Do you want to start your own company but aren’t sure where to begin? Are you worried about how to protect yourself from lawsuits? Or maybe you just want to make extra money without having to work for someone else. Whatever your reason, starting an LLC is a great way to do it.
Starting an LLC is often necessary for many small businesses. It provides protection from personal liability for owners and employees, allows for tax savings, and gives you the ability to form a corporation.
In this guide, we’ll cover everything you need to know about forming an LLC, including how to choose the perfect name, where to register, and how to file taxes as an LLC. We’ll also go over common mistakes new entrepreneurs make when setting up an LLC and how to fix them.
If you’re looking to start an LLC, then this guide will help you get started with confidence.
By the end, you’ll be ready to start your own business in no time!
│What is an LLC?
An LLC stands for Limited Liability Company. An LLC is a type of corporation that offers limited liability protection to owners and managers. Unlike corporations, LLCs aren’t required to file annual reports with state regulators. Instead, they file informational documents with local government agencies. While many states require LLCs to pay franchise taxes, others don’t. Some states may charge fees to form an LLC, while others may waive these fees.
The process of forming an LLC varies depending on the state in which you live. However, once formed, an LLC is treated like any other business entity. Its members are protected under limited liability laws, and it can issue stock shares to investors.
│Benefits of Forming an LLC
The benefits of forming an LLC include:
Limited liability protection: Members of an LLC are personally liable only for the debts and obligations of the LLC itself. A member cannot be held responsible for the actions of another member, partners, shareholders, officers, directors, employees, agents, or representatives.
Tax advantages: Many states offer tax incentives to businesses that incorporate in their jurisdiction. These tax breaks vary from state to state, but generally speaking, incorporating in certain states provides significant savings compared to operating as a sole proprietorship.
Flexibility: Most states allow LLCs to operate without having to register with the IRS, although some states require registration. In addition, most states allow LLCs to avoid paying corporate income taxes.
Privacy: Businesses incorporated in Delaware are afforded additional privacy protections by law.
Simplicity: Forming an LLC is much simpler than setting up a traditional corporation. There are fewer forms to fill out, and filing requirements are minimal.
Control: Ownership of an LLC is flexible. One person can own 100% of the company, or multiple individuals can hold varying percentages of ownership.
Protection: LLCs are often considered “pass-through” entities, meaning profits pass through to individual owners rather than being taxed at the corporate level.
Management flexibility: Managers of an LLC can be anyone over 18 years old. They can be family members, friends, or professional service providers.
Access to resources: An LLC can access bank accounts, credit cards, and loans.
Ease of management: Managing an LLC is simple. All transactions must be approved by the majority of members, but there is no board of directors to oversee operations.
No formalities: LLCs do not have to follow the same rules as corporations.
Low cost: Incorporating an LLC typically costs $100-$500, plus applicable state fees.
|Interesting Facts |
An LLC, or limited liability company, is a business structure that provides limited liability protection to its owners. LLCs are a popular choice for small businesses and startups because they offer personal asset protection and simplified tax and legal compliance.
│Choose the Right Type of LLC
|Corporation||A general partnership (GP)|
|A corporation is a legal entity that is separate and distinct from its owners. It is created by filing articles of incorporation with the state in which it will do business. A corporation has many of the same legal rights and responsibilities as an individual, including the right to enter into contracts, to sue and be sued, and to own property. |
The major difference between a corporation and an individual is that a corporation can continue to exist even if its owners die or leave the business. A corporation is owned by its shareholders, who elect a board of directors to oversee the corporation’s affairs. The board of directors appoints officers, who are responsible for running the corporation.
|A general partnership (GP) is a business structure in which two or more partners contribute capital and labor to a business, and each partner is jointly and severally liable for the debts and obligations of the business. A general partnership can be formed by an agreement between the partners. There is no need to file any documents with the state.|
|A limited liability company (LLC)||A limited liability partnership (LLP)|
|A limited liability company (LLC) is a business structure that combines the pass-through taxation of a sole proprietorship or partnership with the limited liability of a corporation. An LLC is not a corporation; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs do not need to be organized for profit. |
Most states also permit single-member LLCs, which are LLCs with only one owner. A limited liability company can be formed by filing articles of organization with the state in which it will do business.
