How to Start an LLC

Step 1: Pick a Name

All LLCs must have a business name to be legal. All states have rules regarding the type of name you can use for your organization. However, many states differ on their exact requirements.

However, the majority of states have requirements that:

1. Your company name must end in an LLC designator – Limited Company or Limited Liability Company or abbreviation of such (L.L.C. or LLC)
2. Your name cannot be the same as other LLCs or business entities already registered within your state.
3. The name cannot include letters or phrases that imply a government agency – CIA, FBI, DEA, FDA, etc.
4. Using restricted words like a university, attorney, or bank can require extra paperwork and a licensed professional to be a member.

You often have the option to pay a small fee to reserve your LLC business names while you file your articles of organization.

Research to ensure your chosen name hasn’t been taken. You may also want to see if any similar names exist which may confuse customers. Some business owners also check to see if there’s an available domain in the chosen name so you can set up a business website.

Step 2: Designate a Registered Agent

All LLCs must have a designated registered agent to be official. The registered agent agrees to be the recipient of any legal documents on behalf of the LLC. They can manage any legal summons or file any required documents after forwarding them to you for review.

Your registered agent must have a physical street address in the same state where you register your LLC. You can serve as your own registered agent, assign the role to a member of your LLC, or hire a commercial agent.

The majority of states keep an updated list of commercial registered agents and private service companies. You can hire one of these agents to work as your service of process. Be aware that hiring a private registered agent will require you to pay a fee.

Step 3: File Articles of Organization

The next step you have to take to form an LLC is to file your article of organization forms.

Note: In some states, including Washington, Delaware, New Hampshire, Mississippi, and New Jersey these may be referred to as a “certificate of formation.” In Pennsylvania or Massachusetts, the formation documents are called “a certificate of organization.”

It’s best to check with your specific state to determine the individual requirements you need to complete to file articles of organization forms.

Depending on your state, you may be able to complete articles of organization online. There may also be forms you can fill out on the website of the current Secretary of State.

Information that you will have to list includes:

• LLC name
• Address of operation (if there will be multiple locations, you must designate a primary address for tax and mail purposes)
• Name and address of the registered agent
• LLC owners names and contact information
• Length of time in existence
• LLC management
• LLC mission statement and an explanation of the operation

The exact information you’ll need to provide varies by form. You’ll also have to pay for filing fees, which also vary by state. Most locations charge a fee of around $100, give or take.

You can file these forms online or send them in by mail.

Step 4: Member vs. Manager Managed

Your next step will be determining the management structure of your LLC. A vast number of small LLCs go with a member management system. This option means that a small group of owners manage the day-to-day operations of the business.

But you can also choose to turn your LLC management over to a person or group of people who are not part of the organization. This method is manager-managed and allows the owners to step aside for the managerial tasks and not be involved in how the business operates daily.

The LLC management will handle crucial business issues through voting, such as getting loans, lines of credit, or business credit cards, buying property, or making changes to existing strategic plans.

Step 5: Create an LLC operating agreement

Most states do not require you to have an LLC operating agreement, although a few do. However, experts recommend that all LLCs create these agreements, even if it’s not legally necessary.

Your LLC operating agreement is an internal document that outlines your business’s operating practices. This document will include the LLC’s management and key points about the LLC’s owners.

You can use this document to outline the percentage each owner holds in the business, the shares and losses of profit, rights, and responsibilities, and define what will occur if a partner decides to leave the business, referred to as dissolution.

It also explains how the management handles decisions, voting, and capital contributions for each member’s financial support and how to earn funds in the future.

If you do not draft an operating agreement, your LLC will operate according to your state’s laws.

Step 6: Comply with Tax and Regulatory Requirements

You’ll also need to determine if your LLC must comply with any specific regulatory or tax requirements. There are a few things that may apply to your LLC.

EIN

LLCs that have more than one member must apply for an IRS Employer Identification Number (EIN). This rule also applies to LLCs that have zero employees.

One-member LLCs only need an EIN if there will be multiple employees or taxed as a corporation rather than a sole proprietorship.

Obtaining an EIN requires filling out an online application on the official IRS website. This process takes less than thirty minutes.

Licenses

You’ll also need to check with state and local agencies to determine if your LLC must obtain any types of business licenses.

Depending on the type of business you operate and your location, you may have to register your business and hold a valid license and legal operation permit.

Taxes

In instances where you sell goods, collect sales tax, or have multiple employees, you’ll also need to figure out what taxes apply to your LLC.

First, you’ll need to determine what type of employer taxes you must pay. You’ll also need to register with your state taxing authority. Most states require an annual report and charge taxes or fees annually to LLCs. Check out this link to see your state’s requirements.

You’ll also need to determine if you have to charge sales tax on your products. If you do, you’ll need to figure out the correct amount and any other requirements that may pertain to the situation.

Step 7: File Annual Reports

As we just mentioned, some states require LLCs to file annual reports and pay a filing fee. This fee varies by state and can sometimes be quite high. In California, it can be as high as $800.

Some states may not have any requirements about your annual reports. It’s crucial to know which applies to you, so you don’t end up paying late fees and dealing with other hassles.

Step 8: Register LLC Out of State

LLCs must list a registered agent in the state where they will be conducting business. This rule also applies if you plan to operate in multiple states or in a state outside where you’re currently registered. You must have a registered agent listed for every state where you conduct business.

Hiring a registered agent is easier for LLCs operating in more than one state, as you need a physical address in the state where you can receive legal mail. Rather than having an office in each state where you operate, you can hire multiple registered agents.

Agents are also a good way to keep your legal matters handled without having to do them in-house. You won’t have to worry about missing important filing dates, court appearances, and other legal correspondences.