Starting a business? An LLC (limited liability company) is a popular choice for many entrepreneurs due to the liability protection and tax flexibility it provides. But how do you actually get an LLC license once you form the LLC?
Getting an official LLC license involves several key steps at both the state and federal level. This comprehensive guide walks you through the entire process of obtaining an LLC license from start to finish.
A Quick Overview of the LLC Licensing Process
Here’s a quick rundown of the key steps involved in securing an official LLC license after filing formation documents:
- Choose a unique LLC name and submit Articles of Organization
- Obtain an Employer Identification Number (EIN) from the IRS
- Apply for any required state/local licenses and permits
- Open a business bank account in the LLC’s name
- Create an LLC operating agreement
- Comply with ongoing maintenance requirements
Continue reading for an in-depth guide on completing each of these steps to get a legitimate license to legally operate your LLC.
Step 1: File Your Articles of Organization
The first step to getting an official LLC license is submitting your Articles of Organization (sometimes called a Certificate of Formation or Certificate of Organization) to your Secretary of State’s office.
The Articles of Organization includes key details about your LLC, such as:
- The LLC’s business name
- Registered business address
- Purpose of the LLC
- Names and addresses of LLC members
- Name and address of registered agent
You must choose a unique LLC name that complies with your state’s naming requirements. The name must include an LLC designator such as “LLC” or “Limited Liability Company”.
Filing fees for the Articles of Organization vary by state but typically range from $50 to $500. Many states offer expedited filing for an additional fee.
Once your Articles are accepted, your LLC legally exists! But other steps are still needed to obtain a license and legally operate.
Step 2: Apply for an EIN from the IRS
Your new LLC needs its own Employer Identification Number (EIN) for tax and banking purposes. This is essentially the business equivalent of a Social Security Number.
Although getting an EIN is not technically mandatory, it’s highly recommended for liability protection. Applying for an EIN is free and easy directly through the IRS website.
The EIN (along with your Articles of Organization) will be required for many of the next steps involved in licensing your LLC.
Step 3: Obtain State and Local Licenses and Permits
Most states and local municipalities require special business licenses and permits to legally operate an LLC, depending on your industry type. Common examples include:
- Sales tax license – Required if selling taxable goods/services. Enables collecting and remitting sales tax.
- Health permits – Needed if serving/selling food or operating restaurants, cafes, etc.
- Liquor license – Required for any business selling alcohol.
- Professional licenses – Doctors, lawyers, CPAs, contractors, etc. need professional licensing.
Be sure to thoroughly research which licenses and permits are needed for your specific business activities and location. Requirements vary widely.
Many LLC licenses can be applied and paid for through your state or local government website.
Step 4: Open an LLC Business Bank Account
A dedicated business bank account is crucial for proper financial management and liability protection.
Having a business bank account clearly separates LLC finances from your personal finances. Plus, you need the LLC’s EIN to open the account.
Step 5: Create an LLC Operating Agreement
An operating agreement is the governing document that outlines ownership stakes, voting rights, rules of operation, and other terms between LLC members.
Although operating agreements aren’t strictly required in most states, they are strongly recommended for all LLCs to help avoid disputes and clarify financial/legal matters.
Single-member LLCs can use a simple template operating agreement. Multi-member LLCs need a more detailed custom agreement.
Step 6: Ongoing LLC Maintenance
Congratulations, you now have an official license to legally operate your LLC! But that’s not the end…
To keep your LLC in compliance, you must adhere to certain ongoing maintenance tasks, including:
- Annual reporting – Most states require submitting an annual report and paying a fee to remain active.
- Tax compliance – LLCs require special tax documentation and filings. Work with an accountant.
- Record keeping – Maintain detailed company records per state regulations.
- Operating Agreement upkeep – Review and amend the agreement as needed over time.
Key Takeaways on Obtaining an LLC License
- Obtaining an official LLC license involves multiple steps at both the state and federal levels.
- Filing Articles of Organization and getting an EIN establish the LLC from a legal standpoint.
- Additional state/local licenses are usually required based on your LLC’s activities.
- Follow ongoing maintenance tasks to keep your LLC properly licensed.
- Consult legal and tax professionals for personalized guidance on licensing your new LLC!
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Frequently Asked Questions About Getting an LLC License
Do I need a license to operate my LLC?
Yes, getting a license is mandatory to legally operate your LLC in nearly all circumstances. The exact licenses and permits required vary based on your LLC’s location and business activities. But filing Articles of Organization and obtaining an EIN are baseline requirements.
How long does it take to get an LLC license?
The timeframe depends on your state. Once you submit the Articles of Organization, approval often takes 5-10 business days but can be expedited for a higher fee in many states. Other licenses and permits may take additional time. Opening a business bank account takes 1-2 weeks typically.
Does an LLC operating agreement count as a license?
No, an operating agreement is an internal governance document between LLC members. It does not grant any type of official state or federal license. Articles of Organization, permits, EIN, etc. are required for an LLC license.
Can I operate my LLC without a license?
Technically you can operate without licenses for a period before getting caught. But this opens you up to substantial penalties, fees, and potential lawsuits or legal issues down the road. It also does not grant LLC limited liability protection. Don’t risk it – proper licensing is crucial!
How much does an LLC license cost?
The cost depends on state filing fees and which licenses your business requires. Articles of Organization filing fees range from $50-$500 in most states. Some local licenses are under $100, while liquor licenses can cost thousands. Many ongoing legal/tax fees also apply.
Ready to Get Your LLC License?
We hope this guide gave you a helpful overview of the entire process for officially licensing your new LLC.
Each state and municipality has its own unique requirements. Reach out to local legal and tax experts for personalized guidance on completing the licensing process smoothly and efficiently.
The effort is well worth it for the liability protection and professional legitimacy an official LLC license provides!
Alfie Wilson, Esq., is a legal content writer with expertise in business formation, criminal law, veterans disability, family law, DUI law, personal injury, animal welfare, and legal writing. He holds a J.D. from Emory University School of Law and has experience in appellate advocacy and regulatory matters. Alfie’s passion lies in breaking down complex legal topics for a non-lawyer audience. He currently writes for law firms and non-profits on various issues and resides in Arlington, Virginia.