How to Start an LLC Online

Most small business startups with one or a few partners will choose an LLC formation for their business entity. An LLC allows business owners to protect their assets from liability without being “double taxed” at the corporate and income level. Unlike a C corporation, an LLC is flexible to manage and subject to few regulations.

Before starting an LLC online, you’ll need critical information about your business entity. This article will prepare your LLC for the filing process and make sure your LLC formation process gives you peace of mind for a profitable business future.

Starting an LLC Online: Key Takeaways

• An LLC grants access to pass-through taxation, which allows business income to go directly to you as an owner or member. 

• To avoid high self-employment taxes as an LLC owner, you can elect to be taxed as an S corporation, significantly lowering your tax burden.

• A professional LLC formation service saves business owners time and money while opening the door for vital services such as registered agents.

Benefits of Creating a Limited Liability Company

A limited liability company (LLC) is a business structure designed to combine a larger corporation’s liability protections with the simplicity and tax advantages of a sole proprietorship or partnership. There are many benefits of an LLC, especially for certain small businesses. 

Limited Liability

When you’re doing business as a sole proprietorship, there’s virtually no separation between your business’s money and your own. It’s low-maintenance but can also be risky — especially if you’re sued or take on significant business debts. All your assets are exposed in legal proceedings involving your business — unless you form an LLC.

A limited liability company’s central purpose is to provide limited liability protection to its members. They can then do business without fear that a disaster or lawsuit will ruin them financially.[1] 

For small businesses, this liability protection is the main advantage of incorporating a business entity. An LLC is often the simplest way to enjoy these protections.

Flexible Management

Making your business official involves filing fees, red tape, and strict corporate governance structures. But the LLC business entity was designed to avoid those pitfalls. 

The members of an LLC are subject to very few of the requirements of most corporations, which need to hold annual shareholder meetings, adopt bylaws, and keep thorough records.[2]

Business owners can run their LLCs mostly as they see fit, as long as they’ve set up an operating agreement that shows members are on the same page. However, there are limits on how they can raise money and some other aspects of operations. 

Pass-Through Taxation

Business owners who choose a C corporation for their business structure enjoy limited liability protections that sole proprietorships don’t. But there’s a cost: their company is “double-taxed.” A C corporation’s income is subject to corporate income taxes, and when shareholders receive profits or dividends, the individuals who benefit pay income tax on the funds they receive.

The magic of an LLC is that it provides “pass-through” taxation, whereby income from your business goes directly to the members. You’ll still have to pay income tax to the IRS on your federal taxes, but the LLC itself won’t be subject to income tax. 

When a business owner passes the LLC’s income to their personal income, the IRS treats it as a “disregarded entity.” The owners’ tax returns are the same as if they did business as a sole proprietorship, but they have the limited liability protection of an LLC.[3] 

Choose Your Taxation

LLCs usually take advantage of “pass-through” taxation. Still, they can elect to be taxed as an S corporation or C corporation. Business owners that maintain an LLC can select a tax status by notifying the IRS of their choice. Some business owners would benefit from an S corp or C corp tax status for their limited liability company. 

Simple Business Formation Process

It’s straightforward and affordable to set up an LLC. Once your members agree on a unique name and designate a registered agent, it’s a simple process and doesn’t require significant upkeep.

When you’re ready to begin the LLC formation process, it’s easy to do online. We recommend filing your LLC with a service like Swyft Filings to speed up the process, get you started on the right foot, and keep your business in good standing for the long haul. Trust us with the process so you can focus on doing what no one else can: building your business one customer at a time.

Disadvantages of a Limited Liability Company

Choosing a business structure is a crucial decision for new business owners. While an LLC can be an excellent fit for many startups and small businesses, there are drawbacks to keep in mind.

Cost of Filing for an LLC

An LLC is a low-cost business structure, but it’s not free. State filing fees can range from $500 in Massachusetts to $50 in many states and around $100-$130 in others.[4, 5] Many states also charge an annual fee similar to the initial filing fee. You can find your state filing fees on your Secretary of State’s website.

The Limits of Limited Liability

LLC owners enjoy protection from business debts by separating the business entity’s responsibilities from their assets and financial obligations. But their liability protections are not universal or a guarantee that you will be insulated from the economic woes of your new business.

Through fine print in contracts and agreements or proceedings in court, creditors and landlords will try to breach the gap between your assets and the liabilities of your business.[6] Talk with a lawyer when you sign leases and other contracts. Don’t assume that just because you’re operating an LLC, your assets are 100% protected.

LLC Ownership Transferability

In contrast to a corporation owned and controlled by its shareholders and board, an LLC is tied to its individual members, who are listed on the company’s registration documents and official paperwork with the IRS and state agencies.[7] This makes transferring ownership from one party to another a potentially involved process.

