A growing number of people are starting their own business. Research shows 4.4 million small businesses were started in 2020, which is 27% higher than 2019 and the biggest increase in over a decade. While more people want to create a company, be their own boss, and set their own schedule, launching a business is not easy. Fortunately, there are LLC services that can help.
LLC formation services can help a business owner file the necessary paperwork with the state, file annual reports, serve as the company’s registered agent, and provide a whole host of services that every LLC can utilize.
Ready to learn more? This guide will provide an in-depth look at what LLC services are, how to use them, and what companies offer them.
What is an LLC?
An LLC stands for limited liability company. It’s a type of business entity that many business owners elect to set up because it offers personal liability protection. Personal liability protection keeps the owner’s personal assets, like home and car, separate from the business. Why is this important? If the company falls into debt or gets sued, the owner’s personal assets can’t be used to bail out the company.
A startup that elects an LLC as its business structure will be subject to pass-through taxes, which means the owner pays taxes on revenue earned from the business on his or her own personal tax return. (The business itself isn’t considered an entity, so the company doesn’t pay a federal business tax like a corporation would).
An LLC is just one type of business entity. Other common options include a sole proprietorship, corporation, limited liability partnership, or a C-corp. Before selecting a business entity, it’s always best to speak with an accountant and a lawyer to understand both the legal and financial impacts of each option.
How is an LLC formed?
To understand how LLC services fit into the daily business picture, it’s important to know how an LLC is formed. The steps listed below can be done by the business owner, or any of these chores can be completed by a business formation company or a company that offers LLC services.
To set up an LLC, typical, these steps are taken:
Pick a business name
Before filing any paperwork, a business name must be selected. The business can’t have a name that’s already in use by another company in the state. You’ll need to run a name availability check with the secretary of state to make sure the name is cleared to use.
A name can be reserved for 3-4 months too, which makes sure no other company takes it during that time period.
Pick a registered agent
A registered agent is a person or company that receives official company documents. Tax notices and updates from the state, for example, would be sent to the registered agent. The registered agent can be a person, like the company owner, or a company that’s hired to fill the role.
Every state requires an LLC to have a registered agent. This point of contact is listed on LLC formation documents and updated yearly with the state.
File Articles of Organization
Once a business name and a registered agent are selected, the owner must file Articles of Organization; the official documents used to register an LLC with the state. This document can be filed online, though there are some states that allow people to mail it in.
The form asks for basic information like the company name, company address, registered agent’s name, registered agent’s address, a list of managers, a description of the company, and the owner’s signature.
You may have heard the term Articles of Incorporation, but this document is used to form a corporation, not an LLC. In the same vein, a corporation uses incorporation services as opposed to LLC services.
To file Articles of Organization, there is a filing fee. The fees vary widely by state. Some charge a modest $50 while others have higher fees that can top $500.
Once a year, the information on the Articles of Organization is updated by way of an annual report. There is a fee to file this document as well and stiff penalties if deadlines are missed.
When the state approves the Articles of Organization, which can take between 1-7 business days, a business is officially registered with the state.
What are LLC services?
Certain businesses, usually referred to as business formation companies, provide online LLC services. In other words, they provide a variety of services that help a company get set up, file state-mandated paperwork, and meet compliance rules set out by federal, state, and local governments.
In a nutshell, LLC services handle timely administrative tasks that every LLC is responsible for. The type of services vary from company to company, but most offer these services:
Business name reservation
You might assume that picking a company name is as easy as coming with a unique description of your business. However, most states have rules about what you can and can’t name your company.
One of the most common rules in many states is that no two businesses can have the same name. Before you declare your business name, you must check to see that no other company is using the name. If the name is already in use, you have to pick another name.
Most states provide a business name search tool for entrepreneurs to research the availability of a name. If the name is available, but you’re not quite ready to set up your business, you can reserve the name. To do so there is a state fee, but the name is reserved for 3-4 months.
