April 6, 2024 – Understanding the Timeframe for LLC Formation

April 6, 2024 – Understanding the Timeframe for LLC Formation

Streamlining Legal Formation: Understanding the Timeframe for LLC Formation in Startup Business Loan Applications

When you launch a new business startup, you’re immediately faced with several key decisions. For instance, you’ll need to decide early on which legal structure you’d like to adopt for your business. And while there’s no one right answer, many startups benefit from the LLC format.

Registering as an LLC can benefit your company in a number of ways, not least by making it easier to secure a loan or some other form of business financing. But before moving ahead with LLC formation, it may be helpful to know a little bit more about the process and general timeline.

What is an LLC?

First things first: What is an LLC?

The LLC, or Limited Liability Company, is one of the most popular legal designations for small business startups.

Some important background: When you launch a new business venture, it’s automatically considered to be a Sole Proprietorship or a Partnership, meaning there is no legal distinction between the business and its owner.

Registering as an LLC is a way for entrepreneurs to establish the company as a distinct legal entity. In doing so, it provides a way to keep business assets and liabilities separate and distinct from personal ones.

Why Register an LLC?

To that end, there are some unique benefits that the LLC format provides. For instance:

  • Registering your business as an LLC allows for personal wealth protection, allowing you to keep your personal assets “off the table” during litigation.
  • There is built-in tax flexibility, with LLCs having the option to choose between corporate or pass-through taxation.
  • There is considerable administrative ease, as well, as the LLC involves much less regulatory oversight than a Corporation does.

These are just a few of the main benefits that come from registering as an LLC.

Credibility & Business Loans

There’s one additional LLC benefit that merits special consideration. That’s the enhanced credibility that comes from choosing the LLC format.

To put it bluntly, not just any business can register as an LLC. Certain legal requirements must be met; we’ll get to the timeline for LLC approval shortly. Suffice to say, establishing an LLC conveys a certain level of professionalism and seriousness. And that becomes important when it comes time to seek investors or apply for credit.

The credibility that comes from having an LLC opens up several new avenues for seeking business loans, and for startups those avenues can be invaluable.

What’s the Timeline for LLC Approval?

So how long does it take to register your company as an LLC? And what are the basic steps involved in the process?

The Timeframe for LLC Approval

Once you’re ready to actually file for approval with your state, you can anticipate a wait time of two to four weeks before you’re given the green light. Note that this is a general estimate, as approval times can vary from state to state; launching an LLC in New York may take longer than launching one in Wyoming.

Also keep in mind that, in most states, you can pay an additional fee to have your approval expedited, in some cases getting an answer in just a few hours or a few days. This may be worth considering for startups that are looking to get up and running fast, with all the legal protections of an LLC behind it.

What are the Steps Required?

Again, the guidelines vary by state, but here are the general requirements.

  • First, you’ll need to choose a name for your LLC, which can’t be shared with any other LLC in your state.
  • You’ll also need to name someone to receive your legal and tax documents. This person (or organization) is your Registered Agent.
  • It’s recommended that all LLCs have an Operating Agreement, a kind of business charter that can prevent more serious legal disputes down the road.
  • To establish your LLC, you’ll need to file Articles of Organization with your state. That’s where you get into the approval window we noted above.

How Much Does it Cost?

A related question about LLC formation: How much does it cost to get your LLC approved by the state? Short answer: It depends! Each state has its own filing fee, and depending on where you are the number might be anywhere from $40 to $300.

What Else Do You Need to Register Your LLC?

A couple of other notes regarding LLC formation:

  • Make sure your startup has a business bank account, not connected to any personal accounts.
  • Also take the time to claim an Employer Identification Number, or EIN, from the IRS website. This is free, and the approval time is usually very minimal.

While you won’t necessarily need either of these things right away, you’ll definitely need them before you can really start operating your company in earnest.

Start the LLC Approval Process Today

For startups, choosing the right legal structure is imperative. And generally speaking, the best way to go is with an LLC. While it can take a little bit of time to get yours registered, the end result will be well worth it, especially if you’re operating in an especially litigious environment. Take the first steps toward LLC formation today.

Author Bio

Amanda Clark

Amanda E. Clark is a contributing writer to LLC University. She has appeared as a subject matter expert on panels about small business ownership, along with content and social media marketing.