How Do You LLC a Company: Everything You Need to Know
To form a LLC you'll need to file the required documents with the state conduct business and follow a few additional requirements it depend on your choice.3 min read
How do you LLC a company? To form a Limited Liability Company (LLC) you'll need to file the required documents with the state in which you plan to conduct business and follow a few additional requirements depending on your state of choice.
What Is an LLC?
LLCs have recently become one of the most popular business structures chosen by entrepreneurs. As the least complicated of the structures with flexible management options, LLCs are a great option for small business owners.
The owners of an LLC are called its members. You can form a single-member LLC or multi-member LLC, but some states do require LLCs to have more than one member, or they will default the business structure to a sole proprietorship.
The startup process for an LLC is pretty simple and can actually be completed in most states within the course of an hour.
LLCs can be either member-managed or manager-managed. A member-managed LLC has its daily business operations run by the members of the company, while a manager-managed LLC either appoints an individual to run things or hires an outsider as manager.
Why Form an LLC?
Depending on what you're looking for in the structure of your business, an LLC entity type might be right for you. Most small business owners appreciate the liability protection combined with the easy setup of an LLC.
If your company encounters legal trouble or is dissolved, the members are protected from creditors coming after their personal assets. LLCs also offer pass-through taxation, avoiding the double taxation that comes with a corporate structure.
Business owners starting an LLC can choose between three different classifications with the IRS for tax purposes:
- Disregarded entity
There are also no requirements for the citizenship status or residency of LLC members.
Why Not Form an LLC?
The LLC business structure may not be the best fit for every company. There are a couple of disadvantages to this structure including:
- Inability to expand the business through stock options
- Differences in regulations and requirements from state to state
- LLC income is subject to self-employment taxes
- Appreciated assets could become subject to taxation if you switch your existing company to an LLC structure
Requirements for LLCs differ depending on where you've formed the company, but they do tend to be less than the requirements for other entity types like corporations. There are no requirements for annual meetings, record keeping, or even management structure.
When forming an LLC, there are a few basics things you'll need to do:
- Choose a name
- File articles of organization
- Choose or hire a registered agent
- Write and sign an operating agreement
- Obtain an EIN (Employer Identification Number)
When choosing a name for your LLC, you'll want to make sure that you follow the state requirements when it comes to business names. First, you can do a name search on the Secretary of State website (or the site for their corporate division) to be sure that the name you want isn't already in use. All states require LLC names to be totally unique in order to avoid any confusion. LLC names also cannot infringe on the trademarks of any other businesses.
Certain words that could cause the business to be mistaken for a different entity type, state agency, or for a business that requires specific licenses are prohibited. Such words include:
- Post Office
The name also must include some form of the words Limited Liability Company or an abbreviated version.
If you find that your desired name is available for use, you can usually reserve it on the state website for a certain period of time if you pay a fee. This is a good idea to make sure that the name isn't taken by other business while you get things ready to file with the state.
LLC Articles of Organization
Once you've chosen the right name for your business, you'll need to file articles of organization or formation documents. Different states call these documents by different names, but basically, they are how you register your LLCs information with the state.
Articles of organization generally include the following information:
- Name and address of the LLC
- Members of the LLC
- Registered agent information
- Duration of the business
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