LLC Application Form: Everything You Need to Know
The LLC application form process allows businesses to establish a limited liability company, a frequently used model that safeguard your personal assets.3 min read
The LLC application form process allows businesses to establish a limited liability company, a frequently used model that enables you to safeguard your personal assets. If you're part of an LLC, your personal assets cannot be sought by lenders to cover outstanding company debts.
The formal step of registering your company involves filing Articles of Organization with the state government where you plan to do business.
How to Apply to Set Up an LLC
State laws regulate the creation of LLCs. Requirements in each jurisdiction vary, but there are certain basic things you should do.
- Choose a business name for your LLC.
- Decide whether you want to treat your LLC as a partnership or corporation for tax purposes.
- Complete your Articles of Organization.
- File the Articles of Organization with the secretary of state's office and pay the filing fee.
- Check whether your state requires LLCs to have an operating agreement.
- Get a bank account for your LLC and apply for any business licenses you require.
Choosing a Business Name
Although marketing and branding considerations are important when coming up with your company's name, you also need to think about some legal issues concerning LLCs. One requirement is that your business needs to include the words limited liability company or LLC in its name to show that you are operating as an LLC.
Your state can prohibit the use of certain words when naming an LLC. Typical words that are restricted include “bank” and “insurance.” However, each state will be different, so it's important for you to check a list of restricted terms.
After you've come up with a suitable name, you need to make sure that an existing LLC isn't already using it to trade. You can contact your state's business office for more information about how to do this.
Your LLC's Tax Status
If you're the only member of the LLC, the IRS will tax the company as a soul proprietor. In multi-member companies, the LLC will be taxed as a partnership, meaning profits are passed through to each member's tax return. LLC members can also choose to have their LLC be taxed as a corporation instead.
States levy taxes on LLCs at various rates. One case in point is California, which taxes all LLCs at $800 annually and adds additional charges if the company makes over $250,000.
If you're unsure about the taxes your state charges, go to your state's department of revenue website to find out.
Articles of Organization
Filling out your LLC's Articles of Organization is usually straightforward because it's often possible to download a blank form online or get one from your state's filing office. You'll need to include your company name, its address, and the names of the LLC's members.
In addition, many states ask that you provide details regarding your LLC's registered agent. The job of an agent is to receive legal documents and government letters on your company's behalf. One of the company's members can act as a registered agent.
When you submit the articles, remember to pay the filing fee charged by the state. Usually, the filing fee is in the region of $100. Some states, such as Illinois, allow you to file your articles either electronically or in paper form.
What Is an Operating Agreement?
An operating agreement regulates how your LLC works internally, including things like the following:
- The percentage owned by each member
- Members' voting rights
- Members' obligations
- How members' interests can be transferred
Members of LLCs have the option of creating any type of company structure they agree on. Unlike corporations, there is no requirement for a board of directors.
In some states, an operating agreement is mandatory, so be sure to check if this is the case for you.
Applying for a Bank Account and Business Licenses
Depending on the sector in which your business operates, your state government may require that you apply for a license or permit. Take a look at the Small Business Administration's website, where you can find information about business license offices in each state.
Your LLC also needs to have its own bank account so the company's finances and its members' assets don't get mixed up. Ask your bank about the documents they need to establish an LLC account.
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