How to Get an LLC License: Everything You Need to Know
Depending on your industry, you may need to obtain additional licenses through the proper state or county authorities.3 min read
Wondering how to get an LLC license? When starting a new business, one of the most important decisions is choosing the right legal structure. An LLC or limited liability company is a type of business owned and operated by members. These members enjoy personal liability protections from company debts.
An Overview of Limited Liability Companies
A limited liability company (LLC) is a type of business which limits an owner's liability in the event of business debts and lawsuits. LLCs also enjoy the tax benefits of a partnership rather than a corporation.
An LLC is different from other types of businesses. For starters, members declare their net income from the business on their personal income taxes. The business itself doesn't pay any federal taxes. Individual state laws determine how LLCs are formed, but it's not as difficult as most entrepreneurs think.
When starting an LLC, there are many forms you must complete to protect yourself and move forward with business operations. If you've formed an LLC in your state, you've taken the first step toward legally establishing your business and protecting your assets. Now that you're all set, you may have questions about what to do next. Depending on your industry, you may need to obtain additional licenses through the proper state or county authorities.
Choosing Your LLC Name
You must choose an available LLC business name according to your state's rules. Search your Secretary of State's online database to see if your preferred name is available. If the name isn't already in use, you can choose the name and see if the state will approve it once you file your documents.
LLCs must end with an LLC designator. In other words, the business name must be your preferred name along with “Limited Liability Company,” “LLC,” “L.L.C.,” or “Ltd. Liability Company” at the end. Certain words are restricted, such as “city,” “bank,” “insurance,” and “corporation,” so check your state's rules regarding LLC names.
Filing Your Articles of Organization
Once you've selected a business name, it's time to file your Articles of Organization with the Secretary of State. Your Articles of Organization includes your business name, address, purpose, and all member names. Filing fees vary, but most states charge an average of $200 to file an Articles of Organization.
Obtaining Your Business License
Before you can open your business doors, you must secure the appropriate licenses and permits. Certain industries require specific licenses. Hotels, for instance, need the required state licenses and must submit to regular inspections to keep the license valid and current.
Business licenses are sometimes referred to as “tax registration certificates.” They may include health department permits, zoning permits, a general business license, professional licenses, or home occupation permits. Depending on your business and location, you may need to obtain licenses from your state, town, or county.
Unfortunately, many entrepreneurs think forming an LLC is equivalent to getting a business license, but this isn't the case. If you make this mistake and operate without a license, you will be fined.
Getting your LLC license is the first step toward creating a legal foundation for your business. It gives you the right to operate and legitimizes the business. The good is that most licenses are inexpensive and easy to obtain. Check with your city offices or Secretary of State's office to determine which permits you need.
Before opening your business, you should:
- Make sure you get a seller's permit if selling goods.
- Contact county, city, and state authorities to find out whether you need additional licenses (for example, daycares and salons need specific state certifications to operate).
- Investigate local laws before paying filing fees, as additional fees may be necessary to refile documents.
- Establish a business mailing address (not all locations allow owners to operate a business from their homes).
Obtaining Your EIN
After you've filed all the appropriate paperwork, paid your filing fees, and obtained your business licenses, you can get an employer identification number (EIN). This is a federal tax number the IRS uses to keep track of your business transactions. Essentially, an EIN is like a Social Security number for businesses.
Not every business needs an EIN. If you plan on hiring employees, for instance, you need an EIN to operate. Even though it isn't always mandatory, however, having an EIN makes good business sense because you can use your EIN instead of your personal Social Security number on official documents.
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