LLC Steps: Everything You Need to Know
LLC steps are the actions that need to be taken when organizing a limited liability company (LLC). 3 min read
LLC steps are the actions that need to be taken when organizing a limited liability company (LLC).
Overview of Starting an LLC
An LLC is a popular type of business entity because of the liability protection it offers the owners.
The owners, also called members, of an LLC are not held personally liable for the debts of the business because an LLC is considered a separate entity.
An LLC differs from a corporation in following ways:
- Less complex
- Provides more versatility
- Requires less maintenance and filing
Paperwork must be filed with the applicable state upon formation of an LLC. While some rules vary with each state, many of the steps required to form and operate an LLC are the same regardless of location.
Steps to Organizing an LLC
There are thirteen steps that owners should take when forming and operating an LLC:
- Determine the state in which to organize and operate the LLC.
- Choose a name for the LLC.
- Designate a registered agent.
- Decide if you want to hire an attorney to organize the LLC.
- Allocate the ownership of the LLC.
- Announce the formation of the LLC in a local newspaper.
- Submit the Articles of Organization.
- Purchase a Kit and Seal for the LLC.
- Choose the type of management to apply and select managers.
- Establish the Operating Agreement of the LLC.
- Acquire a Federal Tax Identification Number for the LLC.
- Register the LLC in any other states associated with the business.
- Maintain the business' limited liability.
Step One: Choose the State of Organization
An LLC becomes official upon filing the Articles of Organization with the applicable state government such as the secretary of state.
There are many elements that should influence the location of the LLC such as the:
- State in which the business is run
- Cost of filing for start-up
- Annual costs and filing requirements
- Advantages unique to each state
Typically, if the LLC will primarily operate and do business in only one state, which will be the location of organization. If the LLC does business in multiple states, the owners may have to register in those states as well as the chosen state for organization.
Most states demand that out-of-state, or foreign, LLCs register and pay related costs pertaining to that state. For instance, a Pennsylvania LLC that is doing business in Florida will be required to register as an out-of-state LLC as well as pay the filing fee related to Florida.
Step Two: Choose the Name of the LLC
While a name must be chosen for all LLCs, owners are allowed to adopt a fictitious name, using a different trade name in public.
For example, an LLC's name could be Dynamic Core Gym and Fitness Center LLC while publicly operating under the name Dynamic Core.
The most important factor to consider is whether a name is already in use. This is important for two reasons:
- It could cause legal issues due to breaching the trademark rights of other businesses.
- A new LLC cannot be registered with the name of a current LLC.
It is important to note that a state will only have information on current LLCs in its state. Therefore, owners should do outside research to determine the overall availability of names and trademarks.
Once owners verify that there is not any issue with trademark infringement, they should use the secretary of state's database to view the names of current LLCs in that state.
It is equally important that the chosen name be distinct from entities such as corporations and partnerships as well as other LLCs.
Owners can usually search current business names at no cost using their state's Secretary of State's website.
Additional factors to consider when naming an LLC are as follows:
- Many states require that businesses indicate their status as an LLC.
- Including the words Limited Liability Company, Limited Liability Co., or LLC helps to establish full liability shielding.
- The use of words like incorporated, bank, corporation, city, and insurance is prohibited in most states.
- Reserving a name is encouraged if owners plan to delay filing the paperwork for their LLC.
A name can be reserved in most states by submitting the required paperwork and paying the reservation fee.
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