Form an LLC Online for Free, Quickly and Conveniently

Can you really form an LLC online for free? Wondering how it works and which LLC services you should use? If you’re struggling with these questions, we’re here to help.

Read this detailed guide to find all the information you need about free online LLC formation.

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Why Form an LLC
LLC vs. Other Entities
How to Form an LLC
Our Top Recommendation
Cost to Form an LLC
FAQ

What Is an LLC?

An LLC (Limited Liability Company) is a popular business structure in the United States that combines the flexibility of a sole proprietorship or partnership with the personal liability protection of a corporation.

It’s a legal entity that provides business owners with legal protection for their personal assets while offering tax advantages and simplified management compared to corporations.

If you want to form your LLC yourself, follow our step-by-step instructions, mentioned later in this guide.

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Why Form an LLC Over Other Entities

LLCs offer a lot of advantages over other business entities. You get the liability protection of a corporation, without the strict management rules and formal structure. When you form an LLC online, you will get the following benefits.

Liability Protection

LLC owners (also known as members) are generally not personally responsible for business debts or lawsuits. When you form an LLC online, you create a legal entity that’s separate from its owners and is responsible for its debts and liabilities.

LLC members cannot be held responsible for paying off the LLC’s debts and their personal assets are protected in case the company fails to pay off the debtors. In case of a business lawsuit, LLC members are protected and not held liable.

Affordability

You can form an LLC online by paying the state filing fee. It’s simple and affordable to form, compared to more formal business structures like a corporation. You can even hire a professional like Tailor Brands and still get the service for free.

The ongoing costs of running an LLC are lower than that of a corporation as there are fewer record-keeping and filing requirements. There are no mandatory meetings or the need to maintain detailed meeting and financial records for an LLC.

Ease of Management

Limited liability companies offer a lot of flexibility to members on how they want to run their businesses. This is particularly useful when you start a small business with few members and want complete control over how your business will operate.

Unlike corporations, which have strict management guidelines, often dictated by the state, LLCs can choose how they want to run. Members can decide the decision-making process and assign managers to take care of operations.

Ownership Flexibility

When you form an S-corp, you are limited by how many shareholders the business can have and who can be a shareholder. Limited liability companies have no such limitations, neither on the number of members they can have nor the eligibility.

A single-member LLC will only have one member, but a multi-member LLC can have as many members as needed. Even non-residents of the US can be members of an LLC, but they can’t be shareholders in an S-corp within the country.

Flexible Tax Options

An LLC can choose to be taxed as a sole proprietorship, an S-corp, or any other entity, depending on the number of members. A single-member LLC will follow the the pass-through taxation of a sole proprietorship, by default.

A multi-member LLC can opt for the pass-through taxation of a partnership or choose to be taxed as an S-corp or a C-corp. Members can decide based on the tax laws of the state of LLC formation and choose the most beneficial structure.

Other Legal Rights

Unlike sole proprietorships and partnerships, which are dependent on their owners, LLCs are separate legal entities. They have certain legal rights, similar to those individuals have. This gives LLCs an edge over some other business entities.

An LLC has the right to enter into legal contracts, without involving the members. It can also buy assets, such as real estate, equipment, and property in its name. This boosts the personal liability protection for members by keeping them separate.

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Why Choose an LLC Over a C-Corp

If you want to form an LLC online but are still confused about whether it’s the right choice over a C-corp, this will help. Here’s a quick overview of their key differences to help you make the right choice.

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Feature	Limited Liability Company(LLC)	C-Corporation (C-Corp)
Taxation	Pass-through taxation: profits pass to owners who file individual tax returns.	Double taxation: corporate taxes on profits + individual taxes for dividends.
Tax Rates	Owners pay taxes at individual tax rates.	Corporations: 21% federal rate. Shareholders: Taxed on dividends at individual tax rates.
Ownership Restrictions	No limit on the no. of owners (members); can be individuals, corporations, or LLCs.	An unlimited number of shareholders; can be foreign individuals or entities.
Stocks	Limited liability companies cannot issue stock to raise capital.	Multiple classes of stock are allowed.(e.g., common, preferred).
Management Flexibility	High flexibility. Members decide how they want to run the LLC, with no external guidelines.	Must follow strict management formalities (e.g., board meetings, minutes, bylaws).
Liability Protection	Limited liability protection for members.	Offers one of the best liability protections among all business entities.
Ability to Raise Capital	Low, as there are no shares or stock. However, it can get loans and investor funding.	Easier to raise capital, can issue multiple types of stock, and can have unlimited shareholders.
Ideal For	Small businesses that want a simple structure that’s easy to manage.	Large businesses that plan to grow rapidly, raise venture capital, or go public.

Ready to Form an LLC Online?

If you decide to form an LLC online over a C-corporation, Tailor Brands can help. The best part is that you can form an LLC online at zero cost.

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Why Choose an LLC Over an S-Corp

A common dilemma among people who want to form an LLC online is whether an S-corp would be a better choice. Both have pros and cons, so you need to make the choice.

Here’s a quick comparison to help you decide if you want to form an LLC online or an S-corp.

