How To Form An LLC In 7 Steps

One of the legal structures you can use to run a business is a Limited Liability Company (LLC). However, ensure that you understand an LLC’s implications before forming one. One of the primary considerations when forming an LLC is that it can protect your individual and business liability. When planning to form an LLC, start by considering the state requirements because they can be different.

How To Form An LLC In 7 Steps

You can either opt to create LLC online or present registration documents physically to the registrar of companies. Whichever way you choose for the registration process, you’ll realize that they’re the same, and the only difference is in the avenue where you’ll apply. With that said, here are seven steps that you can consider when forming an LLC:

1. Settle On A Business Name

The first step when considering registering an LLC is to develop a name for the business. You can take into account various factors when determining the company’s name, such as the marketing strategy, branding, and state laws. You can consult an attorney if you’re unsure about the terms prohibited by the state where you plan the business to operate. For instance, you must know that you can’t use a name already registered with another company within the same state. If you apply to use a particular business name, the registrar of companies will check the register on whether the name already exists. If it does, your application will likely be rejected. In addition, there might also be other state requirements that limit the kind of wording you can use in a name. For example, a name that implies your business is related to a state body might be rejected.

You might also be required to include LLC at the end of your company name. It’d be best to propose three names for the business whose availability you can check by visiting the state agency for business registration. You can then conduct a name search to determine whether you’re clear to use any of your shortlisted names.

2. File The Articles Of Organization

Once your name has been accepted, the next step will be to file your company’s articles of organization at the state corporate filing office or through the online portal the Secretary of State provides. The form of the documents you’ll be filing depends on your state. For illustration, in some states, you’ll be required to use the term ‘certificate of formation;’ in other states, the reference term is ‘certificate of organization.’ Ensure that you’ve checked your state’s requirements before filing the documents.

Further, to complete the articles of organization, you can check for the form provided on the Secretary of State’s website. In the form, you’ll fill in the LLC’s name, details of the registered agent, including name and address, and any other required information. Once done, pay the prescribed fee and submit the documents.

3. Find A Registered Agent

An LLC must have a registered agent who’ll be responsible for receiving legal documents on behalf of the company. You must ensure that the registered agent is a resident in the same state the business is located. Ideally, when the registered agent receives legal documents for the company, they pass them on to whoever is in charge of the LLC.

Another factor you must consider when choosing a registered agent is that they must be at least 18 years old. If you can’t decide on the best candidate for the registered agent role, you can hire someone from a company that offers the services of registered agents.

4. Create An LLC Operating Agreement

While this might not be a state requirement, you must consider having an operating agreement for your LLC. An operating agreement is a document that outlines how the LLC will be managed and run, and if you choose not to have one, then you’ll be governed by state laws. Integrating an operating agreement into your LLC will help with smooth management, which is essential for productivity.

Some areas that should be covered in the LLC operating agreement are finances, management, and the legal rights of everyone in the company. For instance, the document can provide particulars of how profits would be shared and how the LLC intends to raise capital.

You can create the operating agreement by yourself using free online templates. However, if you’re unsure how to make one for an LLC with a complex structure, consider hiring an attorney for guidance.

5. Consider Taxes And Other Regulatory Requirements

Every business structure must pay taxes depending on state regulations. If you have an LLC, consider the tax implications of the business and how you’ll be meeting the obligations. For example, if your LLC sells goods, you might have to pay sales and employer taxes if you have employees. It’s also crucial that you register the LLC with a taxing authority within the state to avoid issues in the future.

Another regulatory requirement you might have to consider for the LLC is licensing, depending on the business type and location. You can check the state agency on the licenses the LLC should have and any other regulatory requirements to ensure it’s clear for business.

6. File Annual Reports

Depending on your state, you might be required to file an annual fee that must be accompanied by payment of the prescribed fee. If your state requires payment of the mentioned fee, you can check the state office website for the rate and mode of payment. While the costs might be hefty, it’s crucial to ensure that you pay them to ensure the smooth operations of your LLC.

7. Keep The LLC Up To Date

Once you’ve created the LLC, ensure it’s active and adheres to all state requirements. Remember, rules and regulations change over time. The state guidelines at the time of your launch may be superseded by new ones a few years down the road. You must also ensure you’re up to date on all guidelines on the operations of an LLC within a state to avoid problems with the state or running the risk of being shut down. Further, as mentioned earlier, ensure that you file annual reports and taxes for the LLC to remain in good standing with the state.

Conclusion

An LLC might be a great option if you’re trying to figure out the best business structure because it offers liability protection. In addition, the process of registering an LLC is straightforward and can be done online or physically through the Secretary of State’s office. It’d be best to hire an attorney to handle the entire process if you’re not confident enough to handle it yourself. Once the LLC is registered, you’re free to start transacting!

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