|A limited liability partnership (LLP) is a business structure in which two or more partners contribute capital and labor to a business, but each partner is only liable for his or her own negligence or misconduct. An LLP must be formed by filing a certificate of limited liability partnership with the state in which it will do business.|
|A limited partnership (LP)||Sole proprietorship|
|A limited partnership (LP) is a business structure in which two or more partners contribute capital to a business, but only one partner (the general partner) is liable for the debts and obligations of the business. The other partners (the limited partners) are only liable up to the amount of their investment. A limited partnership must be formed by filing a certificate of limited partnership with the state in which it will do business.||A sole proprietorship is a business structure in which one person owns and operates a business. The sole proprietor is personally liable for all the debts and obligations of the business. A sole proprietorship can be formed by any individual who wishes to start a business. There is no need to file any documents with the state.|
Which type of entity would be best for your business?
First and foremost, you have to decide if you want to form an LLC or a corporation. Both are good ways to establish your business. However, some factors favor one over the other.
For instance, an LLC is typically cheaper than a corporation because of the limited liability it provides its members.
Additionally, entities that are taxed as partnerships can claim their losses against the personal income tax returns of their partners, which offers more protection for members.
If you are just starting out and want a do-it-yourself option, then an LLC would be great for you.
But if you’re looking for more support or elaborate business structures, then a corporation will be better suited for your needs.
│Step 1: Select Your State
In order to form an LLC, you must first select which state you want to register your company in. Each state has different requirements for forming an LLC. Some states require you to file paperwork while others allow you to simply fill out one online application.
|Our best tips for choosing the right state:|
| Choose a state where there is no minimum capital requirement.|
Choose a location where you plan on doing most of your business.
Find a state that offers tax incentives such as low taxes, no franchise fee, etc.
Check if your state allows you to incorporate through a service bureau.
Make sure your state does not require any type of filing fees.
Consider whether or not your state requires a license before incorporating.
Determine what kind of entity you would like to form (S corporation, C corporation, etc.).
Decide if you want to form a limited liability company or a general partnership.
Research each state’s requirements for registering an LLC.
Contact your local Secretary of State office to find out about the process.
│Step 2: Choose a Business Name
Choosing a name for your business is one of the most important decisions you will ever make.
It has to be catchy, memorable, and unique. If you don’t pick a name that stands out, no one will remember your business.
- Choose a business name that reflects who you are and what you do.
- Make sure that the name does not violate any trademark laws.
- A good rule of thumb is to choose a name that sounds professional and unique.
- Make sure your business name doesn’t contain any misspellings or grammatical errors.
- Be careful when choosing a business name that contains numbers. Numbers are difficult to spell correctly and may lead to spelling mistakes.
Here are five tips for choosing a good and memorable business name:
#1. Pick a Name That Makes Sense
Think about what makes sense for your business. What does your business stand for? Does it represent an idea, a person, or a place?
For example, if you run a restaurant, think about what food represents. Do you serve burgers? Steak? Pizza? Pasta? Salad?
What would your customers associate with your business? Would they think of a fast-food chain? An upscale restaurant? A sports bar?
Write down everything that comes to mind. Then narrow it down to three choices.
#2. Use Common Words
Common words tend to stick in our minds longer than unusual ones. For example, “pizza” sounds much easier to say than “doughnut pizza.”
So, if you want to make sure your business name sticks in people’s heads, use common words.
#3. Make Sure Your Name Has Meaning
Make sure your business name has meaning. Think about what your business means to you. How does it feel? What emotions come to mind?
Does it sound exciting? Relaxing? Funny? Serious?
Do you like the sound of your business name? Can you imagine yourself saying it over and over again?
When you find a name that feels right, write it down. Now go back to step 1 and repeat until you find a name that works for you.
#4. Keep It Simple
Keep it simple. Don’t get too fancy. You can always add more information later.
