How to Start an LLC

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Estimated reading time: 6 minutes

Creating a Limited Liability Company (LLC) is the best way to launch your small business with comprehensive asset protection.  A Limited Liability Company is a business that is its own legal entity with its own Employer identification number (EIN) from the IRS, separating business debts and lawsuits from its owners and personal assets.  It can be a single member LLC or a multi-member LLC. 

While LLC formation can seem rather daunting, there is a succinct process of steps that can be followed to ensure proper formation and compliance.

Step #1: Select the State for your LLC

Start here: select the state in which you want to form your LLC.  This may seem like a simple first decision, but it’s actually the most important step to ensuring that your business entity has the protection you want.  Every state has different laws, formation documents, and levels of protection offered to businesses. It’s important to research various states, while considering the needs of your business and future growth plans.  Start thinking about the following:

  • Asset and personal liability protection
  • Taxes
  • Privacy
  • Filing fees
  • Requirements for filing

Once you have made a decision for the best place for your business to incorporate, you’re ready to proceed to the next step.

Step #2: Name your LLC

The next step includes selecting the name of your Limited liability company.  Remember that your LLC’s name must be original and unique.  States don’t allow businesses to share names.  As you think about creating this new entity, start developing your thoughts on what it should be called. Your business name represents more than just a name, it’s also the start of building your brand.  Your brand should appeal to your target audience and can tell any story that you like.  Whether it’s a family name, a humorous play on words, or just a completely non-existent formal word; this is your opportunity to have something that truly represents your vision.

Since your business name must be unique, it’s important to have options with different variations or abbreviations, just in case the name you want is unavailable.  You can utilize the online name search features of your incorporation state to determine if your business name is available.  Any active entity name cannot be used a second time.  

Additionally, we recommend a litmus test.  It’s important to look at other key factors when considering your business name.  For example, if you plan to have an associated website, you may want to look into domain availability for the name you are targeting.  You may also want to perform a quick online search to find competitor names and ensure that your business name won’t be confused.  An online search can also tell you if there is any negative press from a previous business with the name that you are seeking. Social media can be a great outlet for research, as well.  You can review name availability, as well as any negative client feedback.

Now that you have all of these components aligned, you’ll be ready to file your business entity!

Step #3: Registered Agent

The best way to start your LLC filing process is with a Registered Agent.  Registered Agents are nominated by your company to officially receive and send papers on your behalf.  These papers include service of legal action (such as lawsuits), state filings, business licenses, annual reports and any other business mailings.  The Registered Agent must be a resident of the state or a corporation authorized to transact business in the state of incorporation.  This means that a member of the LLC can act as the registered agent of the LLC; however, a company may not act as its own registered agent.

You may be wondering why you need an outside designated Registered Agent service when you can simply be your own.  Using an outside Registered Agent offers many benefits:

  • As a business owner you can take advantage of working on your own schedule, without being tied to typical operating hours of 8am – 5pm.  Your Registered Agent will be available during these hours to ensure that important legal documents, tax returns and service of process are received.
  • Having a Registered Agent allows you the flexibility of forming your LLC outside of your current state of residence.  For instance, if you live in California, but want to utilize Nevada’s generous business laws, you can start an LLC in Nevada and then use a Registered Agent for all correspondence and tax purposes.  
  • If your business is not going to have a physical location (such as an online business), using a Registered Agent will give you a business location, while keeping your personal residence private.
  • If your growth plan includes expansion to multiple states, a Registered Agent can give you physical presence in each state.
  • Registered Agents can also assist with keeping copies of your corporate documents and remind you of any state filings that are due to ensure you stay in compliance.

Step #4: Articles of Incorporation

Now it’s time to file those state documents that actually establish your legal LLC.  For a Limited Liability Company, you will need to file Articles of Organization.  These articles will provide basic information about your new business and describe the fundamental operating characteristics of your Limited liability company.  

Basic information that is typically requested includes the following:

  • The LLC name and address
  • The type of business the LLC plans to conduct
  • Name and address of the Registered Agent
  • Managers and members of the LLC

Once the Articles of Organization are developed and signed, it is time to submit to the appropriate governing office.  These documents are typically filed with the Secretary of State’s office; however, some states have other agencies who oversee business formation.  Once approved, these articles legally create your LLC as a registered business entity within that state law.

Step #5: Operating Agreement

The next big step for a LLC owner is to create your Operating Agreement.  An LLC Operating Agreement explains and defines the roles of members in your business.  It establishes daily responsibilities for each member, as well as expectations for business funding.  All of these roles can be set up exactly as you see fit; it’s your business structure, so you decide how it will operate.

The LLC Operating Agreement also explains how accounting practices will be handled in your company.  You can name the person who will be overseeing finances, business bank accounts, business credit cards, establishing payroll and taking responsibility for distribution of profits.  You can outline management structure as well as who can sign checks and create your fiscal year.  

Your Operating Agreement template is also a good place to detail member withdrawal and dissolution.  You can decide what the process will be, what options will be available and how you will pay member shares.    

Should your LLC need to be dissolved, you can outline the process, responsibilities and distribution of profits.

In Conclusion

Using this step by step guide will help you successfully establish a Limited Liability Company, ensuring compliance and protection for you and your family.

Incorporating is the most powerful thing you can do to legitimize your startup. And at IncAuthority.com, our setup LLC services are 100% free. Always. So, don’t wait. Form your new LLC today and enjoy the protection due to you and your business under the law.

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