LLC Compliance Guide
Everything You Need to Know About LLC Compliance
Stay in good standing and avoid penalties. This guide covers all federal and state requirements for US LLCs.
Compliance Areas
LLC Compliance Requirements
Six key areas every LLC must address to stay compliant
Registered Agent
What It Is
A registered agent is a person or company designated to receive legal documents, government correspondence, and service of process on behalf of your LLC.
Why It's Required
Every state requires LLCs to maintain a registered agent with a physical address in the state of formation. The agent ensures you never miss important legal notices.
Penalties & Consequences
- Missed service of process can result in default judgments against your LLC
- Loss of good standing status
- Potential administrative dissolution
- Unable to conduct business or sign contracts
Annual Reports
What It Is
Annual reports are state filings that confirm your LLC's current information including business address, registered agent, and members/managers.
Why It's Required
States require these reports to keep their records current and verify that your LLC is still operating. Filing frequency varies by state (annual or biennial).
Penalties & Consequences
- Late fees ranging from $25 to $200+
- Loss of good standing certificate
- Administrative dissolution after extended non-compliance
- Inability to obtain business licenses or loans
Franchise Tax
What It Is
Franchise tax is a state tax charged for the privilege of doing business in that state. It's separate from income tax and applies regardless of profitability.
Why It's Required
Several states charge franchise taxes including Delaware ($300 flat), California ($800 minimum), Texas (margin tax), and New York.
Penalties & Consequences
- Interest charges on unpaid amounts
- Additional penalties of 5-25% depending on state
- Revoked or suspended LLC status
- Personal liability for members in some cases
Operating Agreement
What It Is
An operating agreement is an internal document that outlines how your LLC will be run, including ownership percentages, voting rights, profit distribution, and management structure.
Why It's Required
An operating agreement is strongly recommended for every LLC. It protects your liability shield and is essential for banks, investors, and multi-member LLCs.
Penalties & Consequences
- States requiring: California, Delaware, Maine, Missouri, New York
- Without one: risk of pierced corporate veil
- Banks may refuse to open business accounts
- Disputes default to state law instead of your preferences
Federal Tax Filing
What It Is
Federal tax filing requirements depend on your LLC structure. Single-member LLCs use Schedule C, while multi-member LLCs file Form 1065 as partnerships.
Why It's Required
The IRS requires all LLCs to report income. Foreign-owned single-member LLCs must also file Form 5472 with a pro forma 1120.
Penalties & Consequences
- Form 5472 (foreign-owned): $25,000 penalty per form
- Form 1065 (partnership): $235 per partner per month (max 12 months)
- Schedule C late filing: 5% per month up to 25%
- Interest on unpaid taxes
Bookkeeping
What It Is
Bookkeeping means maintaining accurate records of all business income, expenses, assets, and liabilities. The IRS requires businesses to keep records for at least 3 years.
Why It's Required
Proper bookkeeping is essential for tax filing, audit protection, and maintaining the corporate veil. Mixing personal and business finances is a major compliance risk.
Penalties & Consequences
- Commingled finances can pierce the corporate veil
- IRS audit penalties and reconstructed income
- Inability to claim legitimate business deductions
- Personal liability for business debts
LLC Types
Single-Member vs Multi-Member LLCs
Understanding your LLC structure determines your compliance requirements
Single-Member LLC (SMLLC)
Treated as a "disregarded entity" by the IRS. Simpler compliance with fewer reporting requirements.
- File Schedule C with personal return
- Form 5472 required if foreign-owned
- Operating agreement recommended but often optional
- Tax deadline: April 15
Multi-Member LLC (MMLLC)
Taxed as a partnership by default. The LLC itself files a return and issues K-1s to each member.
