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Step-By-Step Guide to Starting an LLC

Step-By-Step Guide to Starting an LLC

Starting a limited liability company properly is a good way to establish your business, equipping it with a legal framework.

Your legal business framework affects every aspect of your business, from how you file your taxes, to going along with special requirements at the local, state, or national level.

Having a limited liability company can provide you with business liability protection, management flexibility, and tax benefits.

On that note, here’s a step-by-step guide to starting an LLC.

Step 1: Come up With a Business Name

When deciding on a business name, select one that is attractive and marketable to customers.

What is peculiar to you may also be peculiar to someone else, so it’s important to search for existing business names in your state to be sure that what you came up with hasn’t been used.

For example, if you set up a business in New York, you aren’t allowed to use the same name that has been registered to another business, This is so your brand doesn’t get mixed up with another company and to avoid any trademark infringement claims.

Step 2: Prepare and File The LLC Article of Organization Form

When registering an LLC, you will need to fill out a form provided by your state’s Secretary of State office; this will establish your limited liability company as a legal entity.

While this document is called the article of organization form in most states, some states use a different name for it such as a certificate of formation.

This document is usually signed by the person forming the company and the registered agent.

When you’ve carefully filled out the form, you can submit it back to your state. You will be required to pay a fee, the amount differs depending on your state.

When your documents are approved, a certificate will be given to you to prove that your LLC is formally registered by the state. You can also use this certificate to get your tax ID number.

Step 3: Check The State-By-State Requirements

Every state has specific laws guiding business practices including the registration of an LLC.

For instance, if you go through with a Texas LLC setup you avoid taxes on your individual and corporate income.

Additionally, some states put a restriction on certain words such as insurance and banking, you may also need to include limited liability company or LLC at the back of the name you eventually pick.

You can consult the Secretary of State in your state for specific requirements for your business.

Step 4: Choose a Registered Agent

The next thing required is to get a registered agent to send and receive legal documents on your behalf.

Sometimes, people come together to form an LCC and designate themselves or any other member of the group as a registered agent, or choose a third-party commercial registered agent.

Using yourself or another member of your group is usually advised against because this agent must always be available, and can be served a lawsuit anywhere including in the presence of customers.

Though every state has special requirements, they all agree that your business must have a registered agent.

Step 5: Prepare an Operating Agreement

An operating agreement sets the terms and conditions under which your LLC works in public and internally. Therefore, it is important to create a structure that fits your business model.

This is not a requirement of most states, however, this is a good way to kickstart your business and set it on the path to success.

This document usually contains the rights and duties of LLC members, how a manager will be hired and fired, how new members can join, and how the profits are paid to members, among others.

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