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How to start an LLC?



How to start an LLC?

An LLC is a Limited Liability Company. It is a form of business where the person who starts the company has limited personal liability. In this form of a business, the owners are a separate entity and not a part of the business. This protects the owners and they will not be personally held liable for debts incurred by the business. Apart from this reason, LLC's are a popular business form as they are fairly easy to setup, as compared to corporations.

If you were planning to start an LLC, then you can carry out the process yourself. You may choose to take the help of an attorney or an accountant. The process is quite simple, and you can do it yourself. Following is a guide that explains how you can start an LLC.

  • Research your state laws

An LLC is registered under the laws of the state where you live. Each state has its own laws related to formation of businesses. You need to research the laws applicable in your state. You can search online to find the laws and rules applicable to your state. There are plenty of online resources where you can find the laws related to your state.

  • Decide on a name

The first thing to do is to decide the name of your LLC. The name you choose must be unique and someone should not have chosen it already. The name must be easy for people to remember, easy to pronounce and must be related to your business. You may need to add 'LLC' after the name of your company. This depends on the laws of the state you live. You can get access to an online database where you can search names of companies already registered.

In case your documentation work is going to take time, you can even reserve the name by paying a fee. This will ensure that the name will be reserved in your name for a particular period. You need to complete registration before this period. The fee and the period for which you can reserve the name depends on the state rules.

  • Trademark the name

If your business name is highly unique and creative, you can trademark your business name. You can register for a trademark at the US Patent and trademark office. Once you patent your business name, the domain name and all intellectual property related to your business name can be held by you. You can visit the website of the Patent office for more information.

  • Prepare an operating agreement

An operating agreement is a document that explains how your LLC is managed. It lists out the names of all the owners/members of the LLC and their ownership rights. Regulations regarding holding of regular meetings, how profits and losses are to be allocated, and  how the business is managed would be all be a part of the operating agreement.

The procedure regarding transfer of ownership, resignation of a member, or death of a member need to be explained in the agreement. This agreement may not be required by the state, but it is needed for you to ensure clarity in your business. This prevents disagreements and disputes in the future.

  • Select a registered agent

Almost all states mandate that you nominate a registered agent or statutory agent for your business. The registered agent is the person who would receive lawsuits, subpoenas, and other documents on behalf of your business and then pass them on to you. Anyone can be appointed as a registered agent, including someone working for your LLC. It is better to use the services of a professional agent service provider.

  • Decide on the management

Your LLC can be member-managed or manager-managed. In a member-managed LLC, one or all of the owners manage the daily operations of the business. This is the most common type of LLCs. The other type of LLC is a manager-managed LLC. Here, you can appoint a manager who works for your business and takes full responsibility for running your business. You can choose this option if you want a professional with expertise to run your business or if you or the other owners do not have time to devote to run the business.

  • File the paperwork

Each state has its own documentation requirements to register an LLC.  The principal document to be filed is the 'Articles of organization'. This official document lists out the following:

  • The name of the LLC.
  • The contact details of the business.
  • Whether the business is formed for a particular period or forever (perpetual)
  • The names of the members of the business.
  • The purpose of the business.
  • Proposed structure of the business.
  • Name and address of the registered agent.
  • Other details as required by the state laws.

A registration fee needs to be paid while filing the paperwork. The paperwork is usually filed at the office of the Secretary of State.

  • Get the certificate

Once you complete the paperwork, it will be verified and the Secretary of State or a related department will issue a certificate. The certificate is proof that you have registered to do business in the state.

  • Complete other formalities

Once your LLC is registered, there are other formalities to be completed before you can start operations. These include:

  • Obtaining a business license from your county/state authority.
  • Applying for an Employee Identification Number (EIN) from the IRS for tax purposes.
  • Opening a bank account in the name of your LLC, so that you can start your operations.
  • In case you plan to operate in more than one state, you can register as an LLC in the other states too.

The procedure to start an LLC is quite simple. It can be done by you on your own. It is an easy process, which is why people prefer to start LLCs when they start a business.

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