A Limited Liability Company (LLC) is a legal structure that is designed mainly for small businesses to provide more flexibility and liability protection. A lot of small businesses today are filing for LLC. The specific requirements for starting an LLC may vary from state to state, but the process is very simple and can be executed within two to three hours. The time required depends on how complex your organizational structure is.
Here, we have created a 10 step guide that will help you in figuring out how to start an llc.
- Get a copy of your state’s LLC articles. You can find it online, or you can visit the Secretary of State’s Office and obtain one. Verify if your state laws require you to post in the newspaper. Also, check the rules made regarding the name of the business.
- Then you have to choose a business name. While doing so, you have to keep in mind that the name complies with the state rules regarding the naming of an LLC. Some of the prohibited words are, “corporation”, “insurance”, “city”, etc. Such words cannot be used in the name. The name of the company should end with an LLC designator. And you will also have to check if there is an existing LLC with the same name.
- Send your LLC details to the state. This is easy as all you need to do is send details about your LLC, such as the purpose of business, business name, address of the business, and the name of the members. It is not mandatory to specify ownership details or structure of management, the names of the members will be sufficient.
- Next is the newspaper notice. This depends on your location and the state laws. If needed, you will have to publish a newspaper article stating the formation of an LLC. This should be done before filling the details in the article, and if not needed, then you can save your money. New York and Arizona require this step at present.
- Submit your article. With the appropriate fee, you need to send this document to the Secretary of State. The fees to form the LLC starts from $40 all the way up to $900, this depends on your location. Beware of the States annual corporate tax that needs to be paid at the time of the filing.
- The operating agreement of LLC. This is the missing piece after you are done with the legal requirements. As the operating agreement is not needed by the state, it can be filed after all other legal filings are completed. If there is another owner, then it is recommended to specify in terms of the agreement in writing.
- You need to be sure that the financial and management responsibilities are mentioned clearly in the operating agreement. Rights such as contribution to additional capital, the system of profit distribution, terms of leave, etc. need to be present in the agreement. Such questions need to be answered even if the agreement is between friends or family. Otherwise, such things create a strain on the business and also on personal relationships down the road.
- Being on the same page with your partners is important. Even though it is not a legal requirement, you should work out the legal details in advance before filing LLC. It needs to be worked in advanced because of unfortunate events like a partner quitting.
- You can hire an attorney to help you with the filing of an LLC, or you can choose to do it yourself. Doing it all by yourself can be straining if the organization is very complex.
- It is best to set up an LLC in your state. There are organizational and tax benefits for doing so. An attorney can help you with this. Setting it up in your own state is the best choice.
Starting an LLC may seem tough, especially for those who are not familiar with the term. The above-mentioned 10 step guide about how to start an LLC should give you all that you need to know regarding filing for an LLC, from initiation to the filing, to making the agreement, and finally posting it. I hope you find all that you need to know regarding an LLC here.