Opening an LLC is the first step to starting your own business. If it’s your first time, I understand that it may sound daunting. However, starting an LLC by yourself is actually easy and cheap! You don’t need to spend $500 – $1500 on a tax and legal firm to do this simple task for you. In this post, I will teach you how to start an LLC by yourself online which costs less than $100.
You can also find many internet articles on how to open an LLC in your state, but I found many of them confusing. They provide too narrow or too much information. It often intimidates starting entrepreneurs with unfamiliar terms like Registered Agent, Article of Organization, Operating Agreement, and so on. Based on my personal experience, you don’t need to absorb all the information in the beginning. You will figure these out naturally as you clear tasks in the process.
I basically summarized important steps and notes that I wish I could take a time machine and tell myself in the past. I’ve simplified the steps and information you need to know to start your new business and shared links that have helped me personally.
7 Steps on How to Start an LLC Online by Yourself:
- Check the availability of the LLC name in your state
- Find the state’s website where you can register a new business
- Fill out the online registration form
- Submit the LLC registration form online and wait for approval
- Apply for EIN on irs.gov.
- Apply for business license and permits
- Open a business bank account
0. Before starting
Your business (LLC) has to be registered at both State and Federal (nationwide) levels. You will be registering an LLC at the state level, and apply for EIN (Employer Identification Number) at the federal level; these two filings will be linked together for you to open a business bank account and do the tax filing in the future.
I previously opened LLC in California and Hawaii and will use Mirae’s Choice LLC as a reference.
1. Check the availability of the LLC name in your state
You have to choose your company’s name and see if the name is available in your state. Each state has its own .gov website where you search business names. Click here to see the list of websites for all 50 states in the United States.
Type in your desired LLC name in the search box. If nothing shows up, that means that the business name is available for you.
Tips:
1. When you apply for EIN on the federal level (IRS) later, the only two symbols you can input as the part of your LLC name are “&” and “-”.
In my case, I registered my company’s name as Mirae’s Choice LLC in the state of Hawaii. When I applied for EIN on irs.gov, I could not include the apostrophe ’ in the part of the name so I registered as MIRAES CHOICE LLC. This is a very minor issue, but I had to explain this to a banker when I was opening a business bank account. Thus, I recommend not including any symbols or using & or – (hyphen) only.
2. Be aware that the name of your LLC will appear on your business transaction.
3. There are rules for the LLC names, but you don’t need to worry about it now. You will figure it when you fill in the online registration form. I listed few examples below:
– Capitalization does not matter.
– You must add “LLC” or “L.L.C” at the end of your business name and cannot use the word like “Corp.” and “Inc.”.
2. Find your state’s website where you can register a new business
Since you’ve figured out which LLC’s name is available for you to use, it’s now time to apply for an LLC in your state. Each state has its own government website where you get the application form, and you can apply through either mail or online. I recommend online filing because it’s easier and faster for registration and approval.
Hawaii as Examples:
LLC approval time is 3-5 business days if you file online.
LLC approval time is 7-10 business days if you file by mail.
Create an account on eHawaii.gov, visit Hawaii Business Express, and press “Get Started” to register a new business.
3. Fill out the Online Registration Form
As you fill out the registration form online, you may encounter unfamiliar terms and concepts.
Don’t worry, there’s no need to get stressed. I’m here for y’all. Let me explain to you one by one.
First, fill in the basic information: your LLC name, mailing address, etc.
The Period of Duration
Unless you have a specific date you want to close your company, “Check at-will” is most common.
Registered Agent
You basically need to input a local’s information who lives in the same state where you’re opening a new business. It can be yourself, a family member, or a friend. Anyone who lives in the same state and can receive letters from the government will work well.
If you don’t know anyone, you can also hire a firm in the state. Search “Registered Agent [StateName]” on Google, and choose one. It costs around $49 per year.
Tips:
- The simplest way is to write down your information. Even if you’re holding a different state’s id during a transitional period, it works.
- If you have to hire a registered agent firm, my advice is to avoid using Legal Zoom. I had a horrible experience with Legal Zoom – and this only represents my own personal experience and may be different for others – but I would suggest hiring a local firm from google search instead.
