Step by Step Guide: How to Start an LLC
A limited liability company is a business entity that provides liability protection, certain tax advantages, and a simple, user-friendly management structure. Due to LLCs' ease of operation, they are commonly preferred by small businesses. However, creating an LLC will require that you complete certain processes, which include correctly filing paperwork with the state. This following will serve as a step-by-step guide detailing steps to form an LLC.
Steps to Start an LLC
- Pick a Name for your LLC
- Designate InCorp Services as your Registered Agent
- Submit LLC Articles of Organization
- Create an Operating Agreement
- Receive a Certificate from the State
- Acquire a Business License
- Obtain a Federal Tax ID Number/Employer Identification Number
1. Pick a Name for your LLC
You will need to have a name that you can use while filing your Articles of Organization, and there are certain things you will need to keep in mind in order to make sure that your name complies with the state's LLC naming requirements.
The following list contains some of the things to consider while naming your LLC:
- Your LLC business name needs to include LLC, LLC, Ltd. Liability Co., Ltd. Liability Company, or Limited Liability Company.
- The name of your LLC must not contain words or acronyms that could confuse it with a governmental entity, such as FDA, EPA, State Department, etc.
- Your name can use the name of a city, town, or state but cannot include words such as "city" as it may be confused with a municipal entity.
- Your name must not be used by another LLC within the state.
- Your LLC name cannot include words such as Corporation, Inc., Trust, Incorporated, etc., that make it sound like a different type of business entity.
- Words such as bank, credit union, lawyer, university, etc., may require that you provide certain licensure and documentation.
2. Designate InCorp Services as your Registered Agent
Your registered agent's physical address will be publicly available through your Articles of Organization; for this reason, many business owners choose to use a registered agent service in order to keep their physical address private.
All states require that your LLC have a registered agent. A registered agent is a designated individual or legal entity that receives official legal documents, service of process in the case of a lawsuit, and notifications from the state on behalf of your LLC. A registered agent must have a physical address within the state and must be able to receive mail at all times during standard business hours.
The role of a registered agent can be fulfilled by an outside entity such as InCorp that provides registered agent services.
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3. Submit LLC Articles of Organization
Your Articles of Organization are a public and legal document that is used to establish your LLC by laying out its basic information. You can submit your Articles of Organization online, in person, or by mail.
You will need to have the following information in order to file your Articles of Organization:
- The name of your LLC.
- Your registered agent's name and physical address.
- The purpose and basic description of the company.
- Management structure: will your LLC be managed by its members or by designated managers.
- Contact name and phone number.
Once your Articles of Organization have been approved by the state, your LLC will officially be established.
4. Create an Operating Agreement
An operating agreement that details the manner in which your LLC will conduct its business. The operating agreement will help outline how your business will function and can help settle any potential disputes regarding financial matters or other issues amongst the LLC's members.
For example, your operating agreement can outline the distribution of control, responsibilities, membership duties, etc. If there is a lawsuit that arises within your LLC without this agreement in place, the courts will utilize state law in order to make decisions on the case, which may or may not be in the best interest of the LLC or its members.
Your operating agreement can include the following details about your business:
- The LLC's name, address, and main contact number.
- Name and address of the LLC's registered agent.
- Information regarding the LLC's Articles of Organization.
- Why the business was created and what role it seeks to fill.
- Who the LLC's various members are and what duties they are expected to preform.
- How financial gains and losses will be divided amongst the LLC's members.
- How the LLC will add new members.
- How the LLC will manage departing members.
- How the LLC will be managed.
- Liability concerns.
5. Receive a Certificate from the State
Once your Articles of Organization have been filed and approved by the state, you will receive a Certificate of Organization that formalizes the existence of your LLC.
If your Articles of Organization were filed through the mail, you should expect to receive this certificate along with your stamped and approved Articles of Organization in the mail. If you filed your Articles of Organization online, you can access and print out your Certificate of Organization and stamped and approved Articles of Organization on the state's online database.
Once you receive this certificate, you will be able to obtain a business license, a Federal Tax ID Number/Employer Identification Number or EIN, and open a bank account on behalf of your LLC.
6. Acquire a Business License
A business license is a government-issued permit that will allow your LLC to conduct business legally within the governmental body's jurisdiction.
A business license can be applied for through the state online or through the mail. Depending on the type of license you apply for, it may require that you renew it annually and pay a fee in order to do so. Once you receive your business license, your LLC can lawfully conduct business in the state.
7. Obtain a Federal Tax ID Number/Employer Identification Number
A Federal Tax ID Number or Employer Identification Number (EIN for short) functions as a social security number for your LLC.
It is assigned to you by the Internal Revenue Service and helps identify your LLC for tax filings and reporting. You can apply for a Federal Tax ID Number/Employer Identification Number through the IRS or InCorp can obtain your EIN number for you.
Once you obtain your Federal Tax ID Number/Employer Identification Number, you will be able to do the following:
- File and manage your LLC's federal and state taxes
- Open a business bank account on behalf of your LLC
- Hire employees to work for your LLC
Conclusion
Once these initial steps have been completed, you'll be ready to operate your LLC legally. An LLC can provide you legal protection so that you can safely operate your business without jeopardizing your own personal assets. Once your LLC is established, you will be able to do the following:
- Obtain specific permits and licenses that are relevant and necessary to operate the type of business you own.
- File your LLC's taxes on the federal and state levels.
- Open a business bank account specifically for your LLC.
- Apply for business credit cards.
- Obtain various types of insurance for your business.
- Protect your intellectual property such as your LLC's name and logo with a trademark.