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Oct 25, 2023

How to Set Up an LLC: a Step-by-Step Guide

How to Set Up an LLC: a Step-by-Step Guide
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Dena Standley
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A Limited Liability Company (LLC) combines the advantages of corporations, partnerships, and sole proprietorships by providing a simpler management structure, protecting against personal liability, and offering tax advantages.

No matter where you live, you can register/form your Single member LLC in any U.S. state. But it’s advisable to choose your home state for convenience. If you want to register your preferred business type in a state other than your own, you’ll need a physical address.

Unlike corporations, LLCs have no board of directors, which protects your assets and allows you to claim pass-through tax treatment. If you want to start, run, and own a successful business that is safe and easy to manage, LLCs are an excellent choice.

Here are the steps for setting up your own LLC.

 

1. Name your LLC Business

Whatever stage of the LLC formation process you are in, remember: your name can make or break your brand. As a business entity, your name can also protect your business on a state and federal level.

By registering your business name, you ensure that it is unique and that no one else can use it. You can use services like LegalZoom, ZenBusiness, or IncFile to check availability with an llc name search, register and file your business name.

Choosing a unique and memorable LLC name can help you stand out and help clients find your business. 

Here are some things to consider when naming your LLC.

Compliance with the law

It must be unique: Your LLC cannot share the same name with another in your state or a trademarked phrase. Check with your local secretary of state and the United States Patent and Trademark Office to see if your desired business name is still available in your state and not already trademarked.

Include the entity type: The LLC name must also contain the words “Limited Liability Company” or the initials “LLC.”

Be careful not to mislead: Using certain business terms, words, or abbreviations in your business name is illegal. States vary in their rules, but generally, words that indicate a different entity type from LLC are restricted, such as “Corporation,” “Incorporated,” and “Limited Partnership.”

LLC names cannot contain words suggesting that your company is a governmental agency, such as “City,” “Township,” or “Federal.” Unless your company is in the bank or insurance industry, you cannot use words such as “Bank,” “Insurer,” or “Trust.”

Other Considerations

Consider your domain name: Your business will likely require a web presence, which means a website with a domain name that represents or matches your entity name. Check if the domain name is available or how much it will cost you.

Consider a name that grows with the business: If you are naming your LLC, keep an eye on the future. If you decide to expand, pick words that evoke what you’re offering without being overly specific.

Alternatively, you can file a Fictitious Business Name (FBA), also known as a Doing Business As (DBA). A DBA allows you to use any name you want as your trade name. Using a DBA, you can keep your LLC name the same but change the brand name.

Ensure that it is memorable: For a business name to be successful, it does not need to be quirky or unique. The key is to make it easy to remember. Your DBA business name can be very literal in reflecting what you do, or it can be catchy, clever, or cute.

2. Designate a Registered Agent

Registered agents receive important tax and legal documents

Selecting a registered agent is one of the steps in forming a limited liability company (LLC). All states require LLCs to have a registered agent and a registered office where they are formed or foreign qualified (registered to transact business outside their home state), where the registered agent is located in the registered office.

How Does a Registered Agent Help You?

Registered agents receive important tax and legal documents on behalf of your LLC. Registered agents receive documents such as:

  • Notice of a lawsuit filed against a company, such as a summons or a complaint. The documents are referred to as “process.” It entails the delivery of these documents to the defendant–in case of a lawsuit.
  • State tax department documents
  • Liens
  • Subpoenas and summonses from the court
  • Annual reports or statements sent by the state
  • Garnishment orders

Your R.A. must have a physical address in the state where the business is formed or qualified. The registered office cannot be a post office box or a private mailbox rented from a company like The UPS Store. Regular business hours must also be observed at the registered office.

Furthermore, the registered agent’s address is publicly available, which means anyone can view it. For companies whose formation or qualification documents do not require an actual business address, the registered agent’s address is all that is kept on file with the state. NorthWest Registered Agent will help you navigate the odd world of state bureaucracy.

Is it Possible to be my Registered Agent?

An LLC may have an individual as its registered agent, although this is not recommended because mishandling legal documents and other essential documents puts your business at risk.

Your LLC might have a registered office in the state where it was formed, and you could name yourself or someone else who is located there as its registered agent. But your new company cannot be its registered agent. In most states, this is illegal.

 

3. Get the LLC Articles of Organization in Your State

Articles of organization an official document that outlines basic information about a company (sometimes called a certificate of organization or certificate of formation.) For an LLC to be legally established, you must file this document with your state. It is like your company’s birth certificate.

Depending on your Secretary of State’s office, a response can take several weeks or a few days, but most states offer expedited service. The LLC becomes a legal entity once these articles are approved and filed.

The Secretary of State can reject the articles of organization. In most cases, they are not approved due to issues with the LLC’s proposed name, filing the wrong entity, or failing to follow state-specific requirements. 

If your articles of organization are incorrect, you can resubmit them by filing an article of amendment, which describes the specific changes you made.

Why are the Articles of Organization Necessary?

In your LLC’s articles of organization, you specify things like your LLC’s powers, responsibilities, and obligations. In most states, the following information is required:

  • LLC name
  • Description/purpose of the LLC
  • Information about the LLC members, managers, and officers
  • The date you’ll start the LLC
  • LLC’s address
  • Name and address of the registered (or statutory) agent
  • Compile Additional Information

You will need to submit additional information to your state before completing your LLC’s articles of organization application. Your state may ask you for the following:

  • The purpose of your LLC: Some LLCs, like accounting firms or law firms, must enter only one professional purpose when filing.
  • Management of the LLC: Is the LLC managed by a manager or a group of members? Answering this question requires preparation. The owners of member-managed LLCs manage the company on a day-to-day basis. Manager-managed LLCs have a more significant number of non-management members.
  • Compile the addresses and names of the LLC members in some states. Your list can contain an unlimited number of members.