- LLC files Form 1065 partnership return
- Schedule K-1 issued to each member
- Operating agreement essential for member rights
- Tax deadline: March 15
Warning
Penalties for Non-Compliance
Understanding the consequences of missing compliance requirements
Form 5472 not filed
Critical$25,000/form
IRS penalty notice, potential audit
Form 1065 late
Critical$235/partner/month
Up to 12 months of penalties
Annual report late
Warning$25-$200+
Loss of good standing
Franchise tax unpaid
CriticalInterest + 5-25%
State revokes LLC status
No registered agent
WarningVaries by state
Missed legal notices, default judgments
Extended non-compliance
CriticalReinstatement fees
Administrative dissolution
Foreign-Owned LLCs: Critical Reminder
Form 5472 is required for all foreign-owned single-member LLCs, even if the LLC had no income or business activity. The $25,000 penalty applies per form, per year. This is one of the most commonly missed filings for international founders.
Glossary
Key Terms Explained
Understanding LLC compliance terminology
Registered Agent
A person or entity designated to receive legal documents, government notices, and service of process on behalf of your LLC.
Annual Report
A state filing that confirms your LLC's current information including address, registered agent, and management.
Franchise Tax
A state tax charged for the privilege of doing business in that state, regardless of actual income or profit.
Good Standing
A status indicating your LLC is compliant with all state requirements, including filings and taxes.
Administrative Dissolution
When a state terminates an LLC for non-compliance with filing or tax requirements.
Corporate Veil
The legal separation between the LLC and its owners that protects personal assets from business liabilities.
EIN
Employer Identification Number: a federal tax ID for your business, similar to a Social Security Number.
Articles of Organization
The formation document filed with the state that legally creates your LLC.
Operating Agreement
An internal document that outlines how your LLC will be governed, including ownership and management.
Foreign Qualification
The process of registering your LLC to do business in states other than where it was formed.
Nexus
A connection to a state that triggers tax filing obligations, such as physical presence or sales volume.
Disregarded Entity
IRS treats a single-member LLC as an extension of its owner for tax purposes (not a separate entity).
Checklist
LLC Compliance Checklist
Toggle between LLC types to see relevant requirements
New LLC (First Year)
Ongoing (Annual)
Foreign-Owned SMLLC
Multi-Member LLC
FAQ
Common Questions
Answers to frequently asked questions about LLC compliance
Missing your annual report deadline typically results in late fees ranging from $25 to $200+ depending on the state. If you remain non-compliant, your LLC may lose its good standing status, which can prevent you from signing contracts, obtaining loans, or doing business. Extended non-compliance can lead to administrative dissolution.
Yes. Foreign-owned single-member LLCs must file Form 5472 with a pro forma Form 1120 even if the LLC had no income or activity. The form reports transactions between the LLC and its foreign owner. The penalty for not filing is $25,000 per form, so this is critical compliance for international founders.
Five states legally require an operating agreement: California, Delaware, Maine, Missouri, and New York. However, an operating agreement is strongly recommended for every LLC regardless of state. It protects your liability shield, satisfies bank requirements, and establishes clear operating rules.
An annual report is an informational filing that updates the state on your LLC's current details (address, agent, members). Franchise tax is a separate tax charged by some states for the privilege of doing business there. Some states combine them, while others have only one or neither.
You can check your LLC's status through your state's Secretary of State website, usually by searching for your business name. A certificate of good standing can be requested for a fee and is often required for bank accounts, loans, and business contracts.
Yes, most states allow administratively dissolved LLCs to be reinstated within a certain period (typically 2-5 years). You'll need to file back annual reports, pay all outstanding fees and penalties, and submit a reinstatement application. Some states may require you to form a new LLC instead.
It depends on your location and what you sell. Most cities and counties require a general business license regardless of whether you operate online. If you sell physical goods, you likely need a sales tax permit. Some industries (consulting, professional services) may require specific licenses.
Keep all formation documents (Articles, Operating Agreement, EIN letter), financial records (bank statements, invoices, receipts, tax returns), meeting minutes, contracts, and correspondence with the state. The IRS requires business records for at least 3 years, but 7 years is recommended.
Stay Compliant Without the Hassle
Let StartGlobal handle your LLC compliance. We track deadlines, file reports, and keep you in good standing across all 50 states.