Are you considering establishing an LLC? From protecting yourself from liability should your business incur debts or face legal issues to providing a formal means of adding new members as your business expands, there are many benefits of doing so.
However, you may not know how to get started. Don’t worry if this is the case. This overview will cover the basics of setting up an LLC. Just be aware that the requirements for business owners establishing LLCs can vary to some degree from one state to another. Although this guide will help you understand the most essential first steps, you should also research the laws in your state to determine any additional steps you may need to take.
In general, though, to establish an LLC, you must:
Choose a name
Usually, laws require that the name of a business not be claimed by any other business or government entity in the state before it can become an LLC. Most states thus offer tools you can use to search for your intended name. For example, in states like New York, conducting a search is as easy as using a free web tool.
If your intended business name hasn’t yet been claimed, strongly consider reserving it. This will cost a small fee, but it allows you to “own” your business’ name while you complete the other steps in the process of starting an LLC.
It’s also a good idea to conduct a URL search to see if your business’ name is already the name of an existing website. You may not want to choose a name if a website with the same name currently exists, as you’ll naturally have to choose something other than the name of your business for your URL if so.
Choose Your Registered Agent
Conduct some research to determine who can be a registered agent in your state. This is an individual or entity responsible for accepting such state documents as tax and formation documents. Identify who is best for the role.
(Maybe) Publish a Notice of Formation
In some states, when establishing an LLC, a business owner must choose a local newspaper (typically one in the county of the registered agent) and publish a notice of formation. This is essentially an ad that must run between one to four weeks formally announcing the LLC is being established. Look into this to learn if this is a requirement in your state.
File Articles of Organization
You must file articles of organization with your state’s corporate filing office. Determine which office this is in your state, and abide by their requirements.
Consider Getting an EIN
In general, to set up a business bank account, you’ll need an Employer Identification Number, or EIN. Some states also require business owners to secure EINs before starting LLCs. As such, you should most likely take this step early.
Draft an LLC Operating Agreement
An LLC operating agreement is essentially a “playbook” for your business. It addresses such factors as ownership percentages, profit division, the process of allowing new owners to join, and similar critical details. Keep in mind, even if you’re currently the only owner of your business, you still need an operating agreement, as you may involve new owners later.
Luckily, drafting an LLC operating agreement doesn’t need to be as difficult as you may assume. With a free LLC operating agreement template or generator, you can create one fairly efficiently. Just make sure it’s as thorough as necessary before signing it.
Once you’ve taken these steps, you’re ready to get started. Just keep in mind that there are also steps you must take after establishing your LLC, such as filing annual reports and complying with tax laws. Review these steps as well to ensure you take full advantage of LLC status.