Start an LLC
Protect your personal assets and gain credibility with a limited liability company.
How to start an LLC
Form an LLC online with fast, personalized support.
Tell us about your business
Answer a few simple questions.
We do the paperwork for you
We reserve your business name and take care of your filing.
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Get affordable legal services for every stage of growth.
Business Structure Options
There are four main types of business entities in the United States: sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Each has its own advantages and disadvantages, so it’s important to choose the right one for your business.
LLC
S-corp
C-corp
Nonprofit
Sole proprietorship
Managing your business
Limited liability
Incorporation can protect business owners and shareholders from having to personally shoulder the financial burden in case of business debts or liabilities.
Members are protected
Shareholders are protected
Shareholders are protected
Directors are protected
Sole proprietors are not protected
Management flexibility
Some entities are more rigid than others when it comes to structure.
Variety of management structures
Defined by state and federal law
Defined by state and federal law
Strict management laws
No management structure
Favorable for financing
Depending on your goals, certain entity types may be more suitable.
Gains credibility when applying for loans and grants
Can distribute one class of stock to up to 100 people
Can issue multiple classes of stock to unlimited shareholders
Gains credibility when applying for loans and grants
Often more difficult to get loans and cannot issue stock
Maintenance
Compliance requirements vary by state and entity type
Easy to maintain and often most affordable
Payroll requirements may create operational overhead
Requires more complex accounting and potentially more reporting and fees
Typically the most demanding due to tax-exempt status
No requirements or fees
Tax considerations
Tax treatment
Your choice of entity can impact your tax rate and filing options.
Pass-through taxes: Most often, LLC members are taxed on their personal tax returns
Pass-through taxes: S-corp shareholders are taxed on their personal tax returns
Double taxation: C-corp income is taxed at the corporate level first, then again at the personal level
Nonprofits can apply for tax-exempt status and donations are tax-deductible
Sole proprietorships are taxed only on their owner's tax return.
Formation fees
State filing fees are required for all legal entities. As a Rocket Lawyer member, you only pay state fees.
Fees are tax-deductible
Fees are tax-deductible
Fees are tax-deductible
Fees are tax-deductible
No fees
Choose a business structure
Compare the advantages and disadvantages of each entity type to find the one that’s best for your business.
LLC
Managing your business
Limited liability
Incorporation can protect business owners and shareholders from personal financial responsibility for business debts or liability.
Members are protected
Management flexibility
Some entities are more rigid than others when it comes to structure.
Variety of management structures
Favorable for financing
Depending on your goals, certain entity types may be more suitable.
Gains credibility when applying for loans and grants
Maintenance
Compliance requirements vary by state and entity type
Easy to maintain and often most affordable
Tax considerations
Tax treatment
Your choice of entity can impact your tax rate and filing options.
Pass-through taxes: Most often, LLC members are taxed on their personal tax returns
Formation fees
State filing fees are required for all legal entities. As a Rocket Lawyer member, you only pay state fees.
Fees are tax-deductible
S-corp
Managing your business
Limited liability
Incorporation can protect business owners and shareholders from personal financial responsibility for business debts or liability.
Shareholders are protected
Management flexibility
Some entities are more rigid than others when it comes to structure.
Defined by state and federal law
Favorable for financing
Depending on your goals, certain entity types may be more suitable.
Can distribute one class of stock to up to 100 people
Maintenance
Compliance requirements vary by state and entity type
Payroll requirements may create operational overhead
Tax considerations
Tax treatment
Your choice of entity can impact your tax rate and filing options.
Pass-through taxes: S-corp shareholders are taxed on their personal tax returns
Formation fees
State filing fees are required for all legal entities. As a Rocket Lawyer member, you only pay state fees.
Fees are tax-deductible
C-corp
Managing your business
Limited liability
Incorporation can protect business owners and shareholders from personal financial responsibility for business debts or liability.
Shareholders are protected
Management flexibility
Some entities are more rigid than others when it comes to structure.
Defined by state and federal law
Favorable for financing
Depending on your goals, certain entity types may be more suitable.
Can issue multiple classes of stock to unlimited shareholders
Maintenance
Compliance requirements vary by state and entity type
Requires more complex accounting and potentially more reporting and fees
Tax considerations
Tax treatment
Your choice of entity can impact your tax rate and filing options.
Double taxation: C-corp income is taxed at the corporate level first, then again at the personal level
Formation fees
State filing fees are required for all legal entities. As a Rocket Lawyer member, you only pay state fees.
Fees are tax-deductible
Nonprofit
Managing your business
Limited liability
Incorporation can protect business owners and shareholders from personal financial responsibility for business debts or liability.
Directors are protected
Management flexibility
Some entities are more rigid than others when it comes to structure.
Strict management laws
Favorable for financing
Depending on your goals, certain entity types may be more suitable.
Gains credibility when applying for loans and grants
Maintenance
Compliance requirements vary by state and entity type
Typically the most demanding due to tax-exempt status
Tax considerations
Tax treatment
Your choice of entity can impact your tax rate and filing options.
Nonprofits can apply for tax-exempt status and donations are tax-deductible
Formation fees
State filing fees are required for all legal entities. As a Rocket Lawyer member, you only pay state fees.
Fees are tax-deductible
Sole proprietorship
Managing your business
Limited liability
Incorporation can protect business owners and shareholders from personal financial responsibility for business debts or liability.
Sole proprietors are not protected
Management flexibility
Some entities are more rigid than others when it comes to structure.