A business formation company can reserve a name for you as part of its LLC services.
As mentioned, LLC formation documents known in many states as Articles of Organization must be filed with the secretary of state to launch a business. By submitting this document, it officially registers a business with the state and is recognized by state authorities as such. This is a one-time requirement, but it can be completed by a business formation company for you.
Annual report services
After filing Articles of Organization, most states require LLCs to file annual reports, which is essentially an updated version of the Articles of Organization. Its purpose is to keep the state informed of any changes, like a change of address, managers, or registered agent.
This report must be filed within a certain filing window, which varies by state. Some states have very straightforward filing schedules where the report is due every year by April 15. Other states have rolling deadlines that are tied to a company’s registration date. So, if a company filed its Articles of Organization on February 15, an annual report is due every year by that date.
An annual report can be filed online, and there’s usually a filing fee that goes along with it. Failure to submit this report has big consequences. The state can levy fines or even administratively dissolve your business.
For these reasons, it’s important to file on time. A business formation company can help by either reminding an owner to file the report or by filing the report for the company.
Registered agent services
Forming an LLC requires listing a registered agent. A registered agent, as discussed, is a person or company that receives official documents on behalf of a company. Official documents could include tax notices, filing reminders from the state, or even service of process paperwork that’s served during a lawsuit.
Think of a registered agent as your company’s official point of contact. All important documents are sent to this person, so it’s crucial to select a reputable registered agent. Aside from selecting a person as a registered agent, a business owner can also hire a registered agent service. This is yet another feature offered by an LLC service provider.
During the formation process, a new business can designate a registered agent service as the company’s official registered agent. The registered agent is listed on the Articles of Organization and on annual reports that are filed with the state.
Obtaining an employer identification number (EIN)
Most companies need an EIN to conduct business. An EIN is a nine-digit number that’s issued by the IRS for identification purposes. This number is similar to your social security number, except it’s for your business. It’s required to pay taxes, hire employees, set up bank accounts, and apply for funding.
An EIN, which is also known as a federal tax ID number, can be obtained on the IRS website, but business formation services can also get this number for you.
Operating agreement template
Another important document that every business should have is an operating agreement. This document discusses how the business runs, who’s in charge, and most importantly, how profits and losses are divided up.
Some companies have a lawyer draw up this paperwork, but some business formation services offer an LLC operating agreement template as one of its add-ons. For a flat fee, an LLC owner can access the template and use it as a starting point for the document.
This document, while important, does not need to be submitted to the state at any time.
Additional service offered
There are additional LLC services that are offered, but again, they vary by company. Additional add-ons might include domain name registration, setting up a DBA (doing business as), logo and website design, or providing access to legal documents.
What costs are associated with LLC services?
As you suspect, pricing varies. For one-time actions, like filing Articles of Organization, there is a formation package with a standard fee plus any state filing fees.
For continuing services, many business formation companies charge a certain fee for a one year contract. For example, for a business formation company to serve as your registered agent, you’ll pay somewhere between $50-$150 for the first year. Many companies offer a discount for signing a two-year contract.
If you want more services, say you want to hire the company as your registered agent and you’d like them to file your annual reports, that’s a higher fee. Many companies offer a worry-free guarantee that your annual report will be filed on time, but you can expect yearly fees to start around $200 for these services.
Companies tend to break their services down into tiers like a basic, pro, and platinum tier, for instance. The more services, the higher the cost. Be aware of customer service representatives using upsells to encourage more services than you need.
What are the benefits of LLC services?
A business owner can do all of the services offered by business formation companies, so why do entrepreneurs choose to pay for LLC services? There are several benefits, which include:
Some business owners want to start a company while working a day job, others have multiple businesses going at the same time. In the interest of time, business owners lean on business formation services to file the necessary paperwork for them to get up and running – and stay up and running. The hassle-free business filings provide convenience and peace of mind.
