LLC
(Limited Liability Company)

The flexibility you want for your business — with the protection you need.

Advantages of an LLC:

  • Protection of your personal assets
  • No taxes at the corporate level (pass-through taxation)
  • Ability to structure your company to fit your needs

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What Is An LLC?

Short for “Limited Liability Companies,” LLCs are one of the most common entity types used by small business owners due to their flexible structure. Another major benefit of LLCs is that they help protect your personal assets by “limiting” your liability as a company owner.

The IRS defines a Limited Liability Company as a:

“[B]usiness structure allowed by state statute. Each state may use different regulations, and you should check with your state if you are interested in starting

a Limited Liability Company.”

Forming an LLC involves filing a document called the Articles of Organization with your state’s secretary of state. Because of regional differences, the exact fees and administrative steps vary from state to state.

Regardless of which state you form an LLC, however, the following rules apply to all LLC business entities:

  • Owners of an LLC are called “members.” Members may include individuals, corporations, other LLCs or foreign entities. However, they cannot be banks or insurance companies.
  • An LLC can be formed by one or more members. There is no maximum number of members.
  • There cannot be more than one active LLC with the same name in the same state.
  • For federal tax purposes, an LLC must choose to be treated as a Sole Proprietorship, Partnership or Corporation. Otherwise, it is disregarded as an entity separate from its owner(s).

HOW DOES LLC TAXATION WORK?

If only one person is establishing an LLC, it is called a “Single Member LLC.” A Single Member LLC is taxed as a Sole Proprietor, meaning profits and losses are passed to the individual’s federal tax return (IRS Form 1040). If a husband and wife form an LLC together, some states (such as California) allow the business to be classified as a Single Member LLC for federal tax purposes.

If there is more than one member in the newly formed business, it is referred to as a “Multi-Member LLC.” By default, Multi-Member LLCs are taxed as Partnerships, meaning profits and losses are passed to each member’s individual federal tax return (IRS Form 1040).

Members of an LLC can also elect to be taxed as a Corporation:

  • If electing for C-Corp taxation status, profits and losses are reported on IRS Form 8832.
  • If electing for S-Corp taxation status, profits and losses are reported on IRS Form 2553.

LLC taxation also exists at the state level, with details, fees and requirements varying from state to state.

In California, for example, there is an income-based annual fee for any LLC earning more than $250,000 in a single tax year. However, there is also an annual flat tax of $800 for all LLCs — regardless of their earnings for the year. This $800 tax is one reason why some small businesses elect not to form an LLC. This is especially true if the benefits of liability protection do not outweigh the cost of the state tax.

To find out what state-specific LLC taxation rules apply to your business, visit your state’s Department of Revenue.

Benefits of an LLC

  • Protected assets: LLCs provide limited liability protection for their owners (members). This means lenders, banks and creditors cannot pursue owners’ savings accounts, homes or other personal assets to pay off company debts. With Partnerships and Sole Proprietorships, the company and owners are legally considered the same — leaving their personal assets exposed.
  • Pass-through tax: LLCs generally do not pay taxes at the corporate level. Any business profits and losses are “passed through” to the owners, who report these earnings on their personal income tax returns. 
  • Heightened credibility: Due to their legal corporate standing, forming an LLC can make your company look more professional and legitimate when working with lenders, employees, vendors, suppliers and prospective customers.
  • Minimal compliance requirements: LLCs face fewer yearly and ongoing state-enforced filing requirements than S-Corporations and C-Corporations do.
  • Flexible management arrangement: LLCs are free to establish any organizational structure agreed upon by the business owners — whether they wish to be managed by members or by supervisors. This is in sharp contrast to a standard corporation, where a board of directors supervises important decisions and officers manage day-to-day issues.
  • Very few restrictions: Unlike with an S-Corporation, there are fewer limitations on who can be an LLC owner or how many owners an LLC may have.

 

Quickly Obtain an EIN for Your Limited Liability Company

Before forming an LLC in your state, you must first obtain an Employer Identification Number (EIN) from the IRS. This unique Tax ID is what state and federal agencies use when determining your business’s tax obligation for the year.

Applying for an LLC EIN is often a time-consuming process due to extensive paperwork and approval delays. With our intuitive one-page form, however, you can quickly apply for your Tax ID in just a few minutes.

Apply For LLC EIN

LLC FORMATION

Our one-page Tax ID application also asks all the state-specific questions required to form a new LLC on the state level— eliminating the need to fill out separate paperwork. By completing our online LLC Formation application, you’re filing to launch an LLC in your home state, as well as easily obtain a Tax ID Number from the IRS at the same time.

After you fill out our online application, our tax specialists will check your paperwork to verify its accuracy. This review process helps to reduce potential mistakes that might delay the approval process. Once everything has been checked, we will then file all the LLC and EIN paperwork with the appropriate state and federal agencies — entirely on your behalf.

With our LLC formation services, you can track the progress of your formation status and LLC paperwork using our free, online portal. If you already have an LLC EIN and need to start the state formation process for your LLC, GovDocFiling has a separate LLC state formation form you can fill out to complete the process.

START LLC APPLICATION

Select Entity Type

The first step is to choose which entity classification is right for your business. If you are unsure, take an easy survey and find out which one is best for you!

Start Survey

Get Tax ID Number

The second step involves submitting an application for an LLC EIN from the IRS. You will receive your Tax ID online, quickly and easily.

Start Application

APPLY FOR LLC

The final step involves legally forming your new LLC. If you have filled out our Tax ID application, then you have already completed this step. Congratulations.

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