An LLC is popular among entrepreneurs because of the liability protection, tax advantages, and management flexibility it offers. However, one of the questions most new entrepreneurs ask is: how long does it take to form an LLC? This article by our team of experts explains the process of how long does it take to set up an LLC.
What Is An LLC?
LLCs are a type of business structure where owners can decide on their management structure and are not held liable for the company’s debts. It is a hybrid entity that combines the benefits of sole proprietorship and partnership structures.
LLCs shield entrepreneurs from being personally liable for the company’s liabilities and debts as it exists legally as a separate entity from its owners. A limited liability company can be owned by an individual or multiple people called LLC members.
How Long Does It Take To Set Up An LLC
Our experts found that the answer to how long will it take to form an LLC depends on several factors, which include the following:
Processing Time for Forming an LLC
The answer to how long does it take to form your LLC varies by state. It depends on how fast the state you choose to form your LLC processes your order. There are recommended states to form an LLC for your online company, for instance, that can only take short business processing. This takes between a few business days to weeks.
In some states, the approval time usually takes a week or up to 10 business days. Other states such as New York and Arizona can take between four to six weeks to issue an approval for business processing.
Some states can form your LLC within three business days. There are also some periods of the year when it takes a longer time than expected to form your LLC. For instance, setting up a limited company at the beginning and end of the year takes longer due to a heavy filing volume.
To know more about setting up a Limited Liability Company, read our article on How to Set up an LLC here.
LLC Expedited Processing
Our experts found that expedited processing is another factor that can influence how much time it would take to form an LLC. An expedited processing is either a feature under a pricing package or a standalone feature offered by LLC formation companies.
The expedited process can significantly cut down the turnaround time to about 24 hours and some services specifically offer same-day filing.
Fees For LLC Formation
Lastly, the pricing plan you purchase or the fee paid for the business formation will determine the time it will take your business to be set up. This fee ranges from $100 to $1000 and depends on the state you want to file your LLC in. The state will not grant the approval of your articles of organization until a full payment is made.
Our team of experts found that some LLC companies have a very affordable basic package but with a longer processing time. They charge more for same-day filing. A shorter processing time means you have to pay higher fees.
Process In Forming Your LLC
Every state has its rules and processes in setting up an LLC. However, there are basic steps to follow no matter which state you’re in. Read on to know these steps.
Choosing Your Business Name
Business name research is the initial step in forming your LLC. Business names should be unique and comply with the rules of your state. For instance, most states don’t allow two different business entities to have the same name. “ABC Techs, LLC” won’t be allowed when “ABC Techs, Inc.” is already registered.
Most states require that business names end with an LLC designator like Limited Liability Company, Limited Company, or LLC. Some restrict the use of certain words in business names, such as “bank.”
Some LLC companies offer availability checks to search for available names that can be used before submitting the necessary paperwork. Business names can also be reserved before the company’s corporation documents are filed to avoid losing them.
Articles of Organization
The next step involves filing articles of organization with the state you want. This legal document is also referred to as “certificate of organization.” This document is required to set up your company which you can get on the website of your Secretary of State. You can complete the articles of organization online or via mail.
You’re required to complete this document with your business name, address of its statutory agent, names of the LLC owner or members, and other relevant information. The state fee is paid upon submission.
This legal document establishes how your business would be managed by its members and how its operations would run. Our experts found that though this legal document is not required by most states, it is important to get it. In case the operating agreement is not available, the state law will dictate how your business operates.
Registered Agent Service
Most states require all LLCs to have a registered (statutory) agent. This agent agrees to receive all official documents, legal documents, subpoenas, lawsuits, and other important general information on behalf of the LLC. The statutory agent is obliged to have a physical street address in the state where the business is set up.
Most corporation companies provide registered agent services for a fee while some provide it free, though you or an LLC member may choose to be the agent for your business.
Employer Identification Number
Your LLC must get an EIN if it has more than one member even if it has no employee. You may not need an EIN if you form a one-member LLC and run it solely. However, according to the analysis by our experts, if your LLC (even if it’s a one-member LLC) will have employees or you choose to have your business taxed as a corporation rather than a sole proprietorship , you need an EIN.
You can get an EIN by completing an online EIN application on the internal revenue service (IRS) website. You will need an EIN for filing taxes, obtaining finances, or getting credit cards.
An LLC works well for most small business owners who want to start a business. In some states, forming businesses is relatively easy and will take only between 7 to 10 business days according to the analysis by our experts. You can opt to do it yourself, use a law firm or hire an incorporation service.