How to Get a LLC Business License: Everything to Know
Depending on the nature of your business, you may need to get a combination of local, state, or federal business licenses.3 min read
Wondering how to get a LLC business license? Depending on the nature of your business, you may need to get a combination of local, state, or federal business licenses. Certain cities require a license for engaging in business activities within city limits, while others require special licenses for certain types of businesses, such as theaters, restaurants, retail, daycare, vehicle repair shops, and manufacturing facilities.
When obtaining a business license, you must also register for LLC taxes with your state tax agency for both sales tax and income taxes.
Limited Liability Companies
A limited liability company (LLC) is a business entity which is owned and managed by its members. These members are personally protected from liability for company debts. While an LLC protects its members from liability, it does not impose the more rigid structure of a fully fledged corporation. Instead, limited liability companies are regulated by individual states and are not recognized as legal structures for federal tax purposes.
Members declare all net income from the LLC on their personal tax returns; the business itself doesn't pay federal income taxes. States also regulate and govern how new LLCs are formed.
An entrepreneur might choose to start an LLC to avoid double taxation, which is imposed on stockholders and corporations. Unlike a corporation, LLCs do not file their own income tax returns, but members pay individual taxes, including self-employment tax.
Many businesses require federal licenses, especially when interstate sales are concerned. Business categories which require specific licenses from federal agencies include:
- Fish and wildlife
- Mining or drilling
- Maritime transportation
- Nuclear energy
- Firearms and weaponry
- Broadcast communications
The paperwork involved in obtaining a federal license is lengthy and complex, and you may need to deal with multiple agencies depending on your business activities.
Professionals may need to register for a license in their state. For example, attorneys, physicians, and other professionals must demonstrate their certification, training, or education when obtaining licenses. Other business owners, such as private investigators, real estate agents, contractors, and auto mechanics, will need to obtain licenses from their Secretary of State's office.
Additionally, if your business conducts any type of retail sales, you must get a permit for collecting sales tax in your state. Most states also require a regular renewal of this permit for it to remain valid.
How to Form an LLC
Following these easy steps to establish your LLC:
1. Choose the State Where You Want to Conduct Business
Since LLCs are formed according to the rules and regulations of individual states, you must decide where to open your business. Entrepreneurs with a certain amount of flexibility tend to choose states with well-developed laws, such as Delaware. Most of the time, however, you will be forming your LLC in the state in which you live.
If you plan to conduct business across state lines, you may need to register in all of those states. This requires filing a notice and paying filing fees with each Secretary of State's office.
2. Name Your Business
There are several things to keep in mind when naming your LLC:
- The name must end with “Limited Liability Company” or one of its designators (“LLC,” “L.L.C.,” “Ltd. Company,” etc.)
- The name must be distinguishable from all others on file
- Avoid prohibited words such as “bank,” “insurance,” or “trustee”
- Avoid restricted words such as “corporation,” “corp.,” or “incorporated”
- Search the internet and your state's business entity database to make sure your name is unique
- File a “fictitious business name” or “doing business as” (DBA) name if necessary
3. File Your Articles of Organization
Your LLC is officially established when you file its Articles of Organization with the Secretary of State. Here are some tips to keep in mind when preparing your document:
- Articles of Organization are short and easy, so keep it simple
- Designate a registered agent for your business — someone with the authority to receive legal documents on behalf of your LLC
- Include a purpose statement
- Pay the filing fee and any required annual tax
- Indicate whether your LLC is managed by one manager or multiple managers (this step is only required in certain states)
Download a sample Articles of Organization template from your Secretary of State's website.
4. Create the Operating Agreement
After registering your LLC with the state, you can prepare your Operating Agreement. The Operating Agreement establishes each member's financial and managerial role as well as their responsibilities and rights.
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