How Long Does It Take To Set Up an LLC for Your Own Business?

8

Min Read

Tom Smery

Almost everyone shares the similar dream of starting their own business. This gives you the benefits of being a business owner, and more importantly, being your own boss.

One way you can achieve this is by forming your own limited liability company (LLC). This offers some benefits different from the ones given from a sole proprietorship.

But how long does it take to set up an LLC? The average data processing time for most states is about seven to ten business days. 

Other states could take up to four to six weeks to finalize. We’ll break down why it will take this long to form your LLC and start running your business.

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What is an LLC?

A Limited Liability Company (commonly known as an LLC) is a business structure created under state law that offers the benefits of pass-through taxation and limited liability protection. We’ll explain what these are later in the article.

These are the key differences between an LLC and a sole proprietorship.

Typically, a person may change a sole proprietorship to an LLC business. However, sometimes an LLC can also be set up as the first business.

Similarly to corporations, an LLC is an independent legal entity created to be separate from the owners.

This allows a business owner to not be held personally responsible in the case that the business goes through debt, bankruptcy, or any form of liability.

The owners are able to conduct business while protecting their personal assets. If the business goes through hardships, the only asset that can be seized is the business bank account or any property strictly related to the business.

How to Create an LLC

Before we get into how long an LLC takes to set up, let's take a look at the LLC formation process and the steps you need to take to file this business structure.

LLC Requirements

When setting up an LLC, you are required to file a Certificate of Organization form. This is also commonly referred to as the Articles of Organization.

The Articles of Organization verify your LLC within the state. This legally binding document is sent to the Secretary of State for processing and approval.

The following are included in your submission of the Articles:

  • You need an Federal Employer Identification Number (EIN) given by the IRS and a business license.
  • You must have a unique name for the LLC that does not resemble any existing companies
  • The business name must include the words "limited liability company" or "LLC".
  • The street address of the state's office where the LLC records will be maintained
  • You must explain the general characteristics of your business and the business operations
  • The business address where the company will be located
  • The member names and signatures along with their addresses
  • The name and address of the designated registered agent for the business

Keep in mind that you will also need to pay a filing fee when you are filing your Certificate of Organization form.

Also, you should obtain an LLC Operating Agreement when you are setting up your LLC. Operating agreements are not mandated by the state, however they are helpful for you and your business. They outline the management of your legal entity while also helping with your federal taxes.

Along with your EIN, you may also need to get a zoning permit. These legal documents will make sure that you are following the requirements of the area when you are operating your business.

Depending on your state, there can also be some differences in the process. For example, the state filing fee may be different. It is worth consulting with a law firm to confirm the laws in your state to avoid any additional fees.

Establishing an LLC

When you have all of the necessary documents, you are ready to begin the process of your LLC formation.

The first thing you need to do is submit the Articles of Organization. Doing this will register your unique business name. It will allow the state to process your submitted documents.

Some states will also require a business to submit an annual report on their business activities. So, you should be ready to record and provide that information to the state office.

You also need to select a registered agent to communicate and serve as the middleman between your LLC and the state government. Each state requires an LLC to have a registered agent to process documents and ensure that you are compliant by maintaining paperwork.

Lastly, you should finalize your operating agreement when you form an LLC. Remember, this agreement will serve as the guideline for your organization and operations.

Read more about the best States to form an LLC in.

How Long Does it Take to Set up an LLC

Each state has its own specific set of rules and requirements for setting up an LLC and processing the paperwork. This means the time it takes to set up an LLC can vary depending on where you are. 

The typical time  is 7 to 10 business days while in some other states it could take about 4 to 6 weeks.  For example, Arizona takes about 22-27 business days to process the submitted documents.

After you file your application, the state will review and approve your submission. In some states, it could be as be as fast as 3 business days as they will approve the articles of organization immediately.

It is worth noting that filing online is generally faster and will take less time to form your LLC.

You can file the documents online in mere minutes, or submit the documents by regular mail which can range from a few business days to weeks.

Some services, such as GovDocFiling Packages, allow you to file documents online within minutes.

The total turnaround time to form an LLC varies by each state. It depends on how fast that state processes business filings.

It is also worth keeping in mind that there may be delays due to COVID 19. Certain states have suspended some services which may affect business filings and the time it takes to review applications. 

How Long Does it Take for an LLC to Get Approved?

So how fast can you get an LLC approved and formed in your state?

First you should make sure that you have all of the documents needed for your LLC application. Once you have submitted your application, your application will be reviewed and the approval time will be based on your state.

In some states, once all of your information is received, the state agency will often issue approval for the LLC within only three business days.

LLC formation can be quick depending on the state and if they allow options to speed up the process.

Expedited or Rush Processing. How to Speed Up the Processing Time

In some cases you can request expedited processing. If you choose to do this, your application will be reviewed ahead of others.

It depends on your state and the price of the additional fee will vary. However, it can greatly reduce how long it will take to form your LLC.

The expedited processing can reduce the processing time by up to 10 business days.

Since expediting depends on the states and each state's timeline will vary, not all states will offer this option.

For example, all LLC filings in California are approved within three to five business days, so they don't offer an expedited filing option.

In this scenario, the only way to speed up your LLC formation would be filing it online instead of regular mail.

How Long is an LLC Good For?

When you form an LLC, it can be good for one to two years depending on the state that you are located in. When the period ends, you must renew your LLC.

The renewal fee for your LLC will vary based on the state that you are set up in.

How Much Does it Cost to Set Up an LLC?

The process to form an LLC isn't complicated as long as you have the necessary documents. It won't cost you a lot of time.

It also won't cost you much money either.

Depending on the state, the LLC fees to set up and file paperwork will range anywhere between $40 to $500.

If you opt to use filing services, then they can charge an additional fee to assist you with the procedures.

You can also incur more fees if you choose to put a rush on your LLC processing.

The Benefits of an LLC

Why should you switch to an LLC? At what point do you need a limited liability company?

The LLC benefits are different from a sole proprietorship. As mentioned earlier, the two major benefits are pass-through taxation and liability protection to safeguard your personal assets.

Pass-Through Taxation

As the owner of an LLC, you will only be required to file individual taxes. Business income or losses will be passed through to the business owner.

This means that the Internal Revenue Service (IRS) will not require you to file separate income taxes for your business.

Your company's profits will be part of your personal income. Therefore, it will be taxed on personal income tax rates.

Limited Liability for LLC Members

When you are running a sole proprietorship, you represent the same entity as your business. This means that you share the same debts and liabilities as your business.

If your business were to acquire debts or liability issues, then creditors will have the right to seize your personal assets such as your home, savings accounts, and more.

However, when you own an LLC, you are protected. Your business organization and your personal life are held separately. You will no longer be held responsible for the business debts and liabilities.

Being protected means creditors cannot seize the personal items of members such as their cars, bank accounts, or houses even if the company goes bankrupt. It is a good idea to have a separate business checking account for an LLC.

As long as you do not pierce the corporate veil, you are protected. Piercing the corporate veil is a unique situation in which business transactions are mixed with your personal transactions. This will void the personal liability protection that an LLC offers if a court decides to hold LLC members responsible.

Tom Smery
Tom Smery is a certified CPA for over a decade. In his free time, he writes articles to pass on his expert knowledge on taxes and accounting. Thomas has a wide range of deep knowledge on 1099 taxes, and finance topics. You can find him fishing when he is not preparing taxes for his clients or writing about accounting.

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