If you have trouble coming up with a name, try using a word processor. Type in all the letters of your chosen name. See how many variations you can create.
Then, take those variations and see how they sound together. Which one sounds better?
#5. Use name generator for new ideas
Use a name generator to help you brainstorm names and new ideas.
Name generators are online tools that allow you to enter keywords and then generate thousands of possible combinations.
You can also use them to search for existing businesses and trademarks.
The best part is that you can save these results so you can easily access them later.
Once you’ve found a few potential names, read through them carefully.
Now, decide which one you like the best. Write it down. Repeat this process as often as necessary until you find a name you love.
|Generators we recommend for creating a unique brand name for your LLC:|
| Business Name Generator|
Cool & Catchy Business Name Generator
Podcast Name Generator
Online Shop Names
Restaurant Business Name Generator
│Step 3: Choose a Registered Agent
Choosing a registered agent is the third step in starting an LLC. When you form a new business, you’re required to appoint a registered agent. A registered agent is a person or business that agrees to receive and forward important legal documents on your behalf. This includes documents like service of process, tax forms, and official correspondence from state agencies.
Two types of agents: domestic and foreign
Domestic agents represent companies within the United States while foreign agents represent companies outside of the U.S.
- For example, if you own a restaurant in New York City, you would choose a domestic agent.
- Meanwhile, if you owned a restaurant in London, England, you would select a foreign agent.
Domestic agents are usually easier to choose since they’re required to register with the state agency that oversees LLCs. Foreign agents are less common, but they still exist. Some states require foreign agents to register with the Secretary of State’s office while others allow foreign agents to register directly with the state agency.
Choose a domestic agent if possible. Most states offer online services that allow you to select an agent based on location. Otherwise, you can contact the secretary of state’s office to request a list of local agents.
Once you’ve chosen an agent, you’ll need to pay a fee. Depending on the type of agent you chose, this could cost anywhere from $50-$200. Make sure to budget accordingly.
What to expect when you work with a registered agent
Working with a registered agent is a crucial step in establishing and running your new business entity – make sure to go ahead without them if you want to avoid potential problems.
In order to ensure that your LLC documents are correctly set up, the registered agent will require access to a lot of detailed information about it. This includes information on your members, management structure, operating procedures etc.
You should also schedule regular consultations so that the registered agent can review all of this documentation as needed and give you professional advice on how best to run or manage your business.
How to choose the right registered agent
When it comes to choosing a registered agent, there are a few things you need to keep in mind. These include their experience as an agent, fees and services they offer, as well as your preferences and the type of business you’re operating.
After doing some research online or by contacting your state secretary of state, arranging a meeting with an agent should be easy enough. During this encounter, make sure to discuss all the relevant details of your LLC – such as filing fees and articles of organization.
|There are a few things you should keep in mind when choosing a registered agent for your business:|
|1. Choose a registered agent with a physical address in the state where your business is formed.|
2. Make sure your registered agent is available during normal business hours.
3. Consider the registered agent’s fee.
4. Choose A Registered Agent With Good Communication Skills
5. Check to see if the registered agent has any history of complaints.
6. Ask the registered agent if they offer any additional services, like document filing or mail forwarding.
7. Look for someone who specializes in businesses similar to yours.
8. Choose a registered agent that you can trust.
It’s important to choose a registered agent based on your needs. Some states require you to register a business entity within 30 days of opening, while others allow you to wait until later.
Appointing a registered agent is an important part of forming a new business. By following these tips, you can be sure to choose a registered agent that’s right for your business.
Once you have your LLC name and registered agent, you can file your Articles of Organization with the state.
│Step 4. File your Articles of Organization (AO)
In order to legally operate a business, you must file articles of organization with the state and pay the filing fee, which is usually around $100.
|This is an official document that shows the state that you are operating a legal business.|
| The process is fairly straightforward|
You will need to provide some basic information about yourself
You to pay a filing fee
Once filed, you will receive a certificate from the state
You need to file your AO before you open any bank accounts, pay any bills, or do anything else related to running your LLC
Article of organization filing requirements vary depending on the state you live in. Some states require you to file within 30 days after opening your business, while others may allow you to wait until your first tax return is filed.
