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Limited liability companies (LLCs) are primarily popular for their strong asset protection and simple formation process. Compared to corporations, LLCs require less paperwork and have fewer compliance requirements. These benefits make them the perfect entity for small businesses and first-time entrepreneurs.
Despite these advantages, LLCs are not without its complexities. There are steps to its formation process that require careful attention to detail. Overlooking one of these steps could mean delays, penalties, and even legal issues.
So, to ensure a smooth and successful LLC formation, we’ve created a comprehensive checklist for starting an LLC online. The list includes all the essential steps, like filing formation documents, drafting operating agreements, and obtaining business licenses.
Let’s get started!
How to Create An LLC Online
There are six steps to starting an LLC online:
Choose A Business Name
The LLC name requirements vary from state to state, but generally, LLCs must have a unique business name that is not similar to any existing business name. In addition, their name should also end with “Limited Liability Company” or one of the following abbreviations:
- LLC
- L.L.C
- Ltd. Co.
- Ltd.
If you have a name in mind, you can use your state’s business entity search tool to check its availability.
Register Your “Doing Business As” (DBA) Name
A “Doing Business As” DBA or fictitious name is a name businesses use that’s different from their legally registered name. For example, if your LLC’s legal name is “Smith and Johnson, LLC,” you may want to use a more marketable name like “Smith & Johnson Consulting Services”.
Most states require LLCs to register their DBA name, while others don’t. We recommend consulting your Secretary of State to determine their requirements for DBA names.
Appoint A Registered Agent
Most states require businesses, specifically LLCs and corporations, to have registered agents. A registered agent is a person or company designated to receive legal correspondence on behalf of your LLC.
Anyone can be your LLC’s registered agent so long as they meet the following requirements:
- Must be 18 years of age or older.
- Must have a physical address within the state the company was formed in.
- Must be available to receive legal correspondence during normal business hours.
However, hiring a professional registered agent is always a good idea. Professional registered agents are trained to handle sensitive legal and tax documents. They ensure that any legal correspondence they receive is forwarded to you immediately.
Submit Your Articles of Organization
Articles of organization are the primary documents that form an LLC. Each state has its version of articles of organization, but they generally include the following information:
- The LLC’s name and address.
- The name and address of the LLC’s registered agent.
- The names and addresses of the LLC’s members, managers, and directors.
- The nature of the LLC’s business.
Once you file your articles of organization, you must pay a filing fee ranging from $35 to $500.
Get Your Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a unique nine-digit number the IRS uses to identify businesses. It’s the equivalent of a person’s Social Security number and is used to file taxes and open bank accounts.
Getting an EIN is relatively easy. You can get one online through the IRS website or by mail. EINs are also free of charge. You don’t have to pay any service fee to get one.
Obtain Your Business License
Depending on your state and the nature of your business, you may have to obtain licenses and permits before starting your operations. These may include general business licenses, sales tax permits, and zoning permits.
Create An Operating Agreement
Operating agreements are legally binding documents that outline the rules and regulations governing an LLC. Most states don’t require them, except California, Delaware, Maine, Missouri, Nebraska, and New York, but they’re highly recommended for all LLCs, regardless of their location or number of members.
Operating agreements vary from one LLC to another, but they generally include the following:
- Ownership structure
- Management structure
- Voting rights and meeting procedures
- Profit and loss sharing.
- Member responsibilities and duties.
- Withdrawal and transfer of membership interests.
- Dissolution terms.
- Dispute resolution.
Do you need to hire a lawyer to write an operating agreement? Not entirely. You can draft the document yourself, but it would be best if you work with a lawyer.
A lawyer will help you ensure your operating agreement is legally sound and complies with state laws. They can also assist you in identifying potential issues and drafting provisions to address them.
Open A Business Bank Account
Lastly, you must open a business bank account before starting your operations. A business bank account will help you separate your personal and business finances, which is crucial for preserving your LLC’s liability protections.
Moreover, a business bank account is the first step to building business credit. If you plan to get additional funding, you need a good business credit score to apply for loans and lines of credit.
To open a business bank account, you’ll need the following:
- Your LLC’s articles of organization.
- Your LLC’s EIN.
- Government-issued IDs for authorized signatories.
- Your LLC’s business license.
Other banks may also ask you to provide your operating agreement or business plan.
Set Your LLC Up for Success
Although our “Starting An LLC Checklist” includes all the essential steps for establishing an LLC, it’s important to remember that laws and regulations vary by state.
Some of the requirements we’ve mentioned may not apply to your area. You should consult a business formation specialist, like Inc Authority, who can provide tailored guidance based on your location and needs.
Inc Authority has helped hundreds of aspiring entrepreneurs form LLCs nationwide. Our team of business formation specialists will help you create your LLC online for free.
We understand how expensive forming an LLC can be, so we’ve made it our mission to help our clients cut costs. When you work with us, we’ll waive our overhead charges and service fees so that you only have to pay the mandatory state filing fees when you form your LLC.
This setup will allow you to establish your business properly without breaking the bank. Ready to get started? Visit Inc Authority’s website here to begin your journey to entrepreneurship.