A limited liability company exists as a hybrid entity that combines the limited liability protection of a corporation with the flexibility of a partnership. An LLC forms when an articles of organization filing occurs with the secretary or department of state. You do not have to reside in the same state where the LLC formation occurs.
You can form an LLC in any state and the District of Columbia. In every state, LLCs members receive limited liability protection from company debts and obligations. The process of LLC formation is very similar, regardless of where the LLC forms. However, the fees to file articles of organization vary from state to state. For example, it costs $500, as of 2011, to file articles of organization in Illinois, but it only costs $90 to file articles of organization in Indiana.
The articles of organization contain basic information like the name and address of the business, and the purpose for starting the LLC. The duration of the LLC's existence should appear in the articles, along with the name and address of each organizer responsible for filing the articles with the secretary or department of state. Depending on the state of formation, the articles may need to indicate whether the company is managed by its members or if nonmembers will handle the managerial duties. The method of filing articles of organization varies from state to state. Depending on the secretary or department of state, the article filing can occur online, by mail, by fax or in person at the secretary or department of state's office.
Every LLC must maintain a registered agent in the company's state of formation. A registered agent may be a person or business that agrees to accept lawsuit documents served against the company. The name and physical address of the LLC's registered agent must appear in the articles of organization. You can hire a company to provide registered agent services to the LLC if you do not have a member or manager that can act as the company's registered agent. The cost to hire a registered agent varies from company to company. Also, if your LLC has a physical office in the state of formation, the company may be allowed to act as its own registered agent, depending on the rules of the state where the LLC forms.
If you plan on conducting business in the state where you live, it may be better to form the LLC in your state of residence. For example, if you form an LLC in Delaware, but conduct all of your business in Florida, you will avoid paying fees in Delaware by simply forming the LLC in Florida. You have to register as a foreign LLC with every state where the company makes business transactions, file annual reports and pay any fees imposed by the foreign state. The extra fees and paperwork can be avoided by forming the LLC in your state of residence.