It helps to have your operating agreement professionally prepared. We can help you with your operating agreement and every stage of your LLC formation to make potential snags and logistical nightmares a non-issue.

Consequences of Member Turnover

If members want to leave your LLC, it may have to be dissolved and drawn back up from scratch.[1] A C corporation business structure might be a better choice if you’re building a company with members who aren’t likely to be in the company for the long haul.

Self-Employment Taxes

The LLC structure helps you avoid being “double-taxed,” or paying corporate and personal income taxes. But you’ll have to pay a high tax rate on your personal income because you’ll be responsible for self-employment taxes — the medicare and social security taxes that W-2 employers normally pay half of.

You can elect S corp tax status to keep an LLC’s management flexibility but minimize the self-employment tax damage. An S corp tax status allows you and your fellow members to draw a “reasonable salary” from the LLC. After that, the dividends you receive aren’t subjected to self-employment taxes. 

Should You Use a Professional LLC Formation Service?

Entrepreneurs have an independent streak. But having a formation service take care of the LLC formation process is worth the modest fee. Here are some reasons why.

Save Time and Money

How much do you think your time is worth? Instead of spending hours puzzling through the articles of organization paperwork, are you better off spending $49 and having the process complete in minutes? Instead of tracking deadlines, addresses, and forms, what could you get done instead? 

Put In Minimal Investment

Even if you’re undaunted by the prospect of taking on the LLC formation process yourself, a service like Swyft Filings provides the security of knowing that nothing important got past you. It’s an affordable price for peace of mind in the long haul of your LLC.

Receive Instant and Ongoing Support

You can access expert support when you enlist an LLC formation service to help make your business entity official. Our Business Specialists help discuss your strategy and incorporation decisions online or over the phone.

Leverage Formation Services As Registered Agents 

You’ll need a registered agent for your LLC formation process, but what if you could streamline your services? A formation service that also provides registered agent services integrates the entire process smoothly. You’ll have a partner that knows your business end to end.

Store Documents Online

If the words “keep this document for your records” make you tingle with anxiety, a formation service can help you out. We’ll keep the documents you want on hand in a secure online place, so you don’t have to worry about printing, saving, or backing up important files.

How to Start an LLC Online

Here’s what to expect when you start an LLC online. State law and state filing fees will change this process depending on where you are, but generally, the process looks much the same from state to state. Every LLC has to follow these basic steps to complete the business formation process.

1. Choose a State in Which to Form an LLC

This will likely be where your office is located or where you conduct most of your business. Some state laws provide tax advantages for LLCs or have low state filing fees. 

Remember, if you’re not doing business in that state, you must register as a foreign LLC. You likely won’t be able to take advantage of those tax or regulatory benefits.

If you’re doing business in multiple states, look at the state filing fees in each and consider which would be more convenient. 

2. Pick an LLC Name

Your LLC has to be distinguishable from all the other LLCs registered with the Secretary of State of your chosen state. When you start an LLC online, you can use our free business name search to verify if your name is available or search a database provided by the state.

Your business name usually has to contain some variation on LLC, whether “LLC,” “Limited,” “Ltd,” or “Limited Liability Co,” to identify it as an LLC. It also can’t contain certain words suggesting that you are a school, a bank, or provide some other service requiring additional regulation or accreditation. These rules vary slightly by state but are generally consistent for any LLC.

3. Identify a Registered Agent

Your registered agent is the office that receives documents related to legal proceedings and service of process for your business. This registered agent must keep standard business hours in the state in which your LLC is located. They must be relied upon to forward you essential documents and correspondence and trusted with confidential information about your business. 

You can technically choose to be your registered agent. But you should think carefully about whether or not this is a good idea. Do you want to maintain regular business hours? Are you comfortable being served with legal documents in your place of business? For most business owners, the answer is no.

Registered agent services are available at reasonable rates around the country. We provide an affordable registered agent service in all 50 states that keeps you on top of the paperwork and state filing fees and stores your documents securely in an accessible place. 

4. File the Articles of Organization

The articles of organization make your LLC official and are filed with your Secretary of State. Usually, this simple process requires you to have the basics of your business figured out: its address, members, and business name. 

We will help you file your articles of organization no matter what state you’ve chosen to do business in. State filing fees vary highly. 

5. Create an Operating Agreement

While the articles of organization lay out the who-what-when-where of your small business, the operating agreement is the how. 

Your operating agreement is a critical document that spells out procedures and ground rules for decisions, allocation of profits and responsibilities, changes to members and ownership, and dissolution. It’s especially beneficial for multi-member LLCs.

