So, How to Start an LLC in the USA? Costs, Process, and Tax Benefits
If you’re an entrepreneur, freelancer, or small business owner, one of the smartest things you can do is to start a Limited Liability Company (LLC) in the United States. No matter if you’re in the U.S. or aren’t, getting an LLC can be a great way to get a legal business structure.
This guide uncovers how to start an LLC, the prices involved, and the way an LLC can save you money in taxes.
Why Form an LLC in the USA?
Flexibility, protection, and tax efficiency are all things you get with an LLC, especially for small to midsize businesses. This is why thousands of people start LLCs each year.
- Limited Liability: Business debts and lawsuits don’t get at your assets.
- Pass-Through Taxation: LLCs don’t pay double taxation; instead, profits are passed through to your personal tax.
- Flexible Ownership: It can consist of a single or multiple members, such as: individuals, foreigners, corporations.
- Credibility: Banks, vendors and customers tend to take LLCs more seriously than they do sole proprietors.
Here is How to Start Your Own LLC in 8 Minutes and at $0
To simplify things here, here’s a general process one can follow to set up an LLC from any U.S. state:
Choose a State for Your LLC
You can form an LLC in any of the U.S. states, even if you do not reside there. Popular states include:
- Wyoming: No state tax, low fees, and privacy.
- Delaware: Legal protection, and business friendly laws.
- Texas & Florida: Perfect features for anyone operating in your state and is free of a state income tax.
Name Your LLC
Choose a name different from the one you picked and end with ‘LLC’ or ‘Limited Liability Company.’ We check your state’s name availability database and confirm whether they are available or not with your state secretary.
Appoint a Registered Agent
According to the law, all LLCs have to have a registered agent from the state in which they are formed with a physical address. Your LLC will have someone or service to which it will receive legal documents.
File Articles of Organization
This document should be sent to your state’s business filing office online or by mail. This basic information is what it includes, like the name of your LLC, its address, and its owners.
Create an Operating Agreement
This internal document is going to tell your LLC how it will be managed. It’s not called for in all states, but it’s strongly advised, especially when you are working with partners.
Get an EIN (Employer Identification Number)
You will be required to get an IRS EIN in order to open a business bank account, hire employees, or file any taxes. You can get it free online even if you’re not a U.S. resident.
Open a Business Bank Account
Open a U.S. Bank Account under your LLC name, thus keeping your business and personal finances separate. This also lends credibility and legal protection to a complaint.
What Cost to Form an LLC in USA?
This is what you will pay:
- State Filing Fees: Depends on the state; $50 to $500 (e.g., WY: $100, CA: $70 + $800 annual fee).
- Registered Agent Services: If you make use of a service, it could cost you $50–$150 a year.
- EIN Application: Free directly from the IRS.
- Annual Reports: $0–$300/year depending on the state.
Optional Services:
- Services such as ZenBusiness or Incfile can range from $0–$300+.
- Virtual business addresses: $10–$50/month.
Tax Benefits of an LLC
Here are the multiple ways to reduce your tax burden through the use of LLCs.
- Pass-Through Taxation: Unavoidable double taxation — income is reported on personal, not business tax return.
- LLC Tax Elections: You may choose to be taxed as an S Corp (S Corporation) in order to reduce taxes on self-employment.
- Business Deductions: Note expenses such as those from the home office, travel, software, and marketing as expenses.
- International Founder Perks: If you are a non-U.S. founder you do not pay any U.S. taxes on non-U.S. income (talk to a CPA).
Can Foreigner Start an LLC in USA?
The good news is: Non-U.S. citizens and residents can actually create LLCs as well without the need for a U.S. visa or address. You’ll need:
- A registered agent in the state.
- An EIN (via IRS Form SS-4).
- The payment processor or bank account of a U.S. person (for example, Mercury or Wise).
Common Mistakes to Avoid
- Not separating personal and business finances.
- Filing annual reports or paying franchise taxes and forgetting to…
- Using your virtual business address instead of your home address.
- The lack of a clearly articulated operating agreement, especially for multi-member LLCs.
FAQs
What is the cheapest state to form an LLC in the USA?
Wyoming is one of the cheapest, with a $100 filing fee and no annual franchise tax.
How much time does it take to form an LLC?
Most LLCs can be formed within a few days to a couple of weeks, depending on the state and method of filing.
If I’m not a U.S. resident, can I form an LLC?
Yes. Online formation services and a registered agent are often used by many non-residents for forming an LLC.
Do I need a lawyer to form an LLC?
No. Almost all use services like ZenBusiness or Incfile to form LLCs or do it themselves without a lawyer.
Is an LLC better than just being a sole proprietor?
It does offer liability protection and better tax planning opportunities, yes.
