnership). Most states require them, but some states like California do not require this step.
II. LLC Operating Agreement:
An optional document (not required by law) contains how much each member must contribute to capital and their percentage share in the profits after tax has been paid.
III. Federal Tax ID Number (EIN):
If you choose to have employees, this number must be applied for because it’s also necessary to pay taxes on your income and unemployment insurance, and other benefits.
The EIN can be applied (e.g., Social Security Number) by filling out the SS-4 form
IV. State Tax Identification Number:
Depending on your state, this number may also need to be applied for.
For example, in California, it is referred to as TA# and can be applied for with an Employer Identification Number (EIN) if you have one already.
How does the LLC formation process work?
Online service is easy to use because they ask simple questions about your business so that your filing is done correctly by a professional who knows what they are doing when completing forms.
The application typically has three steps:
- business name
- location of business & ownership
- registered agent.
1) Name of Business:
This is the name of your business. Most businesses use their legal name for this step, but some may allow you to create an alias to be used depending on your state.
If you are unsure what you can or cannot do in this area, it’s best to check with your Secretary of State website directly
2) Location of Business &Ownership:
Your company will typically be run by at least one person (e.g., yourself) who can be an individual owner or a group of people who must sign the application together.
Different types of ownership apply based on circumstances ranging from sole-proprietorship, single-member LLCs, multi-member LLCs, and corporation.
The majority of businesses we see are LLCs (single-member and multi-member) and corporations
3) Registered Agent:
A registered agent must receive important legal statements for your business, like notices from the state or lawsuits that may be filed against you.
This step requires you to search for an individual or company by name or location, which can be done through the Secretary of State website.
A Registered Agent will only be required if you do not live in your company’s location (e.g., California), so if you plan on working out of your garage in California, where you live, then no registered agent is needed.
What are other ways of applying for an LLC?
If you want to be sure that your LLC is registered without any hiccups, it’s best to hire an attorney specializing in the field (e.g., taxes, business law).
Typically, these professionals can complete everything within 1-3 days, and if you do not live near them, they usually offer phone or email consultations that are more convenient for customers.
There are also other ways of forming an LLC, like using your state’s official website (i.e., Secretary of State) because some states have their software that you need to register a business entity with additional legal advice.
However, this option is not suggested unless you have a lot of free time on your hands because it is very tedious and detailed.
Suppose you’re looking forward to setting up your small business as an LLC. In that case, you should check out one of the best options available today, like LegalZoom, Zenbusiness, and Rocket Lawyer, so that you can receive all necessary paperwork in less than a week.
When comparing paper filing vs. online LLC service, keep in mind that an online incorporation service typically takes much less time than a physical incorporation service to finalize your paperwork for filing and opening your business bank account.