If you’re like most people, the thought of starting your own business has crossed your mind at some point. Maybe you have a great idea for a product or service, but don’t know where to start when it comes to setting up the business itself.
Or maybe the legalities of starting a business seem daunting and overwhelming.
This guide will walk you through everything you need to know on how to start an LLC(limited liability company).
We will also compare the limited liability company model against other business models and all the documents you need to get your small business off the ground.
Why Should You Start An LLC?
- 1 Why Should You Start An LLC?
- 2 How To Start an LLC
- 2.1 Choose a Name For Your LLC
- 2.2 Reserve your business name
- 2.3 Choosing Registered agent services
- 2.4 Preparing LLC Operating Agreement
- 2.5 File LLC liability protection documents
- 2.6 Obtain State Certification
- 2.7 Get EIN Number
- 2.8 Obtain a small business license.
- 2.9 Register To Do business In Other States
- 2.10 Keep Your Limited liability company active
- 2.11 LLC business structure types
- 2.12 Limited liability company LLC Vs Other Structures
- 2.13 LLC & Taxes
- 2.14 Required Formation Documents to Start an LLC
- 3 How to start an LLC FAQs
- 4 Wrapping Up
Limited liability companies are the perfect way to start your business, protect yourself from any lawsuits, and enjoy all of its benefits.
There are many benefits of having an LLC including that it is easy to manage and it has fewer formalities and requirements than other business model structures.
Compared to sole proprietorships, when you form an LLC you are in charge of your business and personally responsible for debts and obligations.
But like a corporation, an LLC can help protect your assets.
How To Start an LLC
Here is the step-by-step process guide to starting a limited liability company.
Choose a Name For Your LLC
Without a doubt, your name is your brand.
Choose a great name that will resonate with the customers within your niche.
Here are a few things to keep in mind when choosing a name for your LLC.
- It must end with ” LLC ” or “Limited Liability Company”
- The fewer the syllables the better, if it can be pronounced within one word then it will resonate better with your customers.
- Your LLC name can not imply that it is something it’s not.
- Your name cannot be associated with local law enforcement names like FBI or CIA
When you’re ready to form your LLC, check with the state’s business entity registration office first.
You’ll need a name that is available and not currently in use by another company or individual before forming an official firm!
The best way is using domain registrars like namecheap because they allow for easy searching across multiple states while also providing additional features such as security questions & answers on their sites which help prevent fraud when setting up new accounts.
Reserve your business name
Name reservation isn’t a mandatory step in forming an LLC, but some business owners choose to reserve their company’s names for the legal documents they file with the state.
A name can only be reserved up until 30 days from when it was first registered or renewed; after this time has passed, anyone else who wants that same domain may claim ownership by recording his/her own registration on Naming Office Databases.
To form an LLP, you may need to follow different rules for reserving a name.
Choosing Registered agent services
In order to form an LLC, you need someone who can represent the company during business hours and take care of any legal documents served on them.
This is where registered agent comes in handy – they’re typically able-bodied individuals with physical street addresses within their state.
Registering as an entity is a great way to simplify your business operations and make sure everything runs smoothly.
You’ll save time with services like service of process, and registered agent status which offers many benefits including easy access to tax documents.
Preparing LLC Operating Agreement
When forming an LLC, the operating agreement sets out how it will be run and who owns what.
This is one of many important documents that go into making up your business’s legal structure another crucial part being articles or shareholders agreements that detail any restrictions on transferability for shares in certain firms as well as define death duties should anything happen to you while running yours.
Having an operating agreement is not legally required, but it’s a good idea to have one even if you don’t live in one of those states.
File LLC liability protection documents
Filing articles of organization and operating agreements is a complicated process that varies based on your state.
Some additional fees might also be required, depending on where you live.
The fees will also depend upon what type, if any, or the number of members you have in an LLC so be sure to check with professionals who can help walk through this step for you.
Obtain State Certification
Finally, after receiving the LLC formation documents from our state agency with all of their requirements being met and approved by them we will receive a certificate that is rightfully ours.
Get EIN Number
The next step in setting up an LLC is to open a business bank account.
An Employer Identification Number or EIN allows the company access and enables them to take advantage of many tax breaks, such as claiming certain losses on their taxes if they have been allocated through work projects that help another person’s bottom line.
You can sometimes get by using your social security number for this purpose but it may not be ideal since there are other ways you might want to be reserved just for yourself such as being able to buy a property with cash!