Swipe horizontally to view the full table

Feature	Limited Liability Company(LLC)	S-Corporation (S-Corp)
Taxation	Pass-through taxation by default, but has the flexibility to be taxed as a corporation.	Pass-through taxation where income is reported on shareholders’ tax returns.
Self-Employment Taxes	Self-employment taxes on all net income (unless it’s being taxed as a C-corp).	Only the salary is subject to self-employment taxes; distributions are not.
Ownership Restrictions	No limit on the no. of owners (members); can be individuals, corporations, or LLCs.	Limited to 100 shareholders, who must be US citizens or permanent residents.
Stock Issuance	Cannot issue any type of stock or distribute shares.	Can issue stock (only one class of stock allowed). It’s good for raising capital.
Management	More flexible management structure (members or managers can run the LLC).	Not very flexible. S-corps must have a board of directors and officers.
Profit Distribution	Flexible. LLCs can allocate profits in any way agreed upon by members.	Must distribute profits in proportion to the share ownership of shareholders.
Formation Costs	Generally lower than that of an S-corporation.	Generally higher than the cost of formation for a limited liability company.
Ongoing Requirements	Less formal; no annual meeting requirements, fewer corporate formalities.	Must hold annual meetings, keep minutes, and comply with other corporate formalities.
Tax Flexibility	LLCs can choose to be taxed as a sole proprietor, partnership, S-corp, or C-corp.	No flexibility; all income flows through to shareholders’ individual returns.
Ideal for	Entrepreneurs who need flexibility and want a simpler, less regulated structure.	Small businesses with fewer owners, looking for a tax-efficient structure.

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How to Form an LLC Online: A Step-By-Step Guide

9. Open a Bank Account

You’ll need your LLC formation documents to prove your LLC is a legal entity.
Next, you’ll need an EIN to prove your LLC’s identity and credibility to banks.
You’ll need to provide business information, such as name and address.
An LLC operating agreement to prove who can manage the account.
You may also be asked to show business licenses and permits to some banks.

10. Get Your Business Insured

General liability insurance to protect against claims of bodily injury.
Professional liability insurance protects against claims of negligence or errors.
To protect physical assets, get business property insurance.
Workers’ compensation provides medical benefits and wage replacement.
Product liability insurance for claims of injury caused by unsafe products.

11. Apply for a DBA

You can apply for a DBA if your LLC name is too long for marketing purposes.
Acquire multiple DBAs to give distinct brand names to different brands.
When you expand into new geographic markets, you may need a local name.
Instead of multiple LLCs for different businesses, you could get multiple DBAs.
Some businesses also get a DBA to give a different name to their online store.

12. Comply with Regulations

File your taxes accurately, ensuring you don’t miss the annual tax filing deadline.
File your LLC’s annual report on time and pay the state filing fees, as required
If you change your registered agent, you need to notify the state authorities.
Renew all licenses and permits before they expire, to stay compliant.
If there are any changes in ownership structure, notify the authorities.

1. Choose an LLC Name

Pick a name that reflects your business and allows scope for growth.
Ensure your business name is unique and not being used by any other business.
Keep it short, easy to spell, and easy to remember for your customers.
Avoid using any misleading or deceptive words or phrases in the name.
Always check if a matching domain name is available before you finalize.

2. Reserve Your LLC Name

Find out if your chosen state of formation allows business name reservations.
Typically, states allow you to reserve LLC names for 90-120 days, but not more.
Some states allow a renewal of the name reservation, but most do not.
Find the filing fees for reserving a name for your LLC within your chosen state.
Your reserved LLC name will be official once you file the LLC application.

3. Select a State

Choose your home state, as it’s easier to run a business from where you reside.
If your home state has high tax rates, choose other states to form an LLC online.
The first choice should be states that levy no taxes, which can save money.
Consider ongoing compliance requirements when choosing a state.
Opt for states that offer business-friendly laws to form your LLC online.

4. Pick a Registered Agent

Decide if you want to be your own agent or outsource to a professional.
Choose if you want an individual or agency to handle your legal documents.
If you plan to operate your business across states, opt for a national agency.
Look for agents that also offer legal services or compliance reminders.
Ensure that your chosen agent meets the eligibility criteria and state requirements.

5. File the Articles of Organization

Include information about your LLC, from its name and address to its purpose.
Add details on LLC members, including their names, addresses, and roles.
Provide the name, address, and other info of your registered agent.
Add information about the organizer—the person filing the Articles of Organization.
Mention if you plan to run your LLC perpetually or for a specific duration.

6. Draft an Operating Agreement

Mention the ownership structure of the LLC, including member roles.
Add the management structure and decision-making process as well.
Mention the initial and planned capital contributions by each LLC member.
Create guidelines for how and when the profits and losses will be distributed.
Mention conflict-resolution procedures—mediation, arbitration, etc.

7. Apply for an EIN

You’ll need to apply for an EIN to open a bank account with some banks.
The most common use case of an EIN is that it’s required for filing payroll taxes.
You’ll also need one if you want your LLC to be taxed as a C-corp or an S-corp.
Having an EIN shows vendors, banks, and customers that your LLC is legitimate.
It builds trust with investors, who’ll be more likely to invest if you have an EIN.

8. Get Licenses and Permits

Businesses often need a general business license to operate in specific locations.
Regulated professions like real estate and consulting, need professional licenses.
Businesses in the food or medical industries may need health permits.
If you run a freelance business, you need a home-based business permit.
You may need federal licenses if your LLC is in a federally regulated industry.