When starting a business, one of the major decisions is to choose your entity type. And many business owners decide to run their enterprises as limited liability companies (LLCs). This type of ownership has elements of a partnership and a corporation.
Under LLC, the company doesn’t pay tax as a business entity. Instead, owners pay taxes from their share of earnings—a characteristic of a partnership entity. Also, they’re not personally liable for the company’s liabilities. A limited liability company is the best entity to protect your personal properties in case of legal issues.
Forming An LLC
The rules and regulations for forming a limited liability company vary depending on the laws of your state. Here are general steps to follow regardless of their location:
1. Create A Business Name
The first step when establishing an LLC is to create a business name. Your company’s name can influence a client’s first impression and allow you to stand out. Most jurisdictions prohibit different businesses from registering their entities under the same name.
For this reason, it’s essential to do a business name search to determine the availability of your preferred LLC name. It’s also necessary to research whether there’s another business in the state using your preferred name. Doing so can ensure you’re not filing your LLC documents with a name already being used by another company.
You can reserve a name after selecting one for your LLC. Most states allow people to secure their company name by paying a reservation fee. This way, no individual can register their businesses under your desired name.
2. Hire An LLC Formation Service Provider
Forming an LLC is a long process with much paperwork. If you’re busy with other things, you might need more help to complete the task efficiently. Fortunately, you can hire the best LLC registration service and streamline the process. An LLC formation service provider will guide you, ensuring you follow all the necessary steps and procedures when creating your company.
The first benefit you can gain by hiring an LLC formation service provider is that you can save time. As noted above, forming an LLC is a long process and time-consuming. The selected service provider will do most of the work, such as drafting all the required documents. Hiring their service will allow you to save time and focus on other critical matters.
An LLC formation service can also ensure you avoid potential errors and omissions. Forming a limited liability company can demand your total concentration. A slight mistake can hurt the whole process, forcing you to start over again.
3. File Articles Of Organization
Another crucial step when forming an LLC is to prepare articles of organization. You can submit these documents to formalize your intention of establishing an LLC. Articles of organization may contain the following information:
- Name and address of the business
- The LLC formation service provider
- Objectives or goals of the firm
- The critical roles in the organization
Preparing articles of organization requires filing them with the Secretary of State or any other government agency responsible for the company’s registration.
4. Prepare Operating Agreement
Once you file articles of organizations, the next thing is to prepare an operating agreement. It may contain the following information:
- Procedures that show how your company will operate
- How members acquire profit
- The rights and responsibilities of each member
- Company ownership interests
- Conditions that can dissolve the company
Although preparing an operating agreement isn’t a legal requirement in most states, it’s an important document when forming an LLC. Once members of the company sign an operating agreement, it becomes a binding set of rules and regulations they must adhere to.
5.Obtain Licenses And Permits
After you file the documents with the state, they’ll review them. Once approved, the state will issue you a certificate of organization or formation to show your company’s legitimacy. After getting the certification of formation, you can apply for the necessary licenses and permits.
The type of licenses and permits depends on the state and local government requirements and the products or services you want to sell. Meanwhile, you can launch your LLC and connect with clients once you obtain all the required documents. Alternatively, you can invest in marketing to increase the visibility of your business.
Forming your business as an LLC can be beneficial since it protects your personal assets from the firm’s liabilities. However, the process might be overwhelming, especially for new business owners. With the information in this article, you can find it easier to create an LLC in your state.