Setting up an LLC doesn’t have to be a complex process. Learn the most simple and easy way to file here.
While there are 30 million businesses operating across the country, not all of them are officially set up as an LLC. Setting up an LLC is a complicated process that not every business owner is prepared to do, even with all of the positive benefits it brings.
If you’re thinking about opening your own LLC, there’s a long process ahead of you but the legal protections that you’re entitled to might be worthwhile.
Here are the six things you need to be prepared to do when setting up and LLC.
1. Pick Out a Name
You might think “what’s in a name?” or “how could my name matter?”
If you did, you would be dead wrong. You need to choose a name because you can’t have the same name as other businesses according to most states. Two different businesses, even if they’re operating in different cities, can’t both be called “Frank’s Pizza, LLC”.
Depending on the state you’re in, you might even be restricted from using certain words in your name. Find out the rules in your state so that you can avoid confusion and start off on the right foot.
Most states provide a directory for searching through business names to avoid duplicate names. Check this directory before you file your paperwork.
Go one step further and look for similar sounding companies. In the world of marketing, you don’t want to sound like another company because if they end up in trouble, you could get dragged down with them. If Frankie’s Pizza Cafe gets in trouble for having rats, you don’t want to be named Frank’s, even across town from them.
2. Reserve Your Name
Once you’ve chosen a name, and you’ve ensured that it’s available, you should think about reserving your name. Filing LLC documents can take weeks if not months depending on the state of your business model. In the meantime, someone else could get your name.
You want to plant your flag on a name so that you can start buying a URL and printing up business cards right away.
By filling out a simple form, most states can let you reserve your name by paying a small fee. Ask the officials you deal with how long the reservation period is to ensure that you don’t lapse in keeping your name. No two renewal policies are the same so get informed.
3. Find A Registered Agent
Every LLC needs to have a “statutory agent” or a “registered agent”, as part of the LLC structure. This person is the one who will receive any lawsuits or legal documents on behalf of the company. They are the one who is responsible for passing them along.
Anyone over the age of 18 can take on this responsibility, even if they’re part of the LLC. You could be an officer at the company as well as the registered agent.
If you don’t feel comfortable with this, you can hire someone through an agent services company. You’ll pay a small fee but it could save on stress.
If you’re looking for a business attorney, find out more info on whether they are willing to act as your agent.
4. Compose Your Agreement
Every LLC needs to have an operating roadmap where everyone agrees on how the business will be run. This is essential to the structure of a functioning company but also to ensure everyone is on the same page.
Your operating agreement will lay out the way that you want your profits and losses to be allocated. It will determine the governing of your business and the rights of all of your members while in the business or if they leave.
It should even detail what you need to do if you go out of business or fall on hard times.
5. File Your Organizational Papers
Your state will have a unique form and process for you to set up your LLC. You need to have a firm name and address, how long it will be set up if it’s not perpetual, and the information about your registered agent. You’ll also need to make a short statement about the purpose of your LLC.
Some people set up and LLC to protect their investments or assets while others do so to start a business.
This paperwork goes to your secretary of state usually. In a few states, there is a specific office to handle business filings. Expect to pay a small fee just to process this paperwork and set up your LLC officially.
6. Get Your State Certificate
In order to start doing business in your state, you’ll need to have a document that claims you’ve filed correctly and gotten your paperwork approved. This document certifies that your LLC exists in a formal sense.
With this certificate, you can then apply for a tax ID and any licenses you need to get in order to open your doors.
After that, you should set up your business bank account to keep your personal finances separate from business expenses. Your certificate might need to travel with you to each of these locations.
If you want to do business in other states, you’ll have to go through another process to certify your business as a legal entity. While you might be able to rely on your current LLC paperwork to be enough to certify you in other states, not every state is the same.
Prepare to fill out just as much paperwork and do just as much documentation for every state that you plan to do business in.
Setting Up An LLC Can Be Easy if You Follow Directions
So long as you follow the letter of your state’s law exactly, setting up an LLC should be the easiest part of starting your business. Rather than having to live in legal limbo, an LLC gives you a number of protections that ensure your business can thrive.
If you’re about to buy your first business property, check out our guide for making the ride as smooth as possible.
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