In this guide, we’ll walk you through how to start an LLC in just seven simple steps. Cassie Bottorff. LLC owners have flexibility in managing their business and how it will be taxed. This makes it an appealing choice for small business owners.
7 Steps to Launch Your LLC
- Select a unique name
- Appoint a registered agent
- Complete and file the necessary paperwork
- Create an operating agreement
- Obtain tax ID numbers
- Set up business license and permits
- Open a business bank account
How much it costs to start an LLC depends on the state your LLC is formed in. The average cost to form an LLC in the US is $132.
Key Insights on LLCs
- An LLC limits owners’ personal liability and provides tax flexibility.
- Costs range from $30-$350 depending on the state.
Common Questions About LLCs
What are 3 disadvantages of an LLC?
- Complexity of taxes
- Paperwork
- Potential audit risks if deductions are claimed without reported income
Can I keep my LLC if I don’t make money? The LLC must file a tax return unless it had no income or expenses during the year.
Do LLCs get tax refunds? LLCs can elect C corporation status to receive refunds if quarterly estimated payments exceed the tax liability.
Tax Implications for Single-Member LLCs
The IRS treats one-member LLCs as sole proprietorships for tax purposes, meaning that the LLC itself does not pay taxes and does not have to file a return with the IRS. As the sole owner of your LLC, you must report all profits or losses of the LLC on Schedule C and submit it with your 1040 tax return.
Ending an LLC
When winding down an LLC, the simplified structure allows for smoothly distributing assets and settling obligations.
Steps to Register an LLC
- Choose a business name
- Select registered agent
- File formation documents
- Create operating agreement
- Get EIN
- Set up business license and permits
Starting to Make Money with an LLC
- Define business goals and target market
- Formally register your LLC
- Arrange financing and accounting
- Market services and products
- Provide consistent quality and value
Dealing with No Income in an LLC
States charge an initial formation fee for an LLC. The IRS will only allow you to claim losses on your business for three out of five tax years. If your net business income was zero or less, you may not need to pay taxes, but the IRS may still require you to file a return.