Domestic LLC (limited liability company)What is it & How to Form One

Denise Elizabeth P
Senior Financial Editor & Contributor
Last Updated: November 10, 2021
Date Published: June 7, 2021

As the years go by, forming a limited liability company (LLC) has been the prime and mainstream choice of Americans when wanting to form their official business entities.

Statistics show that thousands of limited liability companies are formed every single day.

Out of the thousands of LLCs formed, business owners usually opt to either avail of reasonably priced online services such as LegalZoom or they would opt to use methods that allow them to form the LLC by themselves.

It is due to the rising popularity of forming a limited liability company that more and more people are going online to find answers to their questions regarding the LLC.

Limited liability company inquiries are one of the most searched for among all the different forms of business structures.

One of the most frequently asked questions encountered is the difference between domestic and foreign limited liability companies.

Below, we will be briefly discussing the characteristics of a domestic limited liability company and touch on the points that need to be considered like what a domestic limited liability company is, how a domestic limited liability company is formed, and the mechanics of hiring or outsourcing the formation of a domestic limited liability company.

For those that have been wondering about the domestic limited liability company, this is where you will find an overview of what you need to know.

What is a Limited Liability Company (LLC)?

what is an LLC

To better understand a domestic limited liability company, we will first need to be aware of what a limited liability company is.

A limited liability company is the ideal blend of flexible business structures and formal business structures.

Limited liability companies are considered as a middle ground between general partnerships and sole proprietorships (flexible business structures) and a corporation (formal business structure).

What a limited liability company has in common with sole proprietorships or general partnerships is its ability to be considered as a pass through entity when it comes to taxation.

What this means is that corporate tax is not paid.

What happens instead is that the owners of a limited liability company pay taxes on their own personal tax returns when claiming their profits or losses.

On the other hand, what a limited liability company has in common with a corporation is that it grants its owners limited personal liability with an exception to cases that fall under professional negligence, misconduct, or any other forms of malpractices.

Owners or members of a limited liability company, like a corporation, are shielded from creditors using their own personal assets such as their personal bank accounts, family homes, personal properties and vehicles, etc. to collect debt.

Any sort of settlement of financial obligations in the event a limited liability company is sued, must be paid from the assets of the LLC itself and not if its members or owners.

What is a Domestic Limited Liability Company ( Domestic LLC )?

When it comes to classifying a limited liability company, there are two main types: LLCs can either be a domestic limited liability company or a foreign limited liability company.

Unlike what its name would suggest, a foreign limited liability is not an LLC that is operated in another country.

A foreign limited liability company is actually an LLC that is based in a state outside of your current home state.

In order to comply with the external presiding state’s regulations, a foreign qualification will need to be furnished for your business.

Conversely, a domestic limited liability company is an LLC that is based directly in your home state.

The thing about these two kinds of limited liability companies is that a domestic limited liability company needs to be formed first in your home state before a foreign limited liability company can be registered in another state.

It is because of this parameter that a domestic limited liability company is the far more common business type of the two main kinds of LLCs.

How is a Domestic Limited Liability Company Formed?

LLC Organizer

The beginning of a domestic limited liability company’s official formation starts with documents that are often referred to as articles of organization while other states recognize these documents as certificates of formation.

Articles of organization compiles the most commonly requested essential information that your presiding state will need to know to legalize the formation of a limited liability company business entity.

The specifics of what goes into articles of organization will differ depending on the state the documents will be filed into though it is customary to at least submit the following information:

  •       Registered business name
  •       Business street address
  •       The industry the company falls under
  •       The name of the business’ registered agent or registered agent service
  •       The street address of the business’ registered agent or registered agent service
  •       A list of owners that belong to the limited liability company

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Once the articles of organization have been created and compiled, they will have to be filed with the presiding state’s government, usually having these documents filed with the Secretary of State’s office.

Every state has its own corresponding limited liability company formation fees that have to be paid before an LLC is considered as formally established.

LLC formation fees will differ from state to state with some fees costing about $50 and others costing several hundreds of dollars.

There are additional requirements that also need to be considered.

Depending on the state where you are forming your business, part of LLC formation compliance would require publishing evidence or proof of business formation through the local newspaper for example.

Different states may have other additional requirements to comply with.

Can Someone Else Be Hired to Form My Domestic Limited Liability Company for Me?

registered agent

Those who want to opt out of managing their own limited liability company formation processes have several choices available to them ranging from hiring business attorneys to hiring online business formation services.

Entrepreneurs who choose to hire a business attorney to form their limited liability companies will be guaranteed that every single step of the formation process is completed in a timely and precise manner.

In exchange for that, hiring a business attorney will subject these entrepreneurs to often expensive fees especially when measured in relation to the service being done.

A limited liability company is a relatively simple, low maintenance business entity which does not always command the expertise of a qualified business attorney.

Entrepreneurs can also opt to hire an online business formation service to take charge of forming their limited liability company.

Even though online business formations cost less than business attorney fees, these services are designed to make sure that your company is formed professionally.

If you are interested in going into the route of online business formation services, options that are highly recommended include that of Northwest Registered Agent or ZenBusiness.

Those who would like a concise overview of our top 3 recommendations, can find that below:

  •       Northwest Registered Agent ( $ 225 ) : Northwest Registered Agent will manage the formation of your limited liability company and include a full year of their in house registered agent services. Northwest also has top of the line customer service that provides personalized support, leading to an overall better customer experience and satisfaction. Northwest is a definite favorite in this industry with quality services at justifiable prices for the features they offer.
  •       Zen Business ( $ 39 ) : Zen Business is significantly more budget friendly than Northwest Registered Agent while also providing a whole year of registered agent service for free. Depending on your preferences, the thousands of resoundingly positive reviews online that showcase the quality of Zen Business’ services is available which may be a deciding factor for some. It should be noted though that customer support at Zen Business is not as customized and top tier as that of Northwest Registered Agent.
  •      LegalZoom ( $ 79 ) : When it comes to surpassing Northwest Registered Business and Zen Business, LegalZoom falls short. It also does not include registered agent services with their limited liability company formation packages. What makes LegalZoom stand out though is its huge client volume and its notable brand power. Entrepreneurs who are after the most popular service in the market should consider availing of LegalZoom’s services.

Conclusion

The concept of a domestic limited liability company is not overly complex.

In summary, it is basically a limited liability company that is formed within your home state.

Domestic limited liability companies are the gateway to expanding your business in locations outside your residing area.

Without an already established domestic LLC, foreign limited liability companies cannot exist.

Make sure to have your domestic LLC established prior to branching out to other states.

The relative simplicity, low upkeep requirements and compliance of a limited liability company makes its formation impartially forthright.

If you would rather opt to have your LLC formation be processed by experts to ensure it is professionally formed, it is recommended to avail of a business formation service.

Business formation services help cut down on costs compared to hiring a business attorney yet these services have the expertise to ensure the seamless and accurate handling of your LLC formation.

Hopefully, this article helped shed light on what the basics of a domestic limited liability company is and how it can be formed.

A domestic LLC might just be the type of business entity that would suit you and your business’ needs.

If so, with any luck, this article served as a nudge in the right direction.

Best of luck to you and your upcoming domestic limited liability company!

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  1. IRS.gov "Limited Liability Company (LLC)" 1. June 7, 2021

  2. IRS.gov "Business Structures" 1. June 7, 2021

  3. SBA.gov "Business Structures - Limited Liability" 1. June 7, 2021