Forming an LLC in the United States

3 min. read
Published: Feb 13, 2024
Last Updated: March 06, 2024
  • The information provided on this blog is for general informational purposes only and should not be construed as legal advice or a substitute for consultation with a licensed attorney. For personalized guidance, please consult with our attorneys.

How to Incorporate a Limited Liability Company (LLC)?

The first step to establish an LLC is to file “articles of organization” which is equivalent to the “certificate of formation” or “certificate of organization” with your state’s business filing office, usually the Secretary of State. Obtaining a business license from the city or county government is essential which needs to be renewed every year with the cost of around $20 to $100.

Forming an LLC will not change anything for federal income tax purposes. Single-owner LLCs are taxed equivalently to sole proprietorships, and multiple-owner LLCs are taxed similarly to partnerships.

The IRS will treat it as a personal business, which means the owner will pay self-employment taxes on their share of the profits. The owner will be required to pay quarterly estimated taxes if they expect their LLC income to exceed $1,000 in a year. An LLC owner is not taxed separately from the company. Instead, all business profits and losses are passed through to the owner and reported on their personal tax return as part of personal income.

LLC formation in California, Delaware, and Wyoming

In some states like California, LLCs are taxed an additional franchise tax regardless of how much an LLC earns. California’s LLC filing fee is $90 and the ongoing LLC fee is $810. LLC filing fee is the same in Delaware with $90, however, the ongoing LLC fee is substantially cheaper with $300. Wyoming has $100 as the cost of LLC filing and only $50 as ongoing LLC fee.

California approves LLC forming within 3-5 business days, except during the peak filing period from December to January which can extend the process up to 6-7 business days. LLC can be filed online or by mail in California.

In Delaware, after completing the Online Incorporation Form, businesses typically receive their formation documents within 4-6 business days. Delaware is a business-friendly state with no income or sales tax if the business does not operate in the state and there is no tax on intangible income, like trademark royalties, making Delaware beneficial for intellectual property companies.

Filing an LLC can take 5-7 business days in Wyoming. There is no state income tax on LLCs. Wyoming offers asset protection and limited liability which makes LLC assets safe from personal liabilities. The state has no personal income tax or corporate income tax and the sales tax is around 4.0% in Wyoming.

Make it happen with OguzLaw. From formations to ongoing business filings, we help you stay on track as your business grows.

    Team Leader

    Gulbabil Kokver

    Oguz Law

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