Obtain a small business license.
As an entrepreneur, you should always make sure that your business is in compliance with any laws or regulations it needs to operate.
This includes not just local but also state and federal agencies which may have unique requirements for certain types of businesses based on where they’re located across America’s many states.
Obtaining a business license is necessary when you start an LLC.
Register To Do business In Other States
There are many benefits to registering your business in each state where it does business.
This way, you can enhance its protection and liability features with ease by filing the correct paperwork for that particular location.
The need to register as a limited liability company in other states is dependent on the business’s certain circumstances.
Keep Your Limited liability company active
To ensure your LLC’s longevity, you must consider the annual requirements.
One important task is filing an annual report with the secretary of state and paying taxes based on business income to both federal agencies as well as states where they operate in existence throughout America!
LLC business structure types
If you’re looking to start a new business and want the best of both worlds, LLCs are for you.
With different tax implications depending on your situation (and whether having single- or multi-member clubs), these entities can be had in many shapes and sizes.
The great thing about the management structure when your form an LLC is you can have a manager-managed LLC, which means the members do not actively participate in company management.
Manager-managed LLC owners are great for people who want the freedom and flexibility that comes with running their own business but don’t know how best to go about it.
They can have full control over what they do without having any legal obligation or responsibility at all, this type of LLC is attractive to small business entities with few members.
Limited liability company LLC Vs Other Structures
By operating as an LLC, owners can protect their personal assets and maintain a separation between business debts and any individual’s obligation.
In addition to this liability protection for the company itself, there isn’t anything stopping you from conducting your day-to-day operations while maintaining full control over taxes filed with government entities like the IRS or state departments of revenue all handled through just one set of records!
The LLC model is a great choice for small businesses with high liability risks.
The additional protection it provides over other business structures like sole proprietorships makes this an efficient and cost-effective way to manage your company’s assets while still providing you the maximum flexibility in how profits are distributed amongst its members or shareholders if they exist.
If you have a higher risk of liability, then S corporations might be the right choice for your business.
This tax structure provides additional protection from lawsuits and government inquiries by creating multiple entities within one entity called “trusts.”
LLC & Taxes
Now let’s cover taxes and tax benefits for a new LLC business owner.
LLCs are often subject to state taxes.
State laws determine which type of taxation will apply, but it’s common for these transactions, and annual fees or tax on business income rates within each respective state government agency control them so make sure you do your research with the internal revenue service before starting.
Other taxes that might apply to LLCs include self-employment tax, use tax, and property tax.
For example, if the company has employees then employment taxes will have to be paid as well which could lead them into paying franchise tax too depending on where it’s operating within a state or otherwise conducting business activity legally under said laws.
Required Formation Documents to Start an LLC
Apart from the documents mentioned above in this article, some additional documents may be also needed.
Such information such as:
- Your business name & address of LLC.
- the name of your business members within your LLC.
- The name and business address of its LLC’s registered agent.
- Your LLC operating agreement.
How to start an LLC FAQs
What is a federal tax election?
The federal tax election allows businesses to choose which type of taxation they prefer.
It’s an important decision that can impact your bottom line, so it pays not only to consult with a professional but also to get all the necessary paperwork filed correctly!
How Is Business Tax Calculated?
The two most common methods for tax calculation in businesses are the cash method and the accrual/ realization (inclusive) approach.
The former is used by smaller companies that have less need to conserve assets, while larger firms may choose an alternate strategy due to their greater liquidity constraints; however, there’s no “right” choice among all types of enterprise.
What does doing business under a DBA mean?
Businesses should file the appropriate forms with their state’s business office to register a DBA.
A DBA, or “doing business as” designation, is used when a company wants to operate under an assumed name that’s different from the official legal one registered with their state.
This can provide additional protection and flexibility when it comes to how customers perceive your business brand in the marketplace.
A popular alternative name for businesses that want more anonymity is using an LLC or Ltd., which allows them some protection from lawsuits.
An LLC is a great business model for small businesses because it offers limited liability protection to its owners.
This means that the owner’s personal assets are protected in the event that the business is sued or incurs debt.
The LLC also has a simpler structure than other business models, making it easier to start and operate.
If you’re interested in starting an LLC, we can help you get started today. We’ll walk you through all the documents you need and help you compare the LLC against other business models.
Get started on your LLC today!