If you’re thinking of starting a limited liability company (LLC), you already know the benefits it offers. An LLC provides liability protection for ownership and more flexibility than a corporation, particularly in terms of taxation. The LLC itself does not pay taxes. As a “pass-through” entity, income passes through the business to the owner or owners, who report it on their personal tax returns.
Here we will outline some suggestions to start your LLC.
Choose Your Business Name
Your business name is the first impression people will have of your company, so it needs to convey what you do. It should also be catchy and easy to remember. Once you have a few options, you need to make sure it’s not already taken.
First, do a business name search with your state. That will ensure that the name is available to use in your state – but in your state only. You should also check the United States Patent and Trademark Office (USPTO) website to make sure the name is not trademarked. If a name is trademarked, no one else in the U.S. can use the name.
Then, check a domain hosting site like GoDaddy to make sure the domain name is available. You should also just do some Google searching to see if anyone is using the name anywhere other than your state. Even if there is an international company that’s using the name, it could cause confusion.
Choose a Registered Agent and Management Structure
Most states require that you have a registered agent for your LLC. The registered agent is the person or company that sends and receives legal documents on behalf of your LLC. Usually, you or another member of the LLC can be the registered agent, or you could choose your attorney or a registered agent company as your registered agent.
Then you need to decide if your LLC will be member-managed, meaning that you and other owners will be managing the company, or if it will be managed by non-members.
File Articles of Organization Online
Forming your LLC online is the fastest way to get approval for your LLC. You can also get the form and file by mail, but it may take a few weeks before you’re in business. To file, go to the website of the relevant government body in your state, usually the secretary of state, and find the documents to form an LLC. Usually, the form is called the articles of organization, but sometimes it’s called a certificate of organization or a certificate of formation.
The articles of organization will require your LLC name, address, owners, registered agent information, and sometimes your management structure. Fees to form an LLC vary by state and range from $70 to $400.
Create an Operating Agreement
An operating agreement is not usually required (it is required in a few states) but it’s something that you should not skip! The operating agreement will specify the ownership percentages and how profits or losses are allocated to members. It will also specify the rights and responsibilities of members, the management structure, specific member roles in the company, voting rights of members, meeting and voting procedures, and what happens when a member leaves the LLC. It should also specify what happens if member disputes arise.
Depending on your individual situation, it may need to include other provisions as well. It’s highly recommended that you have an attorney help you draw up your operating agreement so that all members and the business are protected.
Other Steps to Start Your LLC
There are a few final steps to take to get your business off the ground.
- Apply for business licenses and permits. Check with your state and local governments for requirements for your particular type of business.
- Obtain an Employer Identification Number (EIN) from the IRS. This is required if your LLC has more than one member or if you will have employees.
- Get business insurance. Talk to your agent about the best types of coverage for your business.
- Open a business bank account.
In Closing
Starting an LLC is a fairly straightforward process. To make sure that you and other members of the LLC are protected, and that the interests of the LLC are protected, don’t skip any of the steps. The operating agreement in particular is critical, even though it’s not usually required, depending on your state. To make sure all your bases are covered, you can have an attorney help you through the entire process.
