How to Start an LLC in 7 Easy Steps
The supermajority of businesses registered in the United Stats are small business Limited Liability Companies (LLC). The old process of creating an LLC used to be painfully slow, but now it comes down to seven very easy steps. Knowing the ins and outs of these legally required steps makes sure your new business has a smooth start.
1. Choose your business name
Your business name should be the first thing a customer sees—and be the first opportunity you have to capture their interest. Your name can distinguish you from the competition, help you to build your own brand, and set yourself up for overall success.
But it’s not just about branding—your LLC’s name also needs to meet specific legal requirements, many of which vary by state and the nature of your new company. You should research a State’s specific requirements, but most require that your business name to:
Distinguishable enough from the names of already existing companies within the state you intend to do business in. Your Secretary of State's website can inform you as to whether there are similar names.
Have terms indicative of the business structure. These can include but are not limited to “LLC” or some other variation and is usually placed at the end of your business name.
Not have restricted terms in the name. Some pre-existing companies have trademarks which should be respected, as litigation for trademark infringement can be expensive.
2. Designate a registered agent
A business’ registered agent must receive legal documents on behalf of your LLC, and then share them with the appropriate person within your business. Who can be a registered agent depends on your State’s requirements, but usually its either an authorized company, or some adult with both a State residency and a physical address in that State.
Most states allow you to be your own registered agent, to designate someone else as an agent on your behalf, or to hire an authorized company for that service. You’ll likely need to do this if:
There’s no physical location in the state where it’s formed; or
There’s no one physically at your business’s address during normal business hours; or
You run a business out of your home and value keeping private your home address.
3. Determine your LLC’s management structure
There’s generally one of two management structures you can choose from for your new company:
Member-managed LLCs. Here, all members participate in the business’ decision-making and day-to-day decisions. This structure is particularly common among small business LLCs.
Manager-managed LLCs. Here, owners choose one or more parties to be managers and to handle operations day-to-day. These people do not need to be owners or members of the LLC, and can be an outside party. This structure is usually better when not all members of the LLC want to be active, or when it’s a large business LLC.
You should give this decision the time and thought it deserves. Choosing the right option can expedite daily operations, clarify your responsibilities, and significantly improve your chances for overall success.
4. Prepare an LLC operating agreement
One of your LLC’s most important documents is your written operating agreement. In it, you’ll outline your financial and operational guidelines, business structure details, interests in ownership, and how profits are to be disbursed. It is in your interest to take your time when drafting your operating agreement, so each member knows what to expect from your LLC. If you do this, you can:
Avoid interpersonal conflicts
Protect yourself from personal liability
Operate smoothly
Safeguard your property
While the owners of a single-member LLC can create an operating agreement on their own, the owners of a multi-member LLC should contract with a qualified business attorney. While this may add to your business’ startup cost, it will likely save you from more headache in the long run.
5. File your articles of organization
You’ll next need to file your LLC’s formation paperwork. Usually these are the business’ “articles of organization or “articles of incorporation”. Regardless of what your state calls them, these documents are to contain information like:
LLC name
The LLC’s business address
Purpose and duration of the LLC
The LLC’s management structure.
The LLC’s registered agent’s name
The registered agent’s office address
The signature of one or more members/managers
However you do the paperwork, you can file it online; with fees ranging from $50-$200. Some States process your paperwork instantly, while others complete it in days to weeks. Once that’s done, you’ll get a certificate of formation.
6. Get an EIN and business bank account
Once your business is legally recognized, your next step should be to apply for an employer identification number (EIN) with the Internal Revenue Service. This is a nine-digit number the government uses for your business’ tax purposes. Also, financial institutions are usually going to ask you for your EIN if you’re going to open a bank account for your business.
You’re absolutely going to need an EIN if your business is (to be) an employer, or has more than one member named in its formation paperwork. This is for Federal Labor Laws, tax purposes, and etc.
7. Obtain business licenses and permits
Depending on the nature of your business and the State it is located in, you may need one or more licenses/permits to function lawfully. You should check with your Industry’s trade associations and with local and state government resources to determine what (if any) types of licenses/permits your business might need. You can also work with us here at The Law Office of Stevaughn J. Bush, Esq. so you can have everything you need to get your business started.
