6 tips that can help you form an LLC
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Incorporating your company as an LLC has many benefits, but unfortunately, many people do not know how to do it or do not know where to start. The truth is that forming a limited liability company is a straightforward process. If you follow the simple steps outlined below, you will be well on your way to being a full-fledged member of the LLC community.
What is an LLC?
An LLC is an acronym for “limited liability company.” It’s a business entity that provides the protection of limited liability. This means that the business owners are not liable for any debts or actions taken by the company, which could be used to protect the owners from financial loss or lawsuits. In addition to this, an LLC offers tax benefits and flexibility in terms of what it can do. Some of the main advantages include:
- You are the sole person in charge of operations
- You limit your personal liability
- You can avoid double taxation
- It involves less setup than other legal entities
- You can distribute profits according to your operating agreement
How to set up an LLC?
In establishing your business, you should take the time to form a limited liability company. An LLC can offer you various benefits, including liability protection, as discussed earlier. While the exact requirements for forming an LLC or incorporating can differ significantly by state, some things are consistent no matter whether you are based. By following the tips below, you will be well on your way to getting your business up and running in no time.
Decide on the name of your business
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Your first consideration when evaluating business names is likely to be marketing. While it’s crucial to pick the right name for branding purposes, your business name must also comply with relevant state laws. State regulations might prohibit using a company name already used by another company. In any case, you don’t want to choose a name already in use as it could confuse your customers and lead to reduced revenue. Therefore, you should spend some time researching names and checking them against state and federal databases to see if they are already taken. In addition, your firm name will almost certainly need to end with “LLC” or “limited liability company.”
A registered agent should be appointed
An LLC registered agent is typically a lawyer or another individual who has been appointed by the members of the LLC to serve as its agent. The service will be made by delivery of a copy of the summons, complaint, and other court documents to an address specified by the agent in writing. The registered agent for an LLC must be a person who resides in the United States and has not been convicted of certain crimes related to fraud, embezzlement, money laundering, or other white-collar crimes to function as such. To that end, you should select someone you trust and who you believe will have the best interests of your business at heart.
Get a copy of the articles of organization in your state
An article of organization is a document in which a business entity is created and registered with the government. In the United States, they are called “articles of incorporation.” The process of organizing a new business or corporation begins by filing articles of organization. The specific requirements for state articles of organization vary by state, but typically, they require the company’s name, address, contact information, and purpose and type.
Prepare the articles of organization
Each state lists its own requirements and procedures for forming an LLC. However, most states will need to provide the following information:
- Name of your company
- Your principal business address
- Defining the mission of the company
- How you will manage your LLC
- The registered agent’s contact information
Once that’s done, the form needs to be signed by one or more business owners, your registered agent, and then filed with appropriate authorities.
Get relevant licenses and permits
LLCs must usually obtain a general business license to operate legally, depending on the state. Your LLC will likely require at least one license or permit, regardless of whether your state requires a general permit. Moreover, county and municipal governments might need additional permits, including but not limited to liquor licenses and occupancy permits.
Create an operating agreement
An LLC operating agreement is a document that sets out the rules and responsibilities of the company. It also defines the relationship between the members and the managers of the company. An attorney or the members themselves can draft an operating agreement. The latter is a more flexible option, but it should be done with care as it will define how the company operates for years to come.
The above tips can significantly help you when forming your own LLC. Starting a business is a big step, and the process can be confusing. However, with these tips, the process can be easy and understandable.