Many business owners go for a Limited Liability Company (LLC) business structure when they open a small business. LLCs provide personal liability protection to the owners, as they legally separate the entity from its owner. With this business structure, you will run your business in the most tax-efficient manner, as LLCs support the business with flexibility in taxes, management, and the allocation of profits and losses.
For new business owners, the process of setting up an LLC may seem complicated, but the truth is, it isn’t. Here’s what you need to know if you want to set up a limited company.
Select The State
Typically, you will set up your company in the state where you plan to do business. However, if you are not tied to a place, you should check the state laws regarding LLCs and pick the state with the most LLC-friendly laws. Additionally, if you are going to do business in several states, then you have to register for an LLC in each state. Check all the paperwork and fees for each state to be prepared before taking any steps.
Name The Company
You should put a lot of thought into choosing a name for your business, as it will determine your brand’s identity and marketing strategies. However, there are some guidelines to be followed that vary from state to state about what the name should include. The name must include “Limited Liability Company” or any of its abbreviations such as Ltd. or Limited. Unfortunately, there can be times when you may not find the name available in your state, so then you should look for another name or be creative with the name you’ve chosen. While most LLCs use their registered names, you may opt for a different business name also known as a DBA name. Check the laws and the process of having a different business name in your state.
Pick LLC Registered Agent
LLC registered agent is a person or a business that will receive legal documents addressed to your LLC such as government correspondence or compliance documents. Most states require LLCs to designate a registered agent who can be one of the company members.
File The LLC
You will have to file the articles of organization when you are creating an LLC with the state you are applying at. The state’s business office usually has this document and depending on each state, you can find it in the filing office. However, the name of this document can be different in some states, as it can be referred to, as a certificate of information. In most cases, you will need to fill this document with your LLC’s name, address, and its members’ names, but the LLC professionals at fatstacksblog.com/corpnet-review/ propose that you hire an attorney to go through the process with you to ensure that nothing goes wrong with the process. After filling out the document, visit the Secretary of State to file the document along with any filing fees that may be required. However, some states require you to file the document in a different office.
Prepare an Agreement of Operation
This agreement isn’t mandatory in most states, but it’s essential to draft one. This document will put a written-down arrangement on how to handle business operations and decision-making. This document will state agreements such as:
- Ownership percentage for each member
- Members’ duties and responsibilities
- Voting rights
- Membership changes
These agreements will prevent any future misunderstandings and some states require this document.
Setting Up a Bank Account
You should open a bank account for your LLC to separate the funds of your business from your personal funds. Each bank will demand different documentations from your LLC to set up a business bank account. In order to prepare the required documents beforehand, contact your bank for details.
Obtain Business Permits and Licenses
There are some permits and licenses required to be able to run your business. The Small Business Administration website has a list of state license offices around the country which you can visit to know what permits you need to have. The state you operate in, the governmental requirements, and the standards of the industry of your business will dictate what kind of permits and licenses you have to acquire.
This handy guide will ensure that the process of creating an LLC will go smoothly. However, it is safer to hire professional help to aid you through the process, as an LLC attorney will prevent any obstacles along the road. Additionally, you may miss any benefits that come with LLCs that an attorney will ensure that you get them. Make sure to familiarize yourself with all the terms before starting the process.