What Is a Domestic LLC?
Are you in the process of starting a limited liability company (LLC), but you’re not entirely certain how to do it? Do you want to form a domestic LLC, but you don’t know how the process works? There are quite a few important aspects to the LLC formation process, so it’s best to know what you’re getting into ahead of time.
With that in mind, we’ve created this guide to domestic LLCs that runs down all of the relevant details of forming your own LLC. By the time you’re finished reading, you’ll know whether or not it’s a good idea to form a domestic LLC of your own.
What Is an LLC?
First off, it’s smart to get a feel for what the limited liability company is. Compared to a sole proprietorship or general partnership, the biggest benefit of an LLC is the fact that as an owner/member, you receive personal asset protection, which means that if your company is sued, your creditors cannot pursue your personal possessions.
The LLC is also a much simpler business structure than a corporation, as it’s both easier to form and cheaper to maintain. The other major advantage of an LLC is the fact that you get to choose the way your business will be taxed. The most common option is the “pass-through” model of taxation, which means that the LLC’s profits or losses are claimed on your personal tax return, rather than filing a separate business return.
What Is a Domestic LLC?
The two common forms of LLCs are foreign and domestic. A domestic LLC is one that’s formed in the same state as the company’s primary business location. For example, if you’re located in Colorado and you start an LLC as a means of opening a retail business in that state, that LLC is considered to be domestic.
You need to have a domestic LLC before you can ever start a foreign LLC to expand your business. A foreign LLC doesn’t mean you’re located outside the country, but rather denotes that your primary business is located in another state.
How Do I Form a Domestic LLC?
To form your own domestic LLC, you’ll need to draft and file documents known as the articles of organization. These forms provide the state with all the information they need to officially form your business, and they usually include the following:
- Your company’s name and physical address
- The nature of your business
- Identity and contact info for your registered agent
- The names of your company’s owner/members
Once you’ve prepared your articles of organization, it’s time to file them with your primary state’s government. There’s always some sort of filing fee involved, regardless of which state you’re in, and some states have additional requirements as well. When these steps are complete and your articles are filed with the Secretary of State, your domestic LLC will be ready for business.
If this process sounds like something you’d rather not DIY, you have options. One popular choice is to hire an attorney to form your domestic LLC. The positive aspect of this option is that you’ll receive a high degree of peace of mind, knowing your business was formed correctly. However, it can be prohibitively expensive for a startup to hire a lawyer because their fees are usually quite high.
The other common option is to find a reputable online LLC formation service to create your new business. This avenue provides entrepreneurs with some middle ground between hiring a lawyer and going it alone. You still get a professionally formed domestic LLC, but you also save hundreds of dollars compared to paying a lawyer’s fees.
If you’re interested in hiring a domestic LLC formation service provider, these are a couple of our favorites:
- IncFile – $49: They offer one of the lowest price points in the entire industry for LLC formations, and they even include a full year of their registered agent service. IncFile also receives stellar customer feedback, so they’re always among our top options.
- Northwest Registered Agent – $79: While their rates aren’t quite as low as IncFile’s, Northwest has a level of personalized customer support that’s rarely seen in this industry. They also bundle in a year of registered agent service like IncFile does, but Northwest is the only major registered agent service provider that locally scans every document they receive as your registered agent ― competitors only scan the government-issued docs they’re required to.
- LegalZoom – $149: They aren’t competitive when it comes to pricing, but with their incredible brand power and high customer volume, they have some advantages of their own. Throw in their 100% satisfaction guarantee and extended customer support hours, and you can see why LegalZoom is so popular.
When you hear people talk about a limited liability company (LLC), they’re usually talking about a domestic LLC. This is the formation in your primary state, and you can’t expand into other states with foreign LLCs if you haven’t first formed a domestic LLC.
While it’s not terribly difficult to draft and file your own formation documents, we find that for many of our readers, it’s worth the money to hire an online LLC formation service. The added convenience and peace of mind are very welcome attributes in our opinion, and it’s still much less expensive than hiring a lawyer.
No matter how you choose to form your domestic LLC, we wish you the best of luck with your new business!