What is a limited company?
A limited liability company or limited liability company is a legal entity that US business owners can choose to use to conduct their business. Forming an LLC protects the assets of an individual or group in the event of legal problems or bankruptcy. It also allows for flexible tax options since not all businesses operate the same way. Some individuals may choose to be taxed as a sole proprietor, but others may choose to be taxed as a business. Consult a tax advisor to determine the best options for your LLC.
Learn more in our complete guide to LLCs.
How to Form an LLC
Use these seven-step instructions to start forming an LLC today. Please note that laws and procedures vary from state to state. Check out our state LLC formation guide for information specific to your state.
1. Deciding on a business name
When you decide on a business name, marketing will be the first thing you consider. While it is important to choose the right name for your business purpose, your business name must comply with state law.
Generally speaking, state laws do not allow you to choose a business name that is already used by someone else doing business in your state. Most states also prohibit the use of certain words that might imply that you work in a business such as insurance or banking. You may want to add some version of “LLC” or “Limited Company” to the end of your business name.
You can check your state’s LLC naming laws and see if the name you need is available by visiting the website of the state’s chief business officer (usually the Secretary of State) and search for the name.
2. Designate a registered agent
The registered agent is the person who receives official or legal documents (such as subpoenas) on behalf of the LLC. Once the registered agent receives these documents, it will send them to the LLC.
Anyone over the age of 18 can become a registered agent and you can register yourself or an employee. However, employees must arrive at your in-state location during normal business hours. You can choose a company that provides registered agent services. Of course, this has a price; The cost of signing up with an agency can exceed a hundred dollars a year.
Should I be my own representative?
You may act as your registered agent in any state. However, the existence of this option may not suit everyone. If you decide to act as the registered agent of an LLC, you should be aware that your name and address will soon be made public.
You must be the registered agent of the LLC to receive and file important documents or notices. If you don’t know much about local laws and think it will be difficult to manage these documents on your own, becoming your own attorney may not be the best choice, even if the goal is to save money.
Before becoming the registered representative of your LLC, consider your options carefully and perhaps even consult an attorney or professional organization.
3. Obtain a copy of the State LLC’s Articles of Incorporation business card in your state. In many states, this document is called Articles of Incorporation, but some states use a different name, such as Certificate of Incorporation. Every state has a form you can use. To find the form for your state, visit the website you use for business name research.
4. Prepare LLC Organization Rules
Each state offers its own unique rules and procedures for those attempting to form an LLC. Important information you must provide includes:
Your business name
Address of your principal place of business
Business objectives< br>How your LLC will be managed
Registered Agent Contact Information (and signing attorney in some states)< br>LLC Term
After completing these steps, one or more business owners or organizations must sign the document.
Some states, such as Nebraska and New York, require you to advertise in the newspaper that you want to register your LLC. This step must be completed before the Articles of Association are made.
5. Collection of Corporate Information
Check your corporate documents carefully before submitting them to your state. You will also need to pay a postage fee, which varies depending on the state where you set up your business.
Once your formation documents are approved, the state will issue you a certificate showing that your LLC is registered to operate. Use this for other necessary tasks, such as creating a business bank account and obtaining a tax identification number.
6. Create an Operating Agreement
The Operating Agreement contains the financial, legal and administrative rights of each member of the LLC. More specifically, it may include how profits are distributed, how members leave the LLC, and who contributes capital to the business. Basically, it should contain all the information regarding the operation of your LLC.
Many states do not require an employment contract, but that doesn’t mean you don’t need to create one. LLCs with multiple owners or partners may want to create one to ensure everyone agrees on their rights and responsibilities. Even single business owners can reap the benefits of content writing.
7. Keeping Your LLC Active
Creating your LLC is just the beginning. Once established, you must ensure that your business remains in good standing in your state. Please check your state’s business website for the most up-to-date information on how to proceed. You may be required to file an annual report, update information about your LLC, and pay an annual filing fee.