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Form LLC: Benefits, Steps, Legal Guidance, Management

This page explains how to form an LLC, its benefits and the steps involved, and when to consult with a lawyer from ContractsCounsel for assistance.

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Quick Facts — LLC Lawyers

Should You Form an LLC?

An LLC (Limited Liability Corporation) is a business structure in which members aren’t liable for legal issues or debts belonging to the business. Some people find establishing LLCs appealing because they don’t have as many rules and requirements as other types of businesses.

But is an LLC right for you? Read the rest of this article to explore the benefits of starting an LLC, the steps involved, and how a lawyer can help you.

What are the Benefits of Starting an LLC?

Some of the most common advantages of establishing an LLC include the following:

  • Member asset protection. The members’ personal assets are protected from debts and legal concerns faced by the company.
  • Management flexibility. Members can decide to either manage the business or choose managers to be in charge of running the business (which is known as a manager-managed LLC).
  • Tax benefits. Members make use of pass-through taxation, meaning that profits and losses are passed to them and they will include their information on their tax returns.
  • Fewer compliance rules. An LLC tends to have fewer requirements for compliance than other business types.

What are the Steps of Starting an LLC?

Although starting an LLC is a simpler process than other types of companies, there are important steps to follow.

Select Your State

You can establish your LLC in any US state, even if your business isn’t going to be in operation there. If you want to set up your LLC in one state but you’ll be operating your business elsewhere, you must be registered in both states.

Different states have different rules for annual report fees, taxation, and laws, so be mindful of these. Some states are more beneficial for LLCs, such as those that don’t require you to pay income tax.

Choose an LLC Name

Your business name will have to include “Limited Liability Company” or “LLC” in its name. Requirements for what you can name your business vary by state, so you’ll have to check all the rules beforehand.

Consider Registering an Agent

An agent will receive all important business documents on your behalf. The LLC owner can be the business’s registered agent, but hiring a separate agent can be beneficial. It enables correct and proper handling of all documents to prevent legal or other issues.

Define Your LLC Management

Are you going to have a member-managed LLC (all LLC members run the business) or one that’s manager managed (the LLC is run by appointed managers)? You might need to mention your LLC management structure on your filing documents.

Draft an LLC Operating Agreement

An LLC operating agreement specifies important aspects of the company, such as management duties, operating processes, and ownership. It’s essential to draft it clearly so that it prevents disputes in the future.

What you should include in an LLC operating agreement:

  • Ownership percentages. Clearly define how much members own in percentages.
  • Duties of members and managers. This states who is in charge of daily operations and who has the right to make decisions.
  • Loss and profit distribution. How these are allocated among members in the LLC should be mentioned so there’s no confusion.
  • Member benefits and responsibilities. Your agreement should include what members will receive, such as benefits and distributions, as well as what they’re responsible for.
  • Admittance of new members. When new members are brought into the LLC, specific processes need to be followed.
  • Voting rights. Decisions that require members to vote should be states, as well as how votes are considered.
  • Buyout and sellout procedures. If a member leaves the LLC, there should be processes for the transition.
  • Transfer provisions. This section of the agreement defines who controls the transfer of ownership interests and how this should be conducted.

Understand the Legal Requirements

It’s essential to know what the legal and financial duties are of LLC members. These include tax reporting obligations, filing of annual reports, and record keeping that includes keeping accurate financial and tax records.

File the LLC Documents

You’ll file the paperwork with the Secretary of State’s office. This department might vary depending on the state in which you live. You’ll pay a state-specified fee for filing the documents.

Get an Employer Identification Number (EIN) Number

If you are operating a single-member LLC, you won’t need an EIN. However, if you have employees, will be filing excise tax returns, or you’re opening a business bank account in your company name, you will require this number.

It’s recommended to open a business bank account so that you keep the business money separate from your personal finances.

Why Do You Need a Lawyer for Starting an LLC?

Although you don’t always need a lawyer when establishing an LLC because you can file the paperwork yourself, there are advantages to seeking legal guidance.

  • A lawyer can help you conduct a trademark search for the name of your business protecting you against Intellectual Property (IP) infringement.
  • They will customize your LLC operating agreement so that it’s tailored to your specific management structure. If you already have an operating agreement, a lawyer can review it for consistency, transparency, and legal compliance.
  • They’ll protect you against liability by setting up the business correctly to avoid any issues.
  • Since state laws vary when establishing LLCs, your lawyer will ensure that you meet all the legal requirements.
  • They’ll help you with filing all the important paperwork required.

Do you need to find a lawyer for help with an LLC?

You can find one on the ContractsCounsel platform. ContractsCounsel is an online legal marketplace that connects clients with top-tier, vetted lawyers who have years of experience in helping people start LLCs.

They’re positioned to help you ensure that you follow all the correct procedures and stay legally compliant, while drafting or reviewing your LLC operating agreements to give you peace of mind.


ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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