1. What Is an LLC?
2. Steps to Forming an LLC

How to register for LLC is something that business owners who wish to organize their businesses as limited liability companies (LLCs) need to know. An LLC is one of the most popular business structures because of its appealing combination of personal liability protection and flexible tax structure. In order to attain LLC status, entrepreneurs are required to register with either the Secretary of State or another state agency and meet other requirements. The procedures for registering for an LLC may vary from one state to another.

What Is an LLC?

An LLC is a preferred business structure for businesses that are just starting out. It is a business entity that is established in accordance with state law and protects its owners from personal liability. In addition, it can pay taxes as a pass-through entity instead of being subject to double taxation, the way C corporations are. This means that it does not pay taxes at the company level but passes its income or loss to the individual tax returns of its owners.

Different states have different rules for forming LLCs, but the general requirements are somewhat the same. Although you are not required to hire an attorney to establish an LLC, it is advisable that you do so if your LLC has more than one owner or outside investors.

Steps to Forming an LLC

1. Naming Your LLC

Selecting a business name is the first thing you need to do when forming an LLC. There are a number of requirements you must meet when naming your LLC, including:

  • The name you choose must end with “Limited Liability Company,” “LLC,” or another variant.
  • The name must be different from all domestic or foreign LLCs that are currently registered with the Secretary of State.
  • The name must not contain certain restricted words, such as “bank,” “insurance,” or “trustee.”
  • The name must not contain words such as “corporation,” “incorporated,” “corp.,” and “inc.”
  • A trademark search must be conducted to make sure that you are not violating the trademark of another party.

2. Filing the Articles of Organization

The official formation of your LLC occurs when you file the Article of Organization with the Secretary of State. When filing this document, you are required to do the following:

  • Appoint a registered agent – A registered agent is a party that is authorized to receive service of process, subpoenas, complaints, and other legal documents on behalf of your company.
  • Pay a filing fee – The fee for filing Articles of Organization can vary from one state to another, but typically it is around $100.
  • Include a statement regarding the purpose of your LLC – Typically, this statement should indicate that your LLC will be engaging in lawful activities for the purpose of making profits.
  • Indicate whether your LLC will be member-managed or manager-managed – In some states, you are required to state whether your LLC will be managed by members, one manager, or multiple managers.

3. Drafting an Operating Agreement

The purpose of an Operating Agreement is to set forth the management, financial, and other responsibilities of the owners of an LLC. It usually contains the following information:

  • Amount of capital each member will be contributing to the LLC
  • Dates when the capital contributions will be made
  • Penalties or remedies for missed contributions
  • Method of distributing profits and losses among members
  • Members' preferences for profit distribution or liquidation method
  • Whether the LLC will be member-managed or manager-managed
  • Number of officers to be appointed
  • Voting rights for contributions of additional capital, sale of the company, and other major events
  • Indemnification protection for managers
  • Restrictions on the transfer of ownership interests
  • Procedures for member meetings
  • Procedures for dissolution

4. Obtaining an Employer Identification Number (EIN)

If you are planning to have employees for your LLC, you are required to get an EIN or Federal Tax Identification Number from the IRS. You will need to have an EIN to open a business account in most banks.

5. Getting the Necessary Business Licenses

You may be required to apply for a federal, state, or local business license, depending on the type of business you are operating. For instance, if you are selling alcohol or firearms, you will have to obtain a business license from the federal or state government.

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