Manager-managed or Member-Managed Company?
Manager-Managed
Your LLC has a structured hierarchy among the members like managing roles and non managing roles. If you have a business partner who doesn’t want to be involved in the day-to-day operation (ex: passive investor), manager-managed can be an option.
Member-Managed
Your LLC will be managed by the member(s). All members are expected to take part in the day-to-day operation. This is a more common choice; in some states, LLCs are member-managed by default under state law. There are 2 types of member-managed LLC: single-member and multi-member.
(1) Single-member LLC
You are the only member and owns 100% of your LLC. The LLC’s profit will become your own personal income; You will have to make an owner’s draw – signing a check to yourself – to allocate the LLC’s profit into your personal bank account.
The LLC’s profit will become your own personal income by making an owner’s draw.
(2) Multi-member LLC:
You have business partners when starting this LLC so it becomes a multi-member LLC. Most states treat a multi-member LLC as a partnership as a default.
If you’re forming a multi-member LLC, you will eventually work on the Operating Agreement and I will write more details about the Operating Agreement later in this post. Don’t worry too much about the details of the Operating Agreement at the current stage when you’re filing the registration form.
At this stage, you just have to focus on one thing. Talk to your partner and be on the same page.
Discuss with your partners how much share % (the ownership) of the company you would like to take because you will put how much money (capital contribution) and provide what kinds of works (service, labor, time contribution). Forming a mutual understanding and expectation among your partners is crucial to run the company smoothly.
The profits of LLC will be shared among the partners according to the share % by making an owner’s draw.
For example, if an LLC has made a $100,000 profit and there are 2 founders, Amy with 60% share and Andy with 40% share. Then Amy takes $60,000 as her personal income and Andy can take $40,000.
Tips:
- Most states treat a multi-member LLC as a partnership as a default unless you want to specify a different structure in the Operating Agreement.
- If there are 2 founding members, I would personally say avoid dividing the share into 50:50. 49%:51% will be better instead.
- You can first start the LLC as a single member and later change it into a multi-member. It’s a bit troublesome though. I will share the details in a future post.
- Although an LLC is multi-member and member-managed, you can structure the company with a hierarchy among the members by specifying the terms in the Operation Agreement.
Check “Shall not be liable for the debts, obligations, and liabilities of the company”
This is the most common. You can check other “shall be liable~” if you want, but I don’t see the big benefits of doing so.
4. Submit the LLC registration form online and wait for approval
You’re basically done with your registration form! Submit the form. There is a one-time state filing fee of $51, and there will be an annual fee of $15 every year from the next year.
Tips: Article of Organization
You basically worked on the Article of Organization as you fill the registration form. You don’t need to create another document called “Article of Organization”.
Once you submit the form, online filing will take 3-5 business days for approval, and mail filing will take 7-10 business days. You will receive the confirmation via mail or email, and receive the document that shows the state’s approval.
Once your LLC registration form gets approved by the state, your LLC is now active! Remember the first step of checking the availability of the LLC Name in your state? If you input your LLC’s name, it will appear on the website.
5. Apply for EIN on irs.gov
Your LLC is Active, now let’s apply for EIN (Employer Identification Number) – which is basically your LLC’s federal tax id – on the IRS’s Website. It’s FREE and you will get your EIN INSTANTLY.
Press “Apply Online Now” and it will lead you to the page below.
Click the “Begin Application” button, and start filling out the form. Many parts will overlap with the state registration form. The form is straightforward with thorough explanations about the unfamiliar terms. Once you finish the form, you can get the EIN right away. SAVE THE DOCUMENT called Form SS-4. You will need this form when you open a business bank account.
Tips
This ugly-looking IRS.GOV website is the ONLY WEBSITE WHERE YOU SHOULD APPLY for EIN. If you type “Apply EIN IRS” on google search, there are many websites that will TRICK YOU and CHARGE YOU a few hundreds dollar for getting an EIN. See the image below.
Do you see the mark saying Ad? These websites pretend like it’s part of the IRS and often have a better-looking website; they trick and rip novice business owners off. I actually got tricked and wasted $249 before and later discovered that you can actually get EIN for free and instantly if you use the IRS website.
