LLC Startup Made Easy - A Step-By-Step Guide

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LLC Startup Made Easy - A Step-By-Step Guide

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Whether you’ve finally found the means to become your own boss or you are diversifying your entrepreneurial portfolio, one thing holds true. One of the first things you have to do is decide on a business structure before you get it up and running.

Now, if you’re starting a small business, an LLC is one of the most advantageous business structures you can choose. Besides being fairly easy to run, it also provides various benefits to you as the owner, including tax flexibility and limited liability protection.

But forming an LLC is not always a walk in the park. There are several regulatory requirements to meet, paperwork to handle, and arrangements to make before your business starts operating as a legal entity. Especially for a completely green business entrepreneur, it can sometimes seem a little confusing and overwhelming, but not if you’re well informed.

In this step-by-step guide, we shall take a comprehensive look at what you need to do when forming an LLC – the easy-peasy way!

LLC Formation Requirements May Vary By State 

Before we get started, it’s important to keep in mind that the steps to form an LLC may slightly vary from one state to the other. This is because different states may have state-specific requirements. From registration fees to taxes and regulations, some states have a more favorable business environment than others.

Starting an LLC in AZ, for instance, is cheaper and much less complicated compared to most other states.

With this in mind, it is important to start by figuring out if an LLC is really the best structure for you depending on the state in which you want to establish your business. It’s also a good idea to consult with an attorney or professional business advisor to make sure you are following the correct process.

Basic Steps To start an LLC 

While slight variations might exist in the LLC formation process from one state to the other, the main steps are more or less the same in most states across the US. Furthermore, you can always consult with your target state’s secretary of state office or research state-specific LLC formation guides if you’re in doubt about the requirements.

To put you at ease, however, let’s walk through the major steps involved in setting up an LLC, alongside some considerations you should make during the process.

1. Pick a Unique Business Name 

As much as you do so with marketing and branding in mind, it’s crucial to pick a business name for your LLC that is not already in use in your state. Moreover, the business name you choose must include the words "limited liability company," or "LLC," at the tail end of the business name.

There are also several other state law requirements to consider when choosing a name for your LLC startup. For instance, some words that may imply that you’re in a certain business, say banking or insurance or a government agency are prohibited in most states.

The best way to avoid complications is to start by conducting research on the specific state’s LLC naming requirements. While at it, be sure to check out if the name you have in mind is available by visiting the website of the state body responsible for business registrations. This is most likely to be the Secretary of State Office website – in most states.

2. Choose A Registered Agent For Your LLC.

A registered agent is a person or entity designated to receive legal correspondence documents and other official correspondence on behalf of your LLC. This can either be an attorney or a registered agent service company.

Typically, your registered agent must have a physical address in the state where you wish to form your LLC. They must also be available during normal business hours to accept legal service of process. The last thing you want is for legal papers to fail to reach you just because you or your registered agent was out of office.

In some cases, your LLC’s registered agent should be authorized to accept service of process documents in all other states where your LLC is registered to do business. Besides being responsible for receiving and forwarding legal documents such as summons and subpoenas to your LLC, your registered agent may also be responsible for filing annual reports with the state.

3. File Articles of Organization

This is actually when the formation of a limited liability company officially begins. Depending on the state, articles of organization may also be referred to as the certificate of organization or the certificate of formation.

It is also similar to the Articles of Incorporation used when forming a corporation. Either way, the articles of organization is simply a document that provides basic information about your LLC such as its name, purpose, and address.

Filing the AoO is done with the state's secretary of state office, and is usually not a complicated process. 

It simply requires providing information like:

  • The business address of your LLC
  • Your LLC's registered agent’s name and address
  • Name and address of founder members
  • Who manages the LLC, members or non-member managers?
  • LLC effective date
  • The Duration you want your LLC to be active
  • Business purpose

Once you provide this information, you or other members should sign the document. From there, go ahead and file the form with your state’s secretary of state and pay a filing fee, which can be anywhere between $40 and $150 in most states, give or take.

It’s also worth noting that in some states like New York and Nebraska, you may need to publish a newspaper notice expressing your desire to register your LLC before you file the articles of organization.

4. Create an Operating Agreement

An operating agreement of a limited liability company typically outlines a particular set of business rules to be followed by the LLC, its members, and management, how, and when. It basically outlines the ownership and management structure of your LLC.

The operating agreement can also detail the rights and duties of the board of directors and the officers, as well as policies to be followed, say when a member wishes to leave the company. It should also include details about how profits and losses will be shared or handled.

An operating agreement is usually not a mandatory requirement for forming an LLC in most states.

However, it’s good to have one in place to avoid operational disorder and legal complications. While you can always draft an LLC operating agreement on your own or use an online template, it’s always a good idea to get it done by a business attorney. This is especially true for LLCs with more than one owner.

5. Obtain a Federal Tax ID (EIN) 

An Employer Identification Number (EIN) is a unique, nine-digit identification number assigned to a business entity by the Internal Revenue Service (IRS). It is necessary for businesses of all sizes and types, including LLCs for a variety of reasons. 

Some scenarios where you’ll need your EIN include when:

  • Opening a business bank account
  • Applying for business licenses or permits
  • Filing taxes
  • Applying for a business loan
  • When applying for government grants, tenders, or contracts
  • Purchasing business insurance
  • When hiring employees

To obtain a federal tax ID number for your LLC, all you need is to file Form SS-4 with the IRS. This is usually free of charge and can be done online, via mail, phone, or fax.

6. Acquire Additional Licenses or Permits Where Necessary 

Depending on the type of business you plan to operate your LLC, you may need to apply for additional licenses or permits. It’s one of the important legal precautions you can take for your startup or small business. This may include federal, state, and local business licenses, as well as any permits required to operate your specific type of business.

Business permits and license requirements may vary widely depending on the industry, type of business, and where it is located. So, the best way to determine if and which ones you need is to consult with a CPA as well as your state or local business department.

7. Set up A Business Bank Account

The next important step to take is to open a bank account in the name of your LLC. Even though it is not a mandatory formation requirement, this allows you to keep your business finances separate from your personal finances.

It is also a great way to cushion your personal assets from liability, in case your LLC suffers a hefty lawsuit or goes bankrupt, for instance. 

Moreover, having a business bank account grants you LLC a few other benefits, including:

  • Business accounting becomes easier
  • It allows your LLC to accept credit card transactions
  • You can access loans for your LLC
  • It makes handling business taxes easier
  • It adds a professional touch to your LLC

As you can see, setting up an LLC is nothing close to rocket science. By following the above few steps, you can get your LLC created in as little as 10 days if not less. 

Once your limited liability company is approved, make sure to register for any taxes applicable to your business and comply with other tax laws. Also, remember to keep your LLC active and maintain records of all business activity.

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LLC Startup Made Easy - A Step-By-Step Guide

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