1. Name Your LLC
2. File Formation Paperwork and Pay Fees
3. Create an Operating Agreement
4. Obtain Necessary Permits and Licenses

To get LLC up and running, complete the following steps:

  1. Choose an appropriate business name that meets your state's guidelines.
  2. File formation documents and pay the required fees.
  3. Create an operating agreement for your LLC.
  4. Obtain any required permits and licenses.

Optional steps include publishing a notice of intent, which is only required in some states.

LLC is short for “limited liability company.” Small business owners may prefer this simple structure because it provides liability protection. This protection is similar to what corporations enjoy but without the complications and formalities that come with incorporation. In general, an owner's personal assets are protected in case creditors come after business debts.

Name Your LLC

LLC naming requirements may vary from one state to another, but in general, the following will apply:

  • Your LLC name can't be the same as or too similar to existing business names.
  • You must include a common LLC designator on the end of your name, such as “LLC,” “Limited Liability Company,” or “Ltd. Liability Co.”
  • You won't be able to use certain restricted words in your name, such as “corporation” or “bank.”

You can check your state database to see if your desired business name is available. You should also check to ensure your LLC name doesn't infringe on anyone's trademark.

File Formation Paperwork and Pay Fees

After choosing a name for your business, you'll file formation paperwork with the state. These documents are commonly known as one of the following:

This paperwork is usually simple, and many states may have a standard template with fill-in-the-blank options. Basic information you'll fill out includes the following:

  • LLC name
  • Business address
  • Business owners' names

Each owner/member of your business may have to sign the paperwork, but some states allow one appointed owner to sign for all.

You'll pay fees to file your formation documents. In most states, it's inexpensive. Some states, like California, charge additional taxes on top of filing fees.

You must also designate a registered agent for your company. Also known as an agent for service of process or statutory agent, this is a person or company that accepts legal paperwork on behalf of your LLC.

Create an Operating Agreement

It's recommended that you create an operating agreement for your LLC, although most states don't legally require you to have one or file it with a state agency. In an operating agreement, you outline how your LLC will be run and the rules the members will follow.

Similar to a partnership agreement or corporate bylaws, an operating agreement gives your LLC a framework on how to handle conflicts between members or deal with ownership transfers. You can make your agreement as detailed as you want it to be, but it's necessary in case any disagreements arise over management, ownership, or operations.

An operating agreement will typically cover the following:

  • The percentage of interest each member has in the company
  • The voting power each member holds
  • A member's rights and responsibilities
  • The allocation of profits and losses
  • The management of the company
  • Voting rules
  • Meeting rules
  • “Buy-sell” provisions

Obtain Necessary Permits and Licenses

Once the state approves your paperwork, your business is officially started. Before you open your doors, however, be sure you obtain all the necessary permits and licenses as required by your city and/or state. Commonly required items include a federal tax ID number (also known as an EIN or Employer Identification Number), business license, zoning permits, and seller's permits.

A few states require LLC owners to publish a notice in their local newspaper, announcing their intention of starting a business. You should check your state guidelines to ensure you're meeting all requirements in your jurisdiction. If you wish to register your LLC in other states, you'll have to follow each state's rules for LLC formation.

Starting an LLC is a straightforward process and is much simpler than forming other business structures, such as corporations. In most states, it's rather inexpensive to create your own LLC. You might want to hire a legal or tax professional for advice, however, to be certain this is the right business type for you.

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