How to file your article of organization
You will need to gather the required information and documents, and then submit them to the appropriate state agency. The specific requirements and process will vary from state to state, but the general steps are as follows:
- Gather the required information and documents. This will typically include the LLC’s name and contact information, the names and addresses of the LLC’s organizers, and the LLC’s articles of organization.
- Submit the required information and documents to the appropriate state agency. This is typically the Secretary of State’s office, but it may also be the Department of Business Regulation or the Division of Corporations.
- Pay the filing fee. The filing fee is typically a few hundred dollars, but it may be more or less depending on the state.
- Wait for the state to approve the LLC’s articles of organization. This process can take a few days to a few weeks.
- Once the state approves the LLC’s articles of organization, the LLC is officially formed and can begin operating.
What should be included in the document to file articles of organization?
When you’re ready to file your Articles of Organization with the state, you’ll need to include some important information.
|This checklist will help you make sure you have everything you need before you submit your paperwork:|
| The name of your LLC. This should be the same as the name you registered with the state.|
The LLC’s registered address. This is the address the state has on record for your LLC.
The LLC’s principal place of business. This is the LLC’s main place of business.
The names and addresses of the LLC’s organizers. These are the people who started the LLC.
The LLC’s purpose. This is the reason the LLC was formed.
The names and addresses of the LLC’s members. These are the people who own and run the LLC.
The LLC’s management structure. This is how the LLC will be run, including who will make decisions and how those decisions will be made.
The LLC’s registered agent. This is the person or company who will receive legal documents on behalf of the LLC.
The LLC’s tax classification. This is the tax category the LLC will fall into.
The LLC’s duration. This is how long the LLC will exist.
The articles of organization are the foundation of your LLC. They set forth the LLC’s purpose, management structure, and member roles.
By including this information in your articles of organization, you’ll be able to keep your LLC running smoothly and avoid any legal problems down the road.
│ Step 5: Prepare an LLC Operating Agreement
An operating agreement is a contract that governs the day-to-day operations of an LLC. An operating agreement is required by law in every state except Delaware, New York, and Wyoming.
It’s important to understand that an operating agreement is different from a partnership agreement, which is used to govern the formation of a business entity. While both agreements cover similar topics, they serve different purposes.
Partnerships are typically formed to create a business structure that allows owners to share profits and losses. Partnerships are governed by a partnership agreement, which sets forth rules for managing the partnership.
Operating agreements, on the other hand, are used to govern the daily operations of an LLC. These agreements are usually drafted by lawyers who specialize in drafting LLCs.
To learn more about the differences between partnerships and operating agreements, read our article on the topic.
│Step 6: Obtain a Certificate from the State (EIN)
An EIN number is required for every business entity, including sole proprietorships, partnerships, corporations, limited liability companies, etc. An EIN is issued by the IRS and allows businesses to deduct certain expenses associated with running a business.
To obtain an EIN, you’ll need to complete Form SS-4, Application for Employer Identification Number. Once you submit the form, you’ll receive a letter confirming receipt within 10 days. Then, you’ll need to pay $5 to send in proof of filing. Finally, you’ll need to wait 30 days for the IRS to review your application.
After the IRS approves your request, you’ll receive a certificate in the mail. Keep in mind that you cannot apply for an EIN until you have filed your federal tax return for the previous calendar year. So, if you haven’t yet filed taxes, you’ll need to do so before applying for an EIN.
Once you have an EIN, you can begin deducting business expenses on Schedule C of your federal income tax return.
In addition to the above steps, you may also need to file a fictitious business name statement. Depending on your state’s requirements, you may need to file this every 3 months until you reach the maximum amount allowed.
There are other ways to obtain an EIN, including through online services. However, the fastest and easiest method is to visit the IRS website and follow the instructions.
│Steps After Starting an LLC
Get a business insurance
Insurance is important because it protects your assets against loss due to theft, fire, natural disasters, etc.
If you’re planning to start a small business, you should consider getting business insurance. This includes liability coverage, property damage coverage, and workers’ compensation.
