Getting an LLC: Everything You Need to Know
Some states also require you to publish a notice of intent. If you wish to register your business in multiple states, you'll have to follow the rules of formation in each jurisdiction.3 min read
Getting an LLC started is a simple process involving the following steps:
- Select an appropriate name for your business that adheres to your state's rules.
- File formation paperwork and pay required fees.
- Create an operating agreement for your LLC.
- Obtain any required permits and licenses for your business.
Some states also require you to publish a notice of intent. If you wish to register your business in multiple states, you'll have to follow the rules of formation in each jurisdiction.
Naming Your LLC
Each state has its own requirements for business names, but the following are typical guidelines for most locations:
- Your business name must include a designator on the end identifying it as an LLC, such as “L.L.C.,” "LLC," or "Limited Liability Company.”
- Your business name has to be distinguishable from existing business names in the state.
- Your LLC name can't include words prohibited by your state, such as “Insurance” or “City.”
You can usually check the availability of a business name you wish to use at the website for your Secretary of State office. For a fee, you might be able to reserve a business name for a set period of time. In addition to following state guidelines for business names, you also have to make sure your desired name doesn't infringe on a trademark.
In general, you don't have to register your LLC name because it will automatically be registered once you file your formation paperwork.
Filing Your Paperwork
You'll prepare and file formation documents with the state. In most cases, these documents are called one of the following:
- Articles of Organization
- Certificate of Formation
- Certificate of Organization
This paperwork is usually simple. You may be able to use a fill-in-the-blank template provided by the state. You'll provide basic information, including the name and address of your LLC as well as owner/member names. Sometimes, all members are required to sign the paperwork, but some states allow you to choose one member to sign for all.
When you submit your formation documents, you'll pay filing fees. In most states, these fees average around $100. Some states, like California, charge additional fees or taxes.
You'll designate a registered agent on your paperwork. This is a person or company also known as an agent for service of process, a statutory agent, or resident agent. A registered agent agrees to accept legal paperwork for your LLC.
Creating an Operating Agreement
Most states don't require you to file an operating agreement with them. However, it's recommended that you create one for your own records. Operating agreements lay out rules for your LLC concerning operations and ownership. These agreements are similar to corporate bylaws or partnership agreements.
You can make your agreement as detailed as you like. It's necessary in case any conflicts arise between members concerning management or ownership of the business. Typically, an operating agreement covers the following:
- Each member's rights and responsibilities in the company
- Each member's ownership percentage
- Each member's voting power
- Voting and meeting rules
- Allocation of profits and losses
- “Buy-sell” provisions
Permits and Registering in Other States
After you file your paperwork and pay filing fees (along with any other fees mandated by your state), you've officially created your LLC.
Before you start doing business, make sure you have all the necessary licenses and permits to legally operate your company. This includes having a Federal Tax ID (also known as an Employer Identification Number or EIN), a business license, a seller's permit, and/or a zoning permit.
Some states will require you to publish a notice of intent in your local newspaper, which announces your intention of starting an LLC. In addition, if you wish to conduct business in multiple states, you'll have to register your LLC in those jurisdictions as well. You'll file paperwork similar to what you filed in your state when you created your LLC. You'll also have to designate a registered agent in every state where your LLC is registered.
Because each state has its own rules and regulations, make sure you're familiar with the guidelines in your jurisdiction. In addition, if you register in other states, you'll have to know the rules for those locations as well. Still, LLCs remain popular among small business owners because they're simple and flexible.
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