The LLC business structure is useful for its flexibility in management. But with such open-ended regulations, it’s essential to have some agreements that keep everyone in a multi-member LLC on the same page. And for single-member LLCs, a robust operating agreement will better protect your personal assets and show partners and contractors that you’re a serious business.

We can prepare a professional operating agreement that anticipates the complexities relevant to your situation. Just answer some questions in plain English, and we’ll ensure you have the proper clauses in place to save your assets and your LLC down the line.

6. Receive an Employer Identification Number

Just like citizens pay taxes with a social security number, a business needs an Employer Identification Number (or EIN) to pay taxes. You won’t be able to get a bank account, hire employees, apply for loans or credit cards, or do many business tasks without a Federal Tax ID.

To make sure you get your EIN as fast as possible with no hiccups or miscues, we will get it done for a reasonable fee. This is a process you won’t want to mess up. You can also do it online for free on the Internal Revenue Service (IRS) website.

7. Open a Business Bank Account

You can open an official business bank account with your Employer Identification Number. Because an essential part of a Limited Liability Company is separating your business’s assets from your own, this is a significant first step for your business operations. 

A bank will need relevant documents, sometimes certified by the state, to create your account. Our service stores all these documents in one secure place, not stuffed into drawers or only available by request from slow-to-respond agents.

8. Keep Your Business in Good Standing

For the most part, you won’t have to do much to keep your business in legal operation once the paperwork is done. But any time up to a year from starting your LLC, the renewal deadlines, annual reports, and other forms start coming due. Not to mention that you’ll need business licenses and permits to do many types of business.

We can help you through these obstacles by sending reminders and keeping you compliant with state law. Letting Swyft Filings handle your business licenses, permits, and other documents is worth the investment. It’ll be a small line in your business’s balance sheet, leaving you to focus on the numbers that matter.

Frequently Asked Questions

Should I file an LLC online for my startup?

It’s much easier to start an LLC online than trek to a state office and file your paperwork in person. And while you’re online, you should consider using a business formation service like Swyft Filings, which has years of experience helping thousands of business owners set up an LLC.

What is the LLC estimated tax?

You’ll be familiar with quarterly estimated income taxes if you already run your business as a sole proprietorship. Because LLC income is essentially self-employment income that passes through to your personal income tax, you’ll want to pay a quarterly estimated tax to the IRS based on what you paid last year. If this is your first year in business, consult a CPA about what to pay.

Some states require LLCs to pay a franchise tax at the end of the year. It’s not a part of your LLC estimated tax that you should pay every quarter.

What’s the cost of starting an LLC?

The cost to set up an LLC will vary depending on where you are. State filing fees for articles of organization can range between $50 and $500 but are generally between $50 and $150. If your state has a publication requirement, costs will be higher. A business formation service adds only a little to this total and makes the process much easier.

How long does it take to form an LLC?

The complete LLC formation process timeline varies by state. But you can start an LLC online in minutes if you utilize a business formation service. It’s only a fast process if you get it right the first time, and the support of experienced professionals will make sure you avoid costly mistakes.

What’s the difference between an LLC and a corporation?

LLCs have a more flexible management structure than corporations and can choose how the IRS taxes them. Usually, its members opt for “pass-through” status, which allows them to avoid corporate income tax and claim their LLC compensation as self-employment income.

What’s the difference between an LLC and a sole proprietorship?

If you operate a sole proprietorship, your personal assets are vulnerable in proceedings related to business debts or a lawsuit against your business. On the other hand, LLC stands for limited liability company, meaning you, as an individual, have limited liability for the business.

Do I need a lawyer to file for an LLC?

No. Anyone can set up an LLC, and it’s simple enough to do without a lawyer. But guidance is recommended. When you start an LLC online, let Swyft Filings handle your paperwork. After you answer a few simple questions, we’ll take care of the rest. You can get back to the critical work of building your business. 

Citations

1. U.S. Small Business Association. “Choose a Business Structure.” Accessed on December 27, 2022.

2. AllBusiness. “Pros and Cons of a Limited Liability Company.” Accessed on December 27, 2022.

3. IRS. “Single Member Limited Liability Companies.” Accessed on December 27, 2022.

4. Secretary of the Commonwealth of Massachusetts. “Limited Liability Company Information.” Accessed on December 27, 2022.

5. Upcounsel. “Annual LLC Fees By State: Everything You Need to Know.” Accessed on December 27, 2022.

6. TKN Tyson Law. “The Limits Of Limited Liability.” Accessed on December 27, 2022.

7. Connect2Capital. “How to Transfer Your LLC Business Ownership to Someone Else.” Accessed on December 27, 2022.