A limited liability company, or LLC, is a type of company that is a combination of a partnership and a corporation. LLCs are similar to corporations in that they both shield their owner's personal assets from lawsuits involving the business. An LLC is like a partnership in that it allows the division of losses and profits between LLC members any way that is desired. The owners of an LLC are typically called “members,” although LLCs are allowed to have a single member in many states.

Choosing your type of business and submitting necessary paperwork to your Secretary of State are two of the most important steps of forming an LLC. LLCs are designed to limit your personal liability. However, if you apply for a business loan, you may have to guarantee it personally, meaning you would be responsible for paying the loan if your business cannot.

How to Form a Limited Liability Company (LLC) in the USA

These steps will help you form an LLC:

  • Choose a name for your LLC that is memorable and unique.
  • Select your LLC's management structure.
  • Appoint a Registered Agent to receive Service of Process.
  • Submit your Articles of Organization.
  • Draft and implement an Operating Agreement.
  • If your state requires, publish a notice of formation.
  • Request an Employer Identification Number (EIN) from the IRS.
  • Register with the tax office in your state.
  • Acquire any permits and licenses needed for your business.

Additional Guidelines When an LLC is Formed

Here are a few additional formation guidelines for your LLC:

  • Open a business bank account.
  • Acquire a business insurance policy.
  • Locate a suitable operating space for your LLC.
  • Hire employees that are legally allowed to work in the United States.
  • If a requirement in your state, file an annual report.

Guidelines in Choosing a Name for the LLC

The name that you choose for your LLC should be easily found and remembered by your customers. It's best to select a name that reflects the purpose of your business and that would make people want to work with you. Every state has rules for the naming of your LLC, so it's important to learn and follow these rules when choosing a name. For example, most states require you to add abbreviations such as “Ltd. Liability Co.” or “LLC,” or phrases such as “Limited Liability Company,” to your company name. Some words, such as Insurance or Bank, will usually be prohibited, which is why it's so important to reference your state's naming rules.

If you have a name that you want to use, you'll need to check to see if it is available. You are not allowed to use a name that is similar or identical to the name of an existing business. Most states provide a database where you can search for LLC names. Usually, this database can be found on the Secretary of State's website.

Using names that have been trademarked is not allowed. Search the USPTO Federal Trademark Database to make sure your LLC name hasn't been trademarked. If you're considering acquiring a website for your LLC, you should check to see if the URL is available. Your URL will usually include part of your business name.

Should you find that your desired business name is available for use, you should reserve it right away. The majority of states will allow you to reserve a business name for a period of thirty to sixty days. While your name is reserved, which will cost a fee, you can gather and file the paperwork necessary to form your LLC.

If you wish, you can trademark the name of your LLC. Using your business name to distinguish your services or goods will qualify it as a trademark. Although you have rights regardless of whether you've acquired a trademark, having a trademark will allow you to bring a federal lawsuit if someone uses your mark without your consent.

By default, the name of a business is the name of the primary owner. Generally, your business's legal name will be your full name, assuming you are the sole proprietor. For partnerships, the name of the business will be determined in the partnership agreement.

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