LLC stands for “limited liability company.” It is a specific type of business structure that combines elements of partnerships and corporations. Establishing an LLC is a significant step that many business owners will take, one that provides a blend of flexibility, tax advantages, and liability protection.

The speed of LLC formation can influence a company’s launch timeline, impact strategic planning, and even affect funding rounds. If you’re ready to move your business idea from concept to reality, understanding the time frame for establishing an LLC is key. Depending on where you file and the specifics of your business, getting an LLC can take anywhere from a few weeks up to a few months.

According to a survey conducted by CB Insights, unproductive business planning—such as failing to allow for the time it takes to form an LLC—was among the top reasons small businesses fail. When time is one of your most valuable assets, understanding the process and timeline for setting up an LLC can provide a realistic foundation for planning, while helping you avoid potential pitfalls in the future.

Below are the general steps required to form an LLC and an estimate of the time each step takes, which will allow you to better strategize your business development from inception to launch.

What’s in this article?

• How long does it take to form an LLC?
  
• What types of businesses form LLCs?
  
• How to become an LLC
  
• How Stripe Atlas can help
  

How long does it take to form an LLC?

The time it takes to form an LLC can vary depending on different factors, including the state in which you’re filing and the method you’re using to file. Here are some general timelines:

• Name approval
  Most states allow you to check the availability of a business name online and reserve it if it’s available. Typically, you can complete this step in a few days, but the time frame varies by state.

• Articles of organization filing
  Once you have reserved a business name, you can file your articles of organization. If you submit these online, the approval could come within a few days to a week. If you mail the documents, it might take a few weeks. Some states offer expedited service for an additional fee.

• Operating agreement and EIN
  Generally, you can create your operating agreement and obtain your EIN in a single day, but it’s important to spend as much time as necessary creating your operating agreement to ensure it meets your business’s specific needs.

• Additional permits and licenses
  The time it takes to acquire additional permits and licenses for operating your business can vary widely depending on your industry, location, and the specific licenses you need. This process can take anywhere from a few days to several months.

If you submit your forms online and there aren’t any issues or delays with your application, the process of forming an LLC can take a few weeks. However, if you need specific licenses or permits to operate your business, or if you mail in your forms, it can take anywhere from several weeks to a few months.

Keep in mind that this is a general guideline, and the process may vary by state and country. Check with your local Secretary of State office or a legal professional to get the most accurate information for your specific situation.

What types of businesses form LLCs?

Because LLCs offer flexibility, protection for personal assets, and tax advantages, they can be a beneficial structure for a wide range of business types, from small startups to larger established companies. Here are a few examples:

• Consulting businesses
  Many consultants choose to form LLCs because there is, typically, a low level of risk associated with their work, and they often work as an individual or as part of a small team. Consultants benefit from the personal liability protection that an LLC structure provides.

• Real estate companies
  Many real estate investors form LLCs to protect their personal assets from liabilities associated with their properties. For example, if a real estate investor owns a property through an LLC (and not as an individual), and someone is injured on the property and files a lawsuit, the real estate owner’s personal assets are protected.

• Retail businesses
  Brick-and-mortar store owners, as well as ecommerce business owners, might choose to form an LLC to protect their personal assets from potential business debts or lawsuits.

• Service providers
  Service providers, such as therapists, photographers, and personal trainers, might face liability from client interactions and can benefit from the protections that an LLC offers.

• Small contractors
  Construction or renovation businesses often have a high level of risk in their work, and an LLC can offer them protection from potential liabilities.

• Tech startups
  Many technology startups choose the LLC structure in the early stages because it’s flexible and easy to set up. As the business grows, it might transition to a C corporation—especially if it’s seeking venture capital.

In addition to these examples, there are many other business models that might benefit by establishing an LLC. It’s important to assess your business’s particular requirements and seek advice from a business consultant or legal professional to determine the most suitable structure.

How to become an LLC

Becoming an LLC involves several actions. Here is a brief overview:

1. Choose a name for your LLC: Your business name must be unique and end with “LLC” or “Limited Liability Company.” Most states have an online database where you can check name availability.

2. File the articles of organization: Your articles of organization include information such as your business’s name, its purpose, and the names of the owners. You will need to file this with your state’s Secretary of State office, along with a filing fee, which varies by state.

3. Choose a registered agent: Every LLC must have a registered agent, which is an individual or business entity responsible for receiving important legal documents on behalf of your LLC.

4. Create an operating agreement: This is a legal document that outlines the ownership and operating procedures of the LLC. Not all states require an operating agreement, but it’s a good idea to have one.

5. Get an Employer Identification Number (EIN) from the IRS: Most LLCs are required to obtain an EIN from the IRS, even if the LLC doesn’t have any employees. The IRS uses the EIN, which is also known as an employer tax ID, to identify your business for tax purposes.

6. Register for state and local taxes: Depending on the state in which your business is located and the nature of your business, you may need to register for state taxes (such as sales tax or employee withholding tax).

7. Obtain any necessary business licenses and permits: Depending on the type of business and where it’s located, you may need certain licenses and permits to operate legally. Check with your local and state government to see what’s required.

Angel investors vs. other types of investors

Before pursuing funding from angel investors, familiarize yourself with other types of startup investors. Here’s an overview of investment options:

• Venture capitalists: Venture capitalists (VCs) are firms or individuals that invest in startups showing strong potential for growth, usually in exchange for equity. Unlike angel investors, they typically invest during the later stages of a startup’s development, after the business has shown some market traction. VCs invest larger sums of money than angel investors and are usually more involved in the direction of the company. They seek substantial returns and typically have a more aggressive view toward scaling the business and achieving an exit within a specific timeframe.

• Seed funds: Seed funds are specialized VC funds that focus on early-stage investments, often before angel investment and larger VC rounds. They invest in startups that have moved past the conceptual stage and have a minimum viable product (MVP) or some initial traction.

• Incubators and accelerators: These programs support early-stage companies through education, mentorship, and financing. Incubators focus most often on the initial development phase, helping entrepreneurs turn ideas into a viable business. Accelerators, on the other hand, look to scale up the growth of existing companies over a short period of time.

• Corporate investors: Some corporations invest in startups to access innovative technologies, enter new markets, or nurture strategic partnerships. These investors can offer ample resources, but they might seek more than just financial returns, such as an ownership stake in the technology or control over the company’s direction.

• Crowdfunding: This involves raising small amounts of money from a large number of people, typically through online platforms. Crowdfunding can be a good option for startups that want to validate their product with a broad audience, interact with potential customers, and raise funds without giving up equity or incurring debt.

• Government grants and subsidies: In some sectors—particularly those involving scientific research, clean technology, or social impact—government grants and subsidies can provide funding without diluting equity.

• Peer-to-peer lending and debt financing: Debt financing includes loans from financial institutions or peer-to-peer lending platforms. This type of financing is typically more challenging for early-stage startups to secure and it obligates a startup to repay the loan, with interest, but it doesn’t dilute ownership.

• Family offices: High net-worth families often have private wealth management advisory firms, known as family offices, that directly invest in startups. These investors can provide substantial funding and might be interested in longer-term investments compared to traditional VCs.

• Angel groups and syndicates: Unlike individual angel investors, angel groups or syndicates pool resources to invest in startups. These groups can provide larger sums of capital and combine the expertise and networks of multiple investors.

Each type of investor offers different advantages, expectations, and levels of involvement. Startups should carefully consider their stage of development, industry, funding needs, and the kind of strategic relationships they want to grow before deciding which type of investor to work with.