(Newswire.net — July 4, 2021) –Limited liability companies or LLCs are nothing new. However, it’s only recently that regular people like you and I have realized that they could form their own LLCs. According to The Balance SMB, an LLC is a company structure that protects the assets of the owners from litigation, hence the name limited liability. Creating an LLC differs depending on which part of the country you decide to incorporate. Some states have better options for businesses than others in terms of tax rates and filing fees. Regardless of where you choose to incorporate your business, you have to go through the same basic steps to create an LLC.
Step 1: Pick a State for Incorporation
You can choose any state in the US to incorporate in. because it’s so easy, you might start thinking about your home state, but that could be your first mistake. Several factors impact whether a state is an excellent place to incorporate a business, including:
- Filing Fees: Different areas have their own costs for filing the documents of incorporation for an LLC. Why spend more to file for your company if you can get it done for less in another state?
- Laws that Benefit Businesses: A few states have a reputation for being pro-business in dealing with legislation and tax rates. Corporate-friendly states also have dedicated courts that hear business-related matters.
- Privacy: Some states require that ownership of all companies, including LLCs, be made public. Others allow for anonymous ownership, which may benefit your privacy.
Determining which states fit your needs allows you to figure out where you’d prefer to file your documents of incorporation.
Step 2: Follow State Regulations
Most states have the procedure for filing for an LLC outlined on their websites. A state may require articles of incorporation to be filed, while others prefer a certificate of incorporation. Abiding by state law specifically puts you above suspicion. Since each state has specific regulations regarding companies, you would do well to do some research on what is required in the state you intend to file.
Step 3: Pick a Name
Probably the most fun part of forming a new company is picking a name. However, it needs to be a unique name. Copyright law in many states requires that your company’s name and its logo not match anything else being used to conduct business within the state. You need to choose a relevant name that you can use to do branding and promotion, but at the same time, stand out as one-of-a-kind on the market. You can even have a business name but register a “Doing-Business-As” (DBA) name that you would use on your business correspondence and legal documents.
Step 4: Registered Agents
Most states require you to have someone living within the state to handle official correspondence. If you’re registering in a state you don’t live in, you’ll need a registered agent. These agents are individuals who people who act on behalf of the LLC or company. The LLC or company cannot act as its own legal representative. If the owner doesn’t reside within the state, they can pay someone to serve as the legal representative of their LLC. If you do register in the state you live in, you, as the owner, can be the registered agent. However, that means you’re likely to get all sorts of spam (since your mailing address will be in the public domain). If you travel, you risk not getting critical legal documents on time. If you move or leave, you’d have to update your address in the registry. You can hire a company to operate as the registered agent for your own business if you don’t reside in-state or don’t want to go through the hassle of doing it yourself.
Step 5: Fill Out the Operating Agreement
The operating agreement defines how the business is going to be run. It’ll also outline the business structure and the purpose that the LLC was established for. But, most importantly, it’ll determine the company’s ownership and may define its final tax status.
Step 6: File Articles of Organization
These are usually filed with the secretary of state for your particular location. These articles define what happens when a member leaves the organization or dies and how the business will wind up if it has to close. You can potentially file your articles of organization on your own. However, you may be required to pay a fee for filing, and the payment will vary from state to state. Alternatively, you can hire a company that specializes in filing or an attorney to guide you.
Step 7: File for an Employer Identification Number (EIN)
An EIN is also referred to as your Tax Identification Number (TIN). The EIN is a critical part of how the company files taxes. The IRS usually assigns an EIN after you file. That number is specific to your business and can’t be used by others. Even if your business closes, the EIN remains registered to it. If you intend to hire employees, you will need an EIN to function. Also, it’s usually necessary if you want to open a business bank account.
Step 8: Publish Operating Notices
You’ll be required to publish in two local newspapers when your business becomes active in most states. For the paper to count as a viable source, it must be published in the same state as the company’s registered operating address.
Step 9: Maintain Your LLCs Activity
Taxes and registration fees will need to be paid to most states annually. Some states waive expenses in line with being a business-friendly location. Additionally, bank accounts will need to be maintained, and money continually put into it over time. If you fail to pay your registration fees, you may be in default. Some states may refuse to let a business close if it has outstanding registration fees and taxes.
Is An LLC Worth it?
An LLC is a good idea for many small business owners as it gives them protections that operating as a sole proprietor doesn’t. Hiring employees and setting up bank accounts, as well as managing the business as an entity, are all matters to consider when setting up a new company. Finding out which state works best with your ideal business structure may mean delving through a website that details what is required. Hiring a company or attorney to go through the administrative process for you is also possible. Forming an LLC is a good plan and adds respectability to a sole proprietorship.