Forming an LLC, or Limited Liability Company, is a way to protect your assets from debts and liabilities that may arise from your business. It is also a great way to ensure that your business operating legally. It can be a complicated process, but with the proper guidance, you can easily set up an LLC and get started on the path to success.
Steps for setting up an LLC:
1. Choose your business name:
Choosing a business name can be the most challenging part of starting your business. Not only do you want your business name to be unique you also need to make sure it meets state requirements. You must review your state’s LLC requirements when deciding on a name. After coming up with a name(s), you need to check to make sure that another business is not using the business name in your state. If you need help creating a business name, check out Namelix!
2. Choose a registered agent:
Now, you need to designate a registered agent for your business. This could be you or someone else (make sure this person is at least 18 years old). Whoever you choose will be responsible for accepting legal documents on behalf of the LLC. Often you can google your state and Registered Agent, and then you will find one in your state; for example, Virginia Registered Agent.
3. Prepare the LLC Articles of Organization form & File articles of organization:
Every state will have a list of requirements you need to file the articles of organization. You can find this information on the website you reviewed your state’s LLC requirements. Here is the essential information you need:
- Business name
- Your business address
- The purpose of your business
- The way you plan to manage your LLC
- Registered agent’s contact information
4. Create an operating agreement:
An operating agreement is an internal document that details the financial, legal, and management rights of all members of the LLC. This agreement should include how profits and losses will be distributed, how decisions will be made, how members leave the LLC, and who contributes capital to the business. Although many states do not require an operating agreement, having one is always a good idea.
5. Obtain any necessary licenses and permits:
Depending on the type of business you are starting, you may need to obtain specific licenses and permits to operate legally. The licenses and permits you may need to operate your business depend on your state and the services you will be performing or providing. Be sure to check your state’s official website for more information.
6. Get your Employer Identification Number (EIN):
Obtaining an EIN is essential for anyone looking to start an LLC. Having an EIN that separates your business entity and assets from your personal finances is crucial. You should get an EIN as soon as you set up your business, and it’s free to do on on the IRS.gov website.
7. Open a business bank account:
Once you have legally set up your LLC and obtained an EIN, set up a business bank account. It is important to keep your business finances separate from your personal finances. A business bank account will allow for easier expense tracking and tax filing.