LLC Formation – Steps to Forming a Limited Liability Company
But first let’s talk about some of the benefits to forming your business as a limited liability company.
There are many benefits to choosing a Limited Liability Company as your business structure:
Benefits of Starting a
- Personal asset protection to – as mentioned above, your are protected should your go bankrupt or be sued.
- benefits: Pass-through taxation benefits
- Simple to setup and maintain – no annual meetings, formal officers, or complicated records.
- Flexible – ‘s have very little restrictions regarding the ‘s structure. You decide if you want your to be a single member , multi-member , and so on.
- ‘s are a widely recognized and bring credibility to your organization.
- Access to financing – Once your , you can start to build a credit history which opens the door to is formed loans and financing to grow your .
- Flexible profit sharing – ‘s can choose how they want to do their profit sharing, they are not required to be equally distributed among members.
An LLC structure protects you, as the business owner, from being personally liable for the company’s debts or other liabilities.
Furthermore, ‘s can be owned by more than one person known as an .
If the doesn’t do as well as planned or you have a rough year, you as the are personally protected under an .
For example, if your declares bankruptcy or is sued, your such as your vehicle, personal bank accounts, and house are safe.
An provides some great .
A Single-member is a pass-through which means that profits and losses from the are “passed through” to you and taxed as personal income.
This benefits you as a small because you are not hit with and are not required to pay both corporate and personal taxes on your earnings.
Multi-member ‘s are taxed as partnerships and are also pass-through entities.
This means each owner pays personal income taxes on their portion of the profit.
If this all still sounds good, let’s get into the steps to forming your LLC.
– Steps to Forming a
Select your State
Most ‘s are formed within the state in which they are operating, especially if your will have a physical presence such as a store or office.
If your or foreign ) in each state where you plan on doing (more on this later). will have a physical presence, you will also need to register a foreign agent (foreign
There may be instances where you may choose to form your in a different state from where you live. This is called a foreign .
Choose a name for your New
Every state has their own requirements for choosing a name, but in general, they follow these guidelines:
Name must include “ corporation“” “L.L.C.” or the phrase “
The name cannot include words that could interfere or be confused with a government agency such as FBI, CIA, Treasury, etc.
Certain words such as “bank” or “attorney” may require approval and additional paperwork.
The does not have to be anyone at your or anyone employed by you, and does not have to be a member of the .
In fact, there is a whole industry of companies that you can hire to handle this on behalf of your .
Majority of the states require that an has a and the agent must be a resident in the state in which you are doing .
If you use a to form your , many of them can act as your (more on this later).
If you choose to be your own , your address and other information will be made public.
File your Articles of Organization
Now that we have covered the prerequisites, you will need to register your with the state.
The is most often referred to as the “articles of organization” but can sometimes be referred to as “certificate of formation” or “certificate of organization.”
This document along with the payment of your state are what officially create your .
Once created, the documents can be sent in via mail or online.
Alone with the certificates, you will need to provide the following information:
- Full names, addresses, and contact information for all founding members of the .
- Address of the – if your has multiple addresses, you will need to choose one that will be your official mailing address.
- Length of time the has been in or has existed
- Information about the – mission statement and explanation of purpose
Set Up a Management Structure
As mentioned above, ‘s give you the ability to choose your own management structure.
The can be member-managed which means the members are involved in the day to day operations of the .
You can also choose to have the be manager-managed which means members are not involved in the managerial matters but rather hire managers to take care of the day-to-day functions.
Most states do not require a but we highly recommend creating one.
An is a legal document that outlines the ownership structure and member roles of your .
You can find templates online or if you use an , they will create this document for you.
Get an EIN
An EIN, or ), acts like a Social Security number for your . You will need an EIN to hire employees and open bank accounts. (
You can get an EIN for free from the IRS website, or via fax or mail
in other states
If your will conduct across state lines, then you will need to file to do in those other states.
This is more involved and may require the help of a or lawyer.
Once your is formed, there are annual deadlines that need to be met.
Make sure you familiarize yourself with these deadlines and add them to your calendar so that they are not missed.
As you can see, there are several steps required to make sure that your is formed correctly.
Hopefully these steps helped clarify what needs to be done and can help you prepare for when you are ready to form your own .
If this all still seems overwhelming, then this is where using a comes in handy.
If you have a little bit of flexibility in your budget or you know that the DIY route is not for you, then we strongly recommend hiring an .
An will make sure everything gets filed properly and expediently and they will make sure that all of your annual maintenance deadlines are not missed.
services specialize in just that, forming businesses.
They streamline the process for you and are there to answer questions, fix mistakes, and help with legal advice and needs.
Many of them even take care of your yearly maintenance and filings for you and offer as well.
Here are three popular options to give you an idea of what they offer:
ZenBusiness is one of the most affordable options and a great value.
They are a little smaller and newer than the other two mentioned below, but have excellent customer reviews and overall features.
Northwest also included a year of with any . They also offer premium customer support that is unmatched to their competitors.
If you anticipate questions or more complex , they are the top choice. You definitely get what you pay for and more with Northwest.
Northwest is our best overall value option.
IncFile will form your for free and include a full year of with any .
IncFile is at the top of our list of the best services, year after year.
If you decide to go the DIY route and form your own but need help with the Annual Reporting, checkout the following services:
For $49, MyCompanyWorks will make sure you don’t miss a deadline. They are the most affordable annual report service out there and they offer a 100% satisfaction guarantee.
Their price varies depending on the service package that you choose, but their fully-managed services take care of everything so you don’t have to.
And if you want it all done for you, and Annual Reporting, then you may want to look into MyCorporation.
For $99 MyCorporation will form your and also include a full year of their managed annual report service.
After you have followed the steps to create your , your work is not done.
There are still several actions you must complete as a to set up your for success and security.
As mentioned above, there are deadlines and annual maintenance tasks that need to be completed.
If you feel savvy enough to do it yourself, great!
If not, checkout these top services and let them take the guesswork out of the equation!
They will form your and keep you up-to-date. In other words, they will get you from A-Z!
We hope this how to How to Start an Guide has helped you get started with your !
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