How to Become a LLC: Everything You Need to Know
ou can set up an LLC rather simply with it usually taking an hour or less depending on the complexity of your organization's structure.3 min read
2. How to Form an LLC: Choose a Name
3. How to Form an LLC: File Articles of Organization
How to Become an LLC
In recent years forming a business as a Limited Liability Company has been the most popular legal structure for small businesses. The most common reason business owners set up an LLC is for the protection from liability it provides. You can set up an LLC rather simply with it usually taking an hour or less depending on the complexity of your organization's structure. Although setting up an LLC can be simple, the rules surrounding it vary from state to state including having to set up a business name that is in compliance with state rules.
LLC setup will require a few steps that are quick and simple including:
- Choosing a state-approved name.
- Filing articles of organization.
- Paying the filing fee that typically ranges from $100 to $800.
- Creating an operating agreement which will help outline the rights and responsibility of the members of the LLC.
- Publishing a notice of your intent to form an LLC, required in certain states.
- Obtaining the necessary permits and licenses that are required for operation of your business.
- Registering your business in any other state where business will be performed.
It is important to note that if you are doing business in another state, you will also need to designate a registered agent in every state where you plan to operate your business.
How to Form an LLC: Choose a Name
When choosing a name, you will have to follow the regulations of the state's LLC division which is most often the corporate division combined with the Secretary of State's office. In general, the name of the LLC cannot be the same as an LLC whose name has already been filed. Additionally, the end of the LLC must be tagged with some form of designation such as limited liability company or Limited Company.
Your company names will also be restricted from using certain words that are prohibited by the state including words like bank or insurance, but the rules will vary by each state. The LLC office at the state can let you know any restriction on the name you chose.
It is important to check the availability of your business name before filing the required paperwork, and perform an online search for existing business names to ensure you are not using one that is already filed.
You can search existing business names online in many states to determine whether your proposed LLC name is available. You should always check name availability in your state before filing LLC paperwork. If you would like to reserve your business name, most states will allow this with the proper form and a filing fee, though the length of time and fee amount can vary from state to state.
In addition to following the name rules of the state, you will need to make sure that your name does not violate another company's trademark. When deciding on a name you may also want to determine if a web domain name is available that you will be able to use under that name. After establishing your legal name and ensuring it is available, you will not need to register the name as it will occur when you file your articles of incorporation.
How to Form an LLC: File Articles of Organization
After deciding on your business name, the next step to set up your LLC is filing your Articles of Incorporation with your state's filing office. In certain states, these papers may be referred to as a "Certificates of Formation," or "Certificates of Organization." When filing your papers, you will have to pay a modest filing fee with your state which mostly runs around $100.
It is important to note that some states may also instill a corporate tax that will be required to be paid separately from the filing fees during the process. There are also states like California that will charge additional fees such as an $800 tax that is included on top of the filing fee.
To get the Articles of Organization, you will need to pick them up from the Secretary of State office or download them from their website. The paperwork includes short, simple documents that will not take long to fill out and will include items such as:
- The LLC's name.
- Names of the owners/members.
- An owner's signature.
- Registered agents name and address.
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