Formation: US LLC Formation Process Definition

Definition

Formation refers to the legal process of establishing a Limited Liability Company (LLC) under US state law. This involves filing formation documents with the Secretary of State and satisfying state-specific requirements.

Unlike simply registering a business name, formation creates a legally recognized entity with liability protection and the ability to enter contracts, open bank accounts, and conduct business.

The Formation Process Step by Step

Step 1: Choose Your State

The state where you form your LLC determines:

• Filing fees and ongoing costs
• Privacy protections
• Legal framework (Delaware has the most developed business case law)
• Tax treatment

State	Filing Fee	Annual Fee	Best For
Delaware	$90	$300	Corporate law, investor readiness
Wyoming	$100	$60	Privacy, low cost, simple requirements
New Mexico	$100	$0	Very low cost
California	$70	$800	If you have physical presence in CA

Important: You do not need to form your LLC in the state where you physically operate. Many non-US founders form in Delaware or Wyoming but operate from their home country.

Step 2: Choose a Registered Agent

Every state requires an LLC to have a registered agent with a physical address in the formation state. The registered agent receives:

• Legal summons and lawsuits
• Tax notices from state agencies
• Official government correspondence

You cannot use a P.O. Box or your personal address as a registered agent.

Step 3: File Articles of Organization

This is the primary formation document submitted to the state. It typically requires:

• LLC name (must include LLC or Limited Liability Company)
• Registered agent name and address
• Principal office address (can be anywhere)
• Management structure (member-managed or manager-managed)
• Duration (perpetual or specific end date)

Filing fees range from $50 to $500 depending on the state.

Step 4: Create an Operating Agreement

Although not required in most states, an operating agreement is essential for:

• Defining ownership percentages
• Outlining profit distribution
• Establishing management roles
• Preventing disputes between members

For single-member LLCs, an operating agreement helps demonstrate that the LLC is a separate entity from the owner.

Step 5: Obtain an EIN

The Employer Identification Number (EIN) is required for:

• Opening US bank accounts
• Filing taxes
• Hiring employees (if applicable)

Apply via IRS Form SS-4. Non-US founders can fax the form to IRS to receive an EIN without a US phone number.

Formation Timeline

Method	Time Required	Cost
Standard filing	5 to 14 business days	Filing fee only
Rush filing	1 to 3 business days	Filing fee + rush fee
Online formation services	24 to 48 hours	Service fee + filing fee

Formation vs Registration: Understanding the Difference

Aspect	Formation	Registration
What it creates	Legally recognized LLC entity	Business name within a state
Legal effect	Creates liability protection	No legal entity created
Required for	Opening bank accounts, signing contracts	Operating under a business name
Scope	Federal and state recognition	State-specific

Foreign-Owned LLC Formation Considerations

Non-US founders face unique considerations during formation:

1. No US presence required — You can form and operate an LLC entirely from overseas
2. ITIN not required for formation — EIN is the critical number, not ITIN
3. Registered agent required — This is the only mandatory US connection
4. State selection matters — Delaware and Wyoming offer the best combination of low cost and strong legal protections

Related Terms

• LLC: The legal entity you are forming
• Registered Agent: The mandatory US-based representative for your LLC
• EIN: The tax ID required after formation

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This is a dictionary entry. For full formation guide, see What is LLC Formation?