Form Submission

You’ll need to submit your LLC articles of organization for approval once you’ve provided the necessary information. In some states, you can file electronically or send your paperwork in the mail with a check. The authorized representative of the LLC must sign the articles of organization.

4. Optional: Draft the LLC Operating Agreement

The operating agreement describes how LLC owners will run and manage the company. In this agreement, you should specify how profits and losses will be shared, whether interests can be transferred to third parties, and how the business can be dissolved by its owners.

In the same way that you need an operating agreement as an LLC owner, you also need a business bank account. Your personal assets are protected if the LLC is sued or goes bankrupt.

Is an Operating Agreement Necessary?

When you form an LLC, separate your assets, and follow business formalities, you separate your assets from the business assets so that you will not be held personally liable for its debts. An operating agreement is one such business formality.

Some states require LLC operating agreements, while others do not. But operating agreements benefit most LLCs as they resolve conflicts among or between owners. An LLC may also lose its liability protection if it isn’t treated as a separate business.

When you draft and follow an operating agreement, you demonstrate to anyone interested (such as a business creditor) that your LLC is separate from your assets. Contact an attorney if you need assistance or have questions.

5. Get Your Employer Identification Number (EIN)

Employer Identification Numbers, also called Federal Tax Identification Numbers, are used to identify business entities. The IRS (Internal Revenue Service) assigns 9-digit numbers to taxpayers who need to file business tax returns.

You can apply for an EIN Number in three ways:

  • EIN applications are best submitted online. You can access the online application from 7 am to 10 pm Eastern time, Monday through Friday. EINs are issued immediately upon completion of the application.

  • You can also mail the completed Form SS-4 to the IRS address listed in the PDF Instructions and “Where to File Your Taxes” (for Form SS-4). In about four weeks, you’ll receive your EIN.

  • If you need to fax your completed Form SS-4, Application for Employer Identification Number, you can find the appropriate fax number here: “Where to File Your Taxes.” The fax number is available 24 hours a day, seven days a week. Your EIN will be sent to you via fax within four business days.

6. Open Your Business Bank account

LLC owners need bank accounts for the same reason they need operating agreements: liability protection. If the LLC or you go bankrupt, your personal assets will be protected. The corporate veil refers to this separation of company and individual.

You can lose your personal liability protection if you treat your company’s assets like your own. To give an example, if you use the company’s money to pay household bills, all of the legal protection you gained by forming your LLC could be at risk! This could put your personal property at risk.

7. Comply with Tax Regulations

The two things in life you can’t avoid are death and taxes.

Getting and filing a business license and permits with state and local agencies, then paying income taxes, is the first step to operating and running a business.

Your state determines llc tax filings, business licenses, and permits. Your secretary of state’s office or sba.gov can provide you with what you need to understand if you are required to pay different forms of taxes such as franchise tax, income tax, and required state taxes.

Tax Requirements

There are differing reporting and tax filing requirements for LLCs in all 50 states. The majority of states, however, require LLCs to file annual reports and pay annual taxes. Failure to file a yearly report or pay taxes carries serious penalties.

You may need to hire a tax accountant if you do not understand your state’s tax rules.

Best LLC Formation Services to Setup Your Small Business

LLC formation services provide a range of services, including document preparation, filing, and ongoing support to help business owners stay in compliance with state and federal regulations. There are several reputable LLC formation services available on the market, including:

LegalZoom

LegalZoom is a well-known brand that offers comprehensive LLC formation services, including document preparation and LLC filing, as well as ongoing support. They have a user-friendly platform that makes the process of starting an LLC simple and straightforward.

IncFile

IncFile is known for its low-cost LLC formation services and easy-to-use online platform. They provide a range of formation packages, including a basic option for those who want to start their LLC quickly and easily, as well as a more comprehensive option for small businesses that want additional support and resources.

ZenBusiness

ZenBusiness is a popular option that offers a variety of LLC formation packages, including a premium package that includes a custom business logo and website for new businesses. ZenBusiness focus on helping small business owners start and grow their businesses and their formation services are designed to be affordable and accessible.

ZenBusiness is known for its user-friendly platform and accessible prices, making them a great option for those who are just starting their small business journey.

TailorBrands

TailorBrands is a unique LLC formation service that offers branding and logo design services in addition to its formation services. They are a one-stop shop for small business owners who want to start their LLC and create a strong brand identity.

Regardless of which LLC formation service you choose, it is important to do your research and choose a reputable brand that meets your specific needs and budget.

You Are Ready to Set-Up Your LLC Now

Forming an LLC offers many benefits to business owners, such as liability protection and tax advantages, but unfortunately, it can be challenging. With all the intimidating paperwork, legal jargon, and confusing requirements, it’s easy to get overwhelmed. And worst of all, it’s easy to make mistakes.

Setting up a business requires a lot of research, which is a good thing. Business structures and how they work are complex, as well as the state’s business operations. An LLC, however, is the simplest business structure compared to a sole proprietorship. As an added advantage, LLCs give you a more legitimate image than other companies. So get your business up and running today!

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