Assistance with complicated forms and deadlines
Forming an LLC requires certain paperwork to be filed by certain dates. Some business owners aren’t aware of what papers are required, where to find them, or when their due. Some of the information required can be confusing too. Hiring a business formation company takes all of these responsibilities off the owner. An LLC filing service makes sure the right documents are filed by their due date and ensures the forms are filled out correctly.
Failure to file correct paperwork on time can result in late fees or penalties, which is yet another reason business owners prefer to utilize a business formation service.
Collecting important documents
A business formation company can serve as your company’s registered agent, which has several advantages. For starters, a registered agent must be available during regular business hours. For some owners, that’s not always possible.
Plus, hiring a registered agent service provides a layer of privacy. Their address is listed on all public documents instead of yours and sensitive papers are delivered off-site. If your company is sued, the registered agent is “served” as opposed to the owner, who might be in front of customers or employees at the time.
Access to additional help
Many companies offer a la carte services that you’ll likely take advantage of at some point. For example, some companies offer legal documents. When you hire a new employee and need a non-disclosure agreement, for example, you can work with the company you know to get the document quickly.
Additional services include legal advice, domain name registration, obtaining a seller’s permit, banking resolution, and dissolving a business.
Reviews of the Best LLC Services
Searching for the best LLC formation services isn’t easy. There are many excellent choices available and many offer similar features and pricing. To provide a starting point, here’s a look at the top LLC services offered:
Northwest Registered Agent
Northwest Registered Agent is a well-known name in the business. It has a solid track record, is known for its stellar customer feedback, and has all of the features an owner could want. Don’t let the name fool you, the company offers more than just registered agent services, though that is what it’s most known for. Business formation, mail forwarding, EIN, and annual report services are among its offerings.
Registered agent services start at $125 per year.
Incfile can help your business stay in good standing with the state with its annual reporting services. The company, which also has name recognition in the industry, offers an array of services including formation, state filings, IRS filings (including s-corp tax status), and registered agent services.
One of the things that set this company apart is its $0 formation cost and its free registered agent services.
ZenBusiness is a new kid on the block, but it’s quickly gaining a loyal following for its ease-of-use and affordable fees. Services start at just $49 a year, which is quite attractive to new business owners.
Zen Business also has amazing customer support, which includes phone calls, emails, and individual agent service during business hours. The company rating is 9.4 out of 10 for providing excellent customer service and an A rating from the Better Business Bureau.
Swyft Filings offers all of the usual LLC services including formation for an LLC, C-Corporation, or non-profit. It also offers EIN registration, filing amendments and name changes, converting a business, foreign qualification, registered agent changes, and withdrawal filings for moving a business out of state. It does offer registered agent services too, which start at $149.
LegalZoom, founded in 2001, has helped more than four million businesses and consumers with legal problems over the years. It is an online legal service that provides a one-stop-shop for everything legal. You can get access to many of the documents you need to start an LLC, but they’ll also do all of the legwork for you.
The company is more than just legal documents, it offers online LLC formation services and is backed by its strong legal reputation.
BizFilings has a long history in the industry and offers inexperienced entrepreneurs a tool to help them decide which package suits their needs best. BizFilings offers three packages starting with the basic package of $99. All of the services you’d expect are offered.
While the company does have years of experience, the number of customer reviews it has is fairly low. Some reviews mention its customer service could be improved.
Harvard Business Services
Harvard Business Services has served more than 175,000 customers, but it only helps companies in Delaware. Despite its geographic restrictions, the company offers discounts on a full year of registered agent services with any LLC formation package.
Their standard annual fee for a registered agent is $50, which is quite low by comparison. They are also one of few companies that tout Spanish options.
MyCorporation sets itself apart with some additional features like logo and website design, which many business owners find helpful.
When it comes to acquiring basic formation services or registered agent services, business officials can pick from four packages with the basic package starting at $89 and the premium package starting at $324. Various features are included in each.