6. Apply for business licenses and permits
After your LLC is approved by the state and has obtained EIN from the IRS, you will need to apply for licenses and permits complying with state and local government. There is a state website handling licenses and permit, and you will fill in the form specifying your industry.
For Hawaii as an example, you file it on https://hitax.hawaii.gov/_/. You select the licenses that you need for your business and make a payment. Once you make a payment, you will get the receipt in your email right away but this doesn’t mean your application just got approved. It takes 3-5 business days for approval and will send you the confirmation email when it’s done. Until you receive the confirmation email, you won’t be able to log in to the portal with your account.
If you have any questions, calling the Tax Department of your state will be MOST HELPFUL. For the Hawaii Tax department, their phone number is 808-587-4242.
7. Open a Business Bank Account
Yay! You’ve got your LLC active with business licenses & permits & EIN! Now, let’s prepare the documents that you need to open a business bank account.
(1) Choose a bank for your business bank account
There are many bank options. I see many YouTubers recommend Chase Bank for a business bank account.
In my case, I chose American Savings Bank because of the following reasons:
– My business is in Hawaii, and there’s no Chase or Bank of America branch on the island of Oahu.
– I saw an online article saying that this bank will be most suitable for small businesses. Indeed, I visited both Bank of Hawaii and American Savings Bank, and I didn’t see the perks for Bank of Hawaii.
– The Bank branch was within walking distance
It’s not like I highly recommend American Savings Bank. Honestly, the process wasn’t so smooth and I later heard that the Zelle transaction may not work on American Savings Bank. Also, I discovered that wire transfer from Chase costs $25 and from Bank of American costs $3.
Tips
I recommend you select a bank that has a branch in your neighborhood. In my opinion, having face-to-face meetings with the same banker was most effective in getting the tasks done. Here are the reasons why:
– When you call a bank, it leads you to the lengthy automated call and asks you to dial in for specific departments. You may get transferred across multiple departments and different managers, which makes you repeat your stories multiple times. This process can be very stressful.
– In my case, I visited the bank and found the same banker multiple times because my banker made mistakes and didn’t reach out to me for completing my case. When you make acquaintance with a banker, you know whom to find and solve your issues. Waiting for a call or email can cause a delay. Just find the person and have a talk. Then you can be sure that your task is done at least.
(2) Go to the Bank’s website and see what documents you need to open a business bank account for LLC.
In summary, a bank is asking for 2 types of document:
(1) Documents that you can download online
(2) Documents that you need to work on
Documents that you can download online
- Form SS-4 (EIN Document)
- Article of Organization (DCCA Form LLC-1 or Form FLLC-1, date stamped by DCCA)
- Certificate of Good Standing
You can download these forms from the websites (IRS & State) where you registered your company. Although Form SS-4 isn’t included in the image above, the bank actually requires it. Thus, I recommend you print out Form SS-4, a proof of EIN.
For Hawaii, https://hbe.ehawaii.gov/BizEx/home.eb is the website where you can download the Article of Organization and Certificate of Good Standing. For Certificate of Good Standing : (Login > My Dashboard > My Businesses > Click Your LLC > Under General Info, you can purchase a Certificate of Good Standing for this business with $7.50)
Documents that you need to work on
- Bank Application Form
- Resolution (the Operating Agreement and/or Meeting Minutes)
Each bank has an application form for opening a business bank account. You can download the form from the bank’s website. Fill out the form and bring it with other document to the bank.
Resolution (The Operating Agreement & Meeting Minutes)
Now is the time where you need to work on the Operating Agreement. The Operating Agreement is a contract between the founding members showing mutual understanding. Meeting Minutes is a document that shows that all founding members had an official meeting regarding important matters of the company including the Operating Agreement and put signature for agreement.
Tips:
There are many free online templates for the Operating Agreement and Meeting Minutes. States and federal government do not require you to submit the Operating Agreement when you form a company, but banks do. If one of your founding members is not a US citizen, the bank may ask you to bring his/her green card id or passport when you apply for a business bank account. Lastly, a bank may require you to deposit $100 at the end, so prepare $100.
Conclusion
You’ve completed all the 7 steps of starting an LLC online by yourself! Hope this article helped you and saved your time and money!
