Limited Liability Company or LLC is set up for liability protection in small businesses. LLC, being separate from the owners, handles any business debt itself freeing the owners from personal accountability of such debts and deficits. It’s more flexible and simpler than corporations with lesser reporting issues. In order to set up an LLC, you will have to complete and submit the necessary paperwork to the state. Details of the procedure may vary, however there are some common steps in setting up an LLC.
Decide a Name for the LLC
It may sound simple but it could become quite complicated based on the state policies of your business location. Many states don’t allow similar names for different business entities and there might be restriction in using certain words in company name. Before you ready the paperwork, do your research and check for the availability of your favourite name. Also, check the availability of the domain name for your website. Don’t forget to check names of the similar companies in the area and decide for a unique name to avoid any confusion and infringement claims.
Reserve the Name
After you have decided the perfect name for your company, you don’t want to miss it out for any delay in filing your LLC paperwork. So, in case you are not going to ready and submit all the documents immediately, you can reserve the name easily by filing the appropriate form and paying the name reservation fee to the state. State policies could vary in terms of reservation period, renewal and reservation fee etc. but the point is to keep your unique company name reserved for you. This may be optional but don’t ignore if required.
Decide on the Registered Agent
Each state demands that the LLCs have a registered or statutory agent. The agent receives subpoenas, lawsuits and other official documents on the LLCs behalf and communicates these documents to the designated person of the LLC. There are many companies to serve as agent and you will have to pay for the service. However, any member of the LLC can act as the agent too, also most of the states allow any state resident aged over 18 to act as the agent.
Prepare the LLC Operating Agreement
It’s the written plan for how the LLC will operate. It determines the operational details like voting rights of the LLC members, ownership benefits and interests, the rule of profit and loss sharing and distribution, meeting schedule and procedure, governance of the business, what are the rights of a deceased member or the one who is withdrawing the membership etc. as well as the dissolution process in case the business fails. Prepare it carefully.
Submit the Paperwork to the State
The details of the forms and procedure may vary from state to state. However, the general body of organizational paperwork includes name and address of the company, tentative lifetime of the company if not perpetual, name and address of the registered agent, and the specific purpose behind the LLC’s set up. You will have to sign the paperwork, and in some states signature of the registered agent is also necessary. Most of the states ask to submit your LLC documents to secretary of state but there might be a different department in some states and the fee required could vary too. To get started, you need to apply for EIN online. Doing business legally requires you to have employer ID number. You can easily opt for an EIN filing service and get it done in no time.
Get Your Certificate from the State
The state will give a certificate or a formal receipt after the submission of your LLC organizational paperwork. This certificate is the proof for the existence of your company in that particular state and area. After receiving this document, you can look for other business details and issues like setting up a bank account for your business, obtaining the business license and tax ID number etc.
Register to Expand Your Business to Different States
This might be optional for you if the business is localized in the same state. However, if the LLC want to operate its business in more than one state, you will have to do the appropriate registration for that. For this purpose, you will have to ready and submit similar paperwork as needed during the LLC formation and you will require to have registered agents in each of the states where the LLC will operate.