Starting and running a limited liability company (LLC) can be a daunting task, but with the right information and resources, you can be well on your way to setting up a successful LLC. In this blog post, we'll cover everything you need to know about forming, managing, and growing an LLC, including the legal requirements, best practices, and helpful tips.
Decide on the Structure of Your LLC
Forming an LLC is one of the most common ways to protect your assets from business liabilities. When deciding how to form an LLC, one of the most important factors is to decide whether you want to create a single-member or multi-member LLC. With a single-member LLC, you’re the sole owner of the company, whereas with a multi-member LLC you’ll have multiple owners and investors. Additionally, you’ll need to consider which state you’d like to register your LLC in and whether you’d prefer to form a professional LLC, which requires specialized licenses.
Choose a Name for Your LLC
Selecting the right LLC name is crucial to its success. The name should reflect your business's purpose and the type of goods or services you provide. You should also make sure that the name is legally available in the state you intend to form the LLC. The name of your LLC must include a certain ending, depending on the state you choose to form the LLC in. Generally, the ending must include either "LLC" or "Limited Liability Company."
File the Articles of Organization
Once you have decided on the structure of your LLC and chosen a name, the next step is to file the Articles of Organization, which is also sometimes called the Certificate of Formation or the Certificate of Organization. This document officially registers your LLC with the state in which you plan to do business. The articles should include information such as name and address of LLC, the purpose of the LLC, the duration of the LLC (if applicable) and the name and address of the registered agent.
Create an Operating Agreement
An operating agreement is a legal document outlining the ownership and operational procedures of an LLC. It should include sections on the responsibilities of members, how decisions are made, how profits and losses are distributed, the rights of members and other important details. Creating an operating agreement can help ensure that all the LLC’s operations are conducted professionally.
Get an Employer Identification Number
An Employer Identification Number (EIN) is a unique number used to identify your LLC for taxation and other business purposes. You need to obtain an EIN from the Internal Revenue Service (IRS) before you can open a bank account or apply for any licenses or permits. Your EIN should be included in all tax documents you file, and any contracts or agreements you enter into with third parties.
Maintain Your Records
Record keeping is an essential step in the formation process of an LLC. Even though LLCs are considered to be separate from their owners, you should still keep accurate records of your LLC’s income, expenses, and other financial activities. Maintaining records of your LLC can help you protect your business’s legal status and keep track of your finances for tax purposes.