This Guide Will Help You Form An LLC
Starting a business can be challenging, having limited resources, startup capital, and a scarce knowledge on business ventures can quickly make the promises of having your empire seem very unattainable. After deciding what business you’d like to start, you must decide on the right business structure that will accompany your business ideas.
Whether you’re starting a C-Corp, S-Corp, Partnership, or Limited Liability Company (LLC) each will host a variety of benefits that will help grow your business. Today, many well-established businesses have found success in starting an LLC as this structure will offer owners limited liability and protection for personal assets. This short and concise guide will give you a clearer idea of how to start an LLC.
What is an LLC?
Small business owners and enthusiastic entrepreneurs have found that starting an LLC helps establish more credibility and protect their assets. A Limited Liability Company has many different features, including pass-through taxation, limited liability protection, and simple maintenance.
Business owners are protected by a legal structure called a “Corporate Veil”, this veil helps to protect personal assets in the event of lawsuits, bankruptcy, or any other legal action. LLCs are quite easy to form and can either be done by the business owner themselves or with the help of formation service providers.
How to form an LLC
Depending on the state in which you reside, the formation process will vary, in many cases, the formation process is relatively similar, with some states having different business regulations or taxation benefits for LLC businesses.
Step Name your LLC
The first step in the formation process involves naming your business. Some states have detailed naming guidelines for new businesses, but in many cases, an LLC business would be required to clearly state they’re an LLC by including the structure acronym. Other restrictions on naming your business are to not use an already registered trademarked business name, using governmental entities such as FBI, Treasury, or Department of State.
Step Two – Choose a Registered Agent
A registered agent will act as the link or liaison between your business and certain government entities. This person will receive and be in control of important tax forms, legal documents, and a notice of lawsuits. Some states require your registered agent to reside within the state the business is operating and be an active member of your business.
Step Three – Filing Articles of Organization
These documents will officially form your LLC and are done with your state’s Department of State regulator. This document is a legal notice which will officially register and form your business with both state and federal government.
Step Four – Create an Operating Agreement
Having an operating agreement will help establish the involved members of your business, additionally, it will also outline how profits are shared among shareholders and investors. Operating agreements make it possible to outline who will be accountable for certain taxations, losses, and profits in the business. Some states do not require LLCs to submit an operating agreement, but it’s good nature to have one on hand in any case.
Step Five – Obtain your EIN
An Employer Identification Number or EIN is obtainable from the IRS. Intentionally this will act as your LLCs identification number, as it will help you register and file necessary state and federal tax documents, help to open a business bank account, and hire new staff members. The EIN can easily be obtained online and is it is free. Having an EIN is a good business practice, as it will help your business stay on track with tax regulations and not miss any tax filing deadlines.
Forming an LLC is one of the easiest business structures as it can be done on your own or perhaps with a business partner. Business owners can seek out advice and additional support for formation service providers who will cover and maintain most of the formation process and documentation filing procedures.