30 Jan 2024
29 Jan 2024
Are you planning to register a business as an LLC? If you are and you got confused about the process and nuances, don’t worry. Many business owners have been where you are. That’s why we’ve put together this full guide on all things related to LLC launching and what you should do to get it right from day zero. So, read on to learn how to create a rock-solid LLC.
An LLC (Limited Liability Company) is a business structure used in the United States. It combines elements of both corporations and partnerships or sole proprietorships. Members (owners) of an LLC have limited liability, meaning they are typically not personally responsible for the business debts and liabilities. This is similar to the liability protections afforded to shareholders of a corporation.
Around 21.7 million businesses in the United States are registered as an LLC. There are some reasons why it’s such a preferred registration, too. Here are some benefits and key characteristics that make an LLC an enticing route:
Registering a business as an LLC (Limited Liability Company) has several pros and cons that should be considered. Let’s look at them and see if this is the best route for your business startup.
So, how does one register a rock-solid LLC? Here are all the steps you should take to get started:
Selecting a suitable name for your LLC is the first step, and it’s an important one. Remember that your business name should be unique and adhere to your state's specific LLC naming requirements, including "LLC" or "Limited Liability Company."
You might also want to consider your business's online presence when choosing your business name. Check the domain name's availability for a future website. A well-chosen name will establish your brand. Moreover, it ensures legal compliance and avoids potential legal issues.
Deciding where to form your LLC is a strategic choice. Generally, it's advisable to establish your LLC in the state where you plan to do business because this will simplify the legal and tax processes for your business.
However, some businesses opt for states like Delaware or Nevada. States like these have more favorable business laws and tax advantages. Still, you should keep in mind that creating an LLC outside your home state can add complexity, so weigh the pros and cons well and think ahead.
You’ll need to designate a registered agent, which is the person who will act as the official contact to receive legal documents on behalf of your business. Every LLC must have a registered agent with a physical address in the state of formation.
This agent can be an individual or a company authorized to do business in your state. Choose someone who tends to be proactive so you never miss important legal notices, including tax documents and lawsuit notifications. This can be the CFO or COO of your business.
Filing the Articles of Organisation with your state's business filing agency will officially register your LLC, which is a crucial step too. Your articles will include key details about your business, including its name, address, purpose, duration, and the registered agent's information. This document establishes your business as an LLC and will lay the foundation for all your operations and legal protections.
So, here’s the thing: an operating agreement is not legally required in every state. However, it’s vital to outline your LLC's management structure and operating rules. So, whether it’s required or not, we still recommend that your business have an operating agreement.
This document should detail member percentages, rights, responsibilities, and profit and loss distribution procedures. Additionally, it should cover the processes for adding or removing members. This agreement is a critical internal document, ensuring all members know the business's operation and governance.
You must pick up all the necessary licenses and permits to operate your LLC legally. These vary based on your business type, location, and the specific requirements of local, state, and federal authorities.
This step is crucial for legal compliance and can include a range of permits, from a basic business license to specialised permits, depending on your business activities. Failing to obtain the necessary permits can result in fines and legal challenges.
Lastly, you’ll need to register your LLC for proper taxation. You should get an Employer Identification Number (EIN) from the IRS, which you’ll need for tax purposes and hiring employees.
Next, open a business bank account to separate your personal and business finances. Commingling funds can lead to legal challenges regarding your personal liability protection.
We highly recommend outsourcing your books and taxes to a third party or employee. Hire someone with a bookkeeping certification or accounting degree so they know all the ins and outs of business finance.
We live in exciting times for entrepreneurs. To date, around 65.3% of businesses in the US are profitable. Digitalisation and globalisation have many opportunities, but it must all start with due diligence. Registering your business is a step you shouldn’t skip. So, follow the steps above and get an LLC done. When you do, you can comfortably march on and grow your business to new heights without worrying about all the legalities.
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