Liability coverage covers any legal action taken against you by third parties. Property damage coverage pays for damages done to your home or office. Workers’ compensation provides medical care for employees injured at work.
There are many types of insurance available.
Open a Business Bank Account for your LLC
If you’re thinking about opening a business bank account, you should be aware of some important details. Here are five things to consider when selecting a business banking institution.
1) Choose a local bank. Local banks tend to offer better rates than national banks because they often have lower overhead costs. They may also be able to help you open a business checking account faster than a large national bank.
2) Consider online banking. Online banking allows you to access your accounts 24/7, regardless of where you are located. This means you can deposit checks at any time, pay bills, transfer funds between accounts, etc., whenever you need to.
3) Look for a small business discount. Small businesses typically receive discounts on fees and interest rates. Some banks offer special programs designed specifically for small businesses.
4) Check out credit card options. Many banks offer free business cards, which allow you to accept payments via credit card. These cards usually come with a merchant processing fee, however.
5) Ask questions. Before signing up for a business banking account, ask questions about the services offered. Find out whether there are additional charges for certain types of transactions, such as international wire transfers. Also find out whether there are minimum balances required to maintain a business checking account.
When looking for a business banking institution, keep these tips in mind.
|When you open a bank account for your LLC, you’ll need to provide the following information:|
| Name of owner(s)|
Passport / ID copy
Social Security numbers
Bank routing numbers
Account holder signature
Register for Taxes in your state
If you’re planning on starting a small business, you need to register for taxes in your state. This includes filing federal income tax forms (1040), state income tax forms (W-2), and paying any applicable sales tax.
To file your 1040 form, you must be registered as either a sole proprietor or a partnership. To file your W-2 form, you must be a corporation, limited liability company, or S Corporation. And to pay sales tax, you must be registered in your state as a retailer.
There are many reasons to register for taxes in each state. One reason is because you may qualify for certain tax credits and deductions. Another reason is because some states require businesses to collect sales tax.
In addition to registering for taxes, it’s also important that you register your business name. You’ll want to do this before you apply for a business license.
File annual reports and tax forms
LLCs must file Form 1065 annually, while sole proprietorships do not need to file any tax returns. However, if you choose to operate under an S corporation, then you must file Form 1120S quarterly.
You should also file Form 8832 every year, even if you don’t owe any taxes. This form is used by the IRS to track how much money you’ve paid into the government during the previous year. It will also show how much money you’ve taken out of the government.
Keep records of all financial transactions
As mentioned above, you’ll need to keep detailed records of all financial transactions.This includes deposits, withdrawals, and purchases made from your business checking account.
The best way to record these transactions is through a journal. A journal is simply a book that contains all of your financial transactions.
Get a Business License
Before you officially launch your new business, you’ll need to get a business license. Depending on what type of business you plan to operate, you may need to obtain several different licenses.
To operate a business in the United States, you must obtain a federal license. There are two types of licenses: Federal and State. A Federal license allows you to sell goods across state lines. A State license only applies to activities inside the state.
A business license costs $100-$150 per year depending on the size of the business. To apply for a business license, visit the local county clerk’s office.
You can get a DBA license from the county clerk’s office. Some states require additional fees.
Marketing your new business
After starting your own business, it’s easy to feel overwhelmed by the amount of tasks involved in running a successful operation. But while it might seem overwhelming, it’s important to remember that every business needs marketing, whether it’s online or offline.
Your goal is to attract customers who are willing to pay for your products or services, and the best way to do this is to market yourself and your brand. When it comes to marketing, there are two main types of advertising: paid ads and organic listings. Paid ads are advertisements that appear alongside other businesses’ ads on search engines and social networks. Organic listings are the natural result of having a strong presence on sites like Facebook and Twitter.
While both types of advertising are effective, paid ads tend to generate more leads and sales. So, after setting up your LLC, it’s important to focus on creating a solid marketing strategy. Start by identifying your ideal customer base and developing a plan to reach them. Then, create a budget and set goals for each campaign. Finally, choose the type of ad that will work best for you and implement it.
