Make an LLC: Everything You Need to Know
To make an LLC (limited liability company) is pretty simple. In many states, it's as quick and easy as filing a document once you've chosen a name for your business. 3 min read
To make an LLC (limited liability company) is pretty simple. In many states, it's as quick and easy as filing a document once you've chosen a name for your business. You'll need to check with the Secretary of State in the state where you plan to conduct business to be sure you meet all requirements necessary for an LLC.
LLCs get the best of both worlds with the liability protection of a corporation and the tax benefits of a partnership. The owners, called members, of an LLC are not liable for any of the business's debts unless they personally co-sign loans or guarantee debts. LLCs are taxed as pass-through businesses, so they do not experience the double taxation that corporations do.
Making an LLC
Depending on which state you choose to conduct business in, the requirements for starting an LLC can be very simple and quick. Some states only require you to fill out a form, so you can potentially set up your business in a few hours. Because the rules vary across the country, you'll need to visit the website for your Secretary of State or one of their business divisions to see what particular steps you should follow.
Typically, you'll need to perform the following tasks to start an LLC in the United States:
- Choose a name for your company
- Fill out your articles of organization with the details of your LLC (some states call these documents by different names, such as formation documents and articles of incorporation)
- Pay a filing fee
- Choose a registered agent
- Create an operating agreement (not always required, but good to do, regardless)
Many business owners choose to hire legal attorneys to help them decide if an LLC is the right structure for their companies and assist with required paperwork.
Choose a Name
Once you've settled on forming an LLC for your business, you'll need to choose a name. Consider this name carefully, as it must follow state requirements, and it is how potential customers or clients will find you.
The details of LLC name requirements vary depending on the state, but some of the basics are:
- LLC names must be completely unique, not to be mistaken for any other business entities active in the same state.
- LLC names need to make their entity type clear, so they need "limited liability company" in their titles or some abbreviated form of those words (they also cannot contain words like "corporation").
- LLC names cannot use words that could cause them to be mistaken for state or federal agencies (police, FBI,post office, etc.).
If you choose the right name for your company, you'll first want to make sure it's available by doing a business name search online. Usually these searches are free and easy on the Secretary of State website of the state in which you plan to register your business. If the name is available, many states will allow you to put that name on hold for a fee. Reserving your desired name is a good way to be sure that it isn't taken while you're getting your paperwork together.
File Articles of Organization
The articles of organization is a simple document that includes at least the following information:
- Business name and address
- Member names
- Registered agent name and address
- Business purpose
Usually, the website for your Secretary of State will have a blank template or form for the articles of organization that you can simply fill out and return. Every state charges a filing fee, but the amount varies from $50 to $250, depending on the state.
You'll also want to keep a copy of your LLC's articles of organization for your own records. This will likely cost an extra fee.
Choose a Registered Agent
The rules for an LLC registered agent also vary depending on the state. Generally, a registered agent needs to have a physical address (no P.O. boxes allowed) in the state where the LLC does business. Registered agents are meant to receive legal documents on behalf of the LLC, so if the company is sued, the registered agent will receive the service of process.
Write an Operating Agreement
Operating agreements are not required in many states, but is always good business practice to be sure that all of the business owners are on the same page. If every member agrees on and signs an operating agreement, it can help solve or completely avoid disputes among members.
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