No management structure
Favorable for financing
Depending on your goals, certain entity types may be more suitable.
Often more difficult to get loans and cannot issue stock
Maintenance
Compliance requirements vary by state and entity type
No requirements or fees
Tax considerations
Tax treatment
Your choice of entity can impact your tax rate and filing options.
Sole proprietorships are taxed only on their owner's tax return.
Formation fees
State filing fees are required for all legal entities. As a Rocket Lawyer member, you only pay state fees.
No fees
Limited Liability Company FAQs
An LLC, or limited liability company, is a business entity that offers the limited liability protection of a corporation while allowing for the flexibility and tax benefits of a partnership. LLCs are formed by filing Articles of Organization with the secretary of state in the state where the LLC will operate.
LLCs can be managed either by their members (known as member-managed LLCs) or by one or more managers (known as manager-managed LLCs). The management structure of an LLC is stated in the Articles of Organization. If no management structure is specified, the LLC will be considered a member-managed LLC.
One of the main advantages of forming an LLC is that it protects the LLC members from being personally liable for the debts and obligations of the LLC. This is known as the “corporate veil” or “limited liability shield.” Another advantage of an LLC is that it offers flexibility in how the business can be structured and taxed. For example, an LLC can choose to be taxed as a sole proprietorship, partnership , S corporation, or C corporation.
LLCs are also relatively easy and inexpensive to form and maintain. In most states, the only requirement is to file the Articles of Organization with the secretary of state’s office and pay a filing fee. There are also no ongoing requirements, such as holding annual meetings or preparing corporate minutes, that are required by law.
Articles of organization are the documents filed with a state government to establish a limited liability company (LLC). LLCs are business entities that offer personal liability protection to their owners. The articles of organization establish the LLC’s existence and purpose, as well as the names of its initial members. States have different requirements for what must be included in the articles of organization, but most states require filing fee and the name and address of the LLC’s registered agent.
The articles of organization are also sometimes called the certificate of formation or the articles of association. depending on the state.
An LLC can be formed by one or more individuals, partnerships, corporations, or other LLCs. There is no minimum number of members required to form an LLC, although some states do have minimums if the LLC will be taxed as a partnership.
It can take anywhere from a few days to a few weeks to form an LLC, depending on the state in which you are forming your LLC. The first step is to file the Articles of Organization with the state, which can be done online, in person, or by mail. Once the Articles of Organization are filed, you will need to pay the filing fee and wait for the state to approve your LLC. Once your LLC is approved, you will need to obtain an EIN from the IRS. You can apply for an EIN online, by mail, or by fax. Once you have your EIN, you will need to open a business bank account and obtain any necessary licenses and permits. Finally, you will need to file the necessary paperwork with the state to maintain your LLC status.
How long it takes to form an LLC varies from state to state. In some states, such as Delaware, it can take as little as a few days. In other states, such as New York, it can take several weeks.
The cost of forming an LLC depends on the state in which you form your LLC. Most states charge a filing fee to register your LLC with the state, and this fee is typically around $100. You may also have to pay an annual fee to maintain your LLC status, which is usually around $50. Additionally, you’ll need to purchase LLC insurance, which can cost anywhere from a few hundred to a few thousand dollars depending on the coverage you choose. Overall, the cost of forming and maintaining an LLC is typically around $1,000 per year.
1. Liability protection: One of the biggest advantages of an LLC is that it shields your personal assets from business debts and liabilities. This means that if your business is sued or incurs debt, your personal assets (like your home, car, or savings account) are protected.
2. Pass-through taxation: LLCs are “pass-through” entities, which means that the business itself is not taxed on its income. Instead, the profits and losses are “passed through” to the owners, who report them on their personal tax returns. This can save you a significant amount of money on taxes.
3. Flexibility: LLCs have much more flexibility than corporations in terms of how they are governed and structured. For example, LLCs can choose to be taxed as a corporation, partnership, or sole proprietorship. This flexibility makes LLCs a good choice for businesses that are still trying to figure out their exact business model.
4. Simplicity: Single member LLCs are much simpler to operate than multiple-member LLCs. There’s only one owner to deal with, which makes decision-making and day-to-day operations a lot easier.
5. Low cost: Forming and maintaining an LLC is relatively inexpensive compared to other business structures. In most states, you can form an LLC online in a matter of minutes, and there’s no requirement to file annual reports or hold shareholder meetings.
6. Personal asset protection: As with any business structure, forming an LLC will protect your personal assets from business debts and liabilities. This is especially important for businesses that are high-risk or involve a lot of contact with the public, like personal service businesses.
7. Tax benefits: LLCs can choose to be taxed as a corporation, partnership, or sole proprietorship. This flexibility allows LLCs to take advantage of the best tax status for their particular business. For example, if your LLC has high income but low profitability, you may want to choose to be taxed as a corporation so you can take advantage of the corporate tax rate, which is lower than the individual tax rate.
8. Increased credibility: Forming an LLC can help you gain credibility with customers, suppliers, and investors. An LLC is seen as a more professional and established business than a sole proprietorship or partnership.
9. Ease of formation: LLCs are relatively easy to form compared to other business structures. In most states, you can form an LLC online in a matter of minutes.
Common Business Structures
Find the best entity structure fit for your business
Form an S-corp
S corporations (including LLCs taxed as S-corps) provide liability protection, tax benefits and much more
Form a C-corp
Multiple classes of stock with unlimited shareholders are only available with a C-corporation.
Form a Non-profit
Set up and structure your non-profit for success with the right legal documentation
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