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Cheapest Way to Form an LLC

written by: •edited by: Ronda Bowen•updated: 8/7/2010

If you’ve chosen a limited liability company as the entity for your business, what is the cheapest way to form an LLC? Should you use an attorney or can you go it alone? Jean Scheid takes a look at how to form an LLC.

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    What Is an LLC?

    An LLC or limited liability company is not a corporation or a partnership, but it does offer some of the same benefits to its members. Much like a corporation, the members of an LLC are not personally responsible for company debt, can have unique distributions to members, and it does not require the members to record, retain or keep meeting minutes. An LLC is also a pass-through tax entity where all expenses and profits or losses are passed through the LLC and each member receives a K-1 tax form to file with their personal tax return preventing double taxation.

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    How to Form an LLC

    Most small business owners can skip the legal fees and incorporate an LLC on their own, however, larger LLCs should be handled and documents reviewed by a corporate attorney.

    The cheapest way to form an LLC is by doing it on your own. Follow these tips and download the free templates offered in our Media Gallery to help you form your own LLC:

    • Name – You will first need to find out if the LLC name you have chosen for your company is available. To do this, search your corporation commission’s database for corporation names. If you find one that matches yours, you must choose a name that is not in your state’s corporation name database. Some states, but not all, require you register your corporate name or reserve it. Most corporation commissions provide free forms on their website to help you do this. You will pay a small fee of approximately $25 to register or reserve the name of your LLC. If you state does not require you reserve your LLC name, but gives you the option to do so, you can choose whether pay the small fee or skip the reservation process.
    • Corporation Commission – First visit your corporation commission or public regulatory commission. Most state’s offer websites where you can download corporation forms for free with easy-to-follow instructions. The forms you will need are:
    • Articles of Organization – LLCs do not use articles of incorporation. You can find a sample articles of organization in our Media Gallery
    • Operating Agreement – Instead of bylaws, LLCs use an operating agreement, which again, you can find a template sample in our Media Gallery.
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    Other Items Required to Form an LLC

    You will also need to obtain a corporate book or kit and a corporate seal. The least expensive corporate kits can be found online and will include membership certificates to give to each member of the LLC showing their contribution share, a corporate seal, and book to keep all of your corporate records. StockCerts.com offers corporate kits with 20 membership certificates and a corporate seal at around fifty dollars.

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    How to File Your LLC Documents

    Most state’s corporation commissions only require you file your Articles of Organization and do not require you submit your operating agreement. Check with your state’s corporation commission to see what they require and submit the forms with the filing fee required by your state.

    Once the state receives your articles of organization and fee, they will send you a certificate of incorporation showing your state corporation number.

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    Other Tips to Keep in Mind

    The cheapest way to form an LLC is to do it on your own. In the event you do make an error, your state’s corporation commission will help you to correct errors for either a minimal fee or no fee.

    To further help you form your own LLC, download a Corporation Checklist, which can be found in our Media Gallery.