I Have an LLC, Now What: Everything You Need to Know
While the process of forming an LLC is relatively easy, there are a number of things that LLC owners need to do before they start operating their businesses.3 min read
“I have an LLC, now what” is a common concern for entrepreneurs who have just successfully elected limited liability company (LLC) status. An LLC is a hybrid business entity that provides personal liability protection for its owners and enables them to pay business taxes at the individual level. While the process of forming an LLC is relatively easy, there are a number of things that LLC owners need to do before they start operating their businesses.
What You Need to Do After Establishing an LLC
In order to form an LLC, you are required to file the Articles of Organization with the Secretary of State or another state agency. Once you have completed this step, your company will become a completely separate legal entity. However, there are many more steps you need to complete in order to operate your business as a separate entity.
Apply for an Employer Identification Number (EIN)
If you are planning to hire employees, you must obtain an EIN. This procedure is also necessary for establishing a distinct tax identity for your LLC. One benefit of having an EIN is that it eliminates the need to disclose your own Social Security Number to your customers for payment. In addition, it enables you to build credibility with your customers because it clearly shows that you have taken the necessary measures to make your LLC a separate entity.
Obtain the Required Business Licenses and Permits
Depending on your location and the nature of your business, you may be required to get business licenses and permits from your state, county, or city. To be sure, you can find out from your state and local government offices if you need to obtain business licenses and permits or pay local taxes. Many entrepreneurs have the misconception that forming an LLC gives them the right to operate. In actuality, LLC formation only establishes a legal foundation for your business, while licenses and permits enable you to operate your business legally. Some examples of licenses and permits that apply to businesses include:
- General business operation license
- Professional license
- Health permit
- Home occupation permit
- Zoning permit
In most cases, licenses and permits are relatively affordable. Getting them upfront does not only make your business legit; it can also help you save money by preventing fines and penalties.
Apply for a Seller's Permit
If you are planning to sell taxable retail or wholesale items, you will likely need to obtain a seller's permit. If you are operating in multiple locations, you will have to get multiple permits. A seller's permit enables you to sell goods or services legally in your state and collect taxes on your sales. Most states require businesses to get seller's permits before making any sales.
Open a Business Bank Account
It is necessary to have a dedicated business bank account for your new LLC. A business account enables you to keep track of your business and personal finances individually. Your business and personal funds may remove the personal liability protection that comes with an LLC. To get a new business bank account, you need to provide your EIN and Certificate of Formation. You should also consider getting a business credit card so that your LLC can start building its own credit history.
Ensure Proper Documentation and Recordkeeping
After forming your LLC, you should create a minute book and file for keeping important business documents such as your LLC's Certificate of Formation, operating agreement, bylaws, resolutions, and shareholder information. In some states, you are required to submit an initial report following the formation of your LLC and hold annual member meetings.
Insure Your Business
While electing LLC status protects your personal assets from business liabilities, it does not protect the company from losses. As such, it is a good idea to purchase a Business Owners Policy (BOP) or a general liability insurance policy. Such policies will protect your business against injuries, accidents, and negligence claims. Also, if you are selling products, it is advisable that you get product liability insurance. If you are providing professional services, such as legal, accounting, insurance, or consultation services, you should invest in a professional liability policy.
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