How to Start up an LLC: Everything You Need to Know
Starting an LLC is mostly simple in nearly every state. The rules for forming an LLC are slightly different in each state, but they are mostly similar.3 min read
2. Steps on How to Start up an LLC
How to start up an LLC will vary by each state's law. Limited liability companies (LLCs) provide some liability protection for business owners and pass-through tax status that avoids the double taxation corporations face. In the case of LLCs, only the owners of the LLC pay taxes, not the LLC.
Frequently Asked Questions About Starting Up an LLC
How difficult is it to start up an LLC?
Starting an LLC is, for the most part, simple in nearly every state. The rules for forming an LLC are slightly different in each state, but they are mostly similar. You can complete the process yourself, although you may want to seek the advice of a lawyer if you have more questions or want the extra help. If your company has multiple owners or investors, having a lawyer that can handle agreements is a good idea.
Do I have to form a corporation in the state that I live in?
You do not necessarily have to form your LLC in the state that you live in. It is possible to form an LLC in other states, which is why Delaware is such a popular choice since it has favorable business laws. However, filing in another state will come with additional fees and added complexity that will make your company far more difficult to manage.
Forming an LLC in another state also may come with additional paperwork. If you are going to operate in multiple states, those states may require you to file paperwork in each state. This process can be costly and makes your operations more complex, although there are many companies that do so successfully.
How do I pick the right name for my LLC?
Picking a name for your LLC is an important process. Your company's legal name will be on file with the state, and it is how your company will be identified on documentation. There are variations to the naming rules for each state, but some general considerations include:
- Pick a name that is not already reserved, which you can check online in most states.
- Pick a name that is easily distinguishable from all other registered companies.
- Pick a name that is not misleading as to what your company is or does.
- Pick a name that does not include prohibited words.
- Your LLC name will likely need to include a variation of LLC at the end.
- Your name cannot include other status or organization names like “Corp.” or “Inc.”
How do I know if I can use the name that I picked?
Before you settle on a business name, you should research it to see if it is available. To do this, you should:
- Search the registered trademarked names to see if it is taken.
- Search the internet to see if similar names are used and can lead to public perception issues.
- Search for domain names that use your name to see if any are available.
- Determine if your name will be a good fit if your company grows substantially.
The formal name of my company is really long, so can I use a shorter version?
In some cases, you can use a shortened version of your company's name when you are doing business. However, it must be in an informal way, such as in common conversation. If it is an official business operation such as legal proceedings, or you want to use a different name without changing the legal name of the company, then you need to file a DBA. A DBA (also called a fictitious business name statement or a doing business statement) lets you use a different name while registering its connection to the business. In essence, it becomes a second legal name for your business.
Steps on How to Start up an LLC
- Become familiar with your state's LLC requirements.
- Pick out a name for your LLC.
- Create and file your LLC's Articles of Organization with the Secretary of State.
- Make sure to get a copy of your formation documents from the state to be able to get an Employee Identification Number (EIN), a business bank account, and relevant business licenses.
- Write your LLC's operating agreement that details how your LLC will be managed.
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