Create a website
After starting your business, the next thing you’ll likely want to do is create a website. There are several different options available depending on your needs and budget, including WordPress, Squarespace, Wix, Weebly, and others. Each option offers unique features and benefits, so it’s important to choose wisely.
But where do you start? Creating a website can be a daunting task, especially if you’re not a web developer. But don’t worry – there are plenty of resources out there to help you get started. In this blog post, we’ll give you a step-by-step guide to creating a website for your new LLC.
Step 1: Register a domain name
The first step is to register a domain name for your website. This is the address that people will type into their browser to access your site. Try to choose a name that is short, memorable, and relevant to your business.
Step 2: Find a web hosting provider
Once you have a domain name, you need to find a web hosting provider. This is a company that will provide you with the technology and support you need to keep your website up and running. There are many web hosting providers to choose from, so take your time to find one that offers the features you need at a price you can afford.
Step 3: Create your website
Now it’s time to create your website. If you’re not a web developer, you can use a content management system (CMS) like WordPress or Joomla to create a professional-looking website without needing to learn coding.
There are also many website builders out there that allow you to create a website without any coding knowledge. Weebly and Squarespace are two popular options.
Step 4: Promote your website
Once your website is up and running, you need to start promoting it. There are many ways to do this, but some of the most effective include:
– Search engine optimization (SEO): This is the process of making your website more visible in search engine results pages (SERPs).
– Pay-per-click advertising (PPC): This is a form of advertising where you pay a fee every time someone clicks on your ad.
– Social media marketing: This involves promoting your website and content on social media platforms like Facebook, Twitter, and LinkedIn.
Step 5: Analyze and improve
Finally, it’s important to analyze and improve your website continually. Use Google Analytics to track your website’s traffic and see how users are interacting with your site. Based on this data, you can make changes to improve your website’s performance.
Creating a website for your new LLC is a great way to promote your business and sell products and services.
Checklist for starting a website
|Before making a final decision, consider the following questions:|
| How much does it cost?|
What kind of hosting service do you need?
Do you need a domain name?
Are you going to use a CMS (content management system)?
Will you need to hire someone to manage your website?
Is there anything special you’d like to add to your website?
Does your website require SSL encryption?
Can you afford to pay monthly fees for your website?
How long do you plan to maintain your website?
How easy is it to learn?
How easy will it be to customize?
How easy would it be to change themes?
How easy to update?
How easy it is to install plugins?
How easy are the templates?
How customizable are the templates?
There are plenty of other questions you could ask yourself, but hopefully, this gives you a general idea of what to look for in a web host.
Regardless of which platform you decide to use, you’ll want to create a professional-looking website that showcases your brand and provides visitors with useful information. Once you’ve created your website, you’ll need to build your online presence by sharing your content on social media sites like Facebook, Twitter, LinkedIn, Instagram, Pinterest, and other platforms.
Here are some useful tips we’ve compiled from our team.
Keep it simple
When it comes to your website, less is definitely more. You don’t need a flashy, complicated site to get the job done. In fact, a simple, straightforward website is often more effective than an elaborate one. Just make sure your site is easy to navigate and includes all the essential information about your LLC.
- Highlight what makes you unique
What makes your LLC different from all the other businesses out there? Whether it’s your unique product or service, your commitment to customer service, or your innovative approach to business, make sure your website highlights what sets you apart.
- Use compelling content
Your website should be informative, but it should also be engaging. Use strong headlines and compelling copy to grab your visitors’ attention and keep them interested. And don’t forget to include a call to action on every page.
- Make it visually appealing
People are visual creatures, so it’s important to make your website visually appealing. Use high-quality images and videos to give your visitors a sense of what your LLC is all about. And don’t be afraid to use color to make your site pop.
- Promote, promote, promote
Once your website is up and running, don’t just sit back and wait for visitors to come to you. Get the word out about your site by promoting it on your social media channels, in your email signature, and anywhere else you can think of.
Creating a website for your LLC doesn’t have to be a daunting task. Just keep these tips in mind, and you’ll be well on your way to success.