LLCs offer liability protection but keeping that protection intact requires ongoing compliance. From filing annual reports to maintaining a registered agent, LLC owners must meet state requirements throughout the life of the business. Missing a deadline or requirement can lead to fines, loss of good standing, or even administrative dissolution. That’s why it’s helpful to understand how compliance obligations can change at each stage of the LLC life cycle.
As an LLC moves from launch to growth, ongoing maintenance, and eventual closure, its compliance needs can change. Thinking about those obligations by life cycle stage can make it easier to understand what to file, update, or maintain along the way.
In this article, we'll walk through the common compliance tasks associated with each stage of an LLC's life cycle: launching, maintenance, growth, and, if the time comes, closing.
Launch: Getting your LLC off the ground
Pre-formation
Many small business owners choose to form an LLC because it offers liability protection without the formalities and double taxation that come with a standard corporation. Formation requirements vary from state to state, but generally you'll need to choose a name that meets your state's requirements, decide whether the LLC will be managed by members (owners) or managers, and appoint a registered agent, a person or company designated to receive legal and state correspondence on the business's behalf. You'll typically need this information ready before filing your LLC's formation documents with the state.
- Choose a name for your LLC
- Decide if the LLC will be managed by members or managers
- Obtain a registered agent
Formation
To officially create an LLC, you file Articles of Formation with the Secretary of State's office. Some states have additional requirements at this stage, such as filing an initial report or publishing a notice of formation in a local newspaper.
- File Articles of Formation
- Complete publication or initial report requirement (if applicable)
Post-formation
Once your LLC is formed, there are still a few compliance steps to take care of. You'll need to obtain an EIN, register for state and local taxes, and get any business licenses or permits required for your industry or location. If your state requires an initial report, you'll need to file that as well. If you plan to operate under a name different from your LLC's legal name, you'll also need to register a DBA.
It's also important to have an operating agreement to establish how the business will be run, including how decisions are made and how profits are distributed.
- Obtain an EIN
- Draft an operating agreement
- Register a DBA (if applicable)
- Register for state and local taxes
- Obtain business licenses and permits
See our guide on how to form an LLC.
Growth: Staying compliant as your business expands
Business growth brings new opportunities and a few additional compliance steps. Hiring employees brings new reporting requirements, including registering with your state's labor department, setting up payroll tax withholding, and registering for state unemployment insurance. Rolling out new products or services may also require additional licenses beyond what you obtained at formation.
Expanding into new states or pursuing financing can also trigger compliance steps. Lenders, landlords, and potential partners will often ask for a Certificate of Good Standing to confirm your LLC is legally registered and up to date on its state filings. And if you plan to do business in another state, you'll typically need to file for foreign qualification.
- Report new hires to the state’s labor department
- Register for payroll tax withholding and unemployment insurance
- Obtain additional licenses for new product lines and services
- Request a Certificate of Good Standing
- File for foreign qualification
Learn more about doing business in another state (foreign qualification).
Maintenance: Staying compliant year after year
LLCs have ongoing compliance requirements that continue for as long as the business operates. Some affect your good standing with the state, while others simply keep the business running smoothly.
Most states require an annual report to keep your LLC's information current, and many also require you to pay an annual franchise tax. You'll also want to track renewal deadlines for business licenses, permits, and DBA registrations, and update them whenever your name, address, or other key details change.
Maintaining a registered agent is an ongoing legal requirement for as long as your LLC exists. If you switch to a new registered agent, you'll need to file a change of registered agent form with the state.
Certain other changes to your LLC (such as its name, management style, or business purpose) require filing articles of amendment with the state. And if your LLC does fall out of good standing, filing for reinstatement can help bring it back into compliance.
It's also good practice to keep your operating agreement current, record any transfers of membership interests, and hold annual meetings of members (and managers, if manager-managed).
- File an annual report
- Pay franchise tax
- Renew business licenses
- Renew a DBA
- File change of registered agent form
- File articles of amendment
- File for reinstatement
- Update licenses (address, ownership, etc.)
- Hold annual meetings and record minutes
- Record membership interest or share transfers
For more information, read Business compliance requirements & consequences.
Close: Shutting down your LLC the right way
Closing an LLC isn't as simple as ceasing operations. Without properly dissolving the business, you can remain on the hook for annual reports, franchise taxes, and other ongoing state requirements.
To formally close your LLC, you'll need to file articles of dissolution with the state, and file for withdrawal in any other states where you're foreign qualified. From there, winding down the business involves notifying creditors and settling outstanding debts, filing final tax returns, cancelling any remaining licenses and permits, and distributing any remaining assets to owners.
- File articles of dissolution
- File for withdrawal
- Wind down the business
- Notify creditors and settle debts
- File final tax returns
- Cancel licenses and permits
- Distribute remaining assets
For more information, see our checklist for closing a business.