How to Set Up Your Limited Liability Company
A Limited Liability Company, or an LLC, is a type of business structure permitted by state law. Like a corporation, an LLC limits the amount of personal liability for debts and other actions of the LLC. A pass-through taxation benefit is one of the chief appeals for setting up an LLC as is its ease in forming a partnership and managing the company.
Forming an LLC is a fairly simple process and can be done without an attorney. Yet, there is legal paperwork and documentation involved, thus an attorney can help expedite the process. The following steps are important in completing the LLC formation process:
1. Choose a name. Your company needs a name and it is that name you’ll be using for marketing your business. You will need to register your company’s name with your state, choosing the appropriate agency for filling. In many states the department of the secretary of the state handles this responsibility.
2. File your paperwork. You’ll be filing your paperwork with the state. These so-called articles of incorporation or articles of organization can be supplied by an attorney or obtained from a business that offers this service. Follow your state’s instructions for filing and paying the related fee.
3. Secure a federal tax identification. Contact the IRS and ask for a federal tax identification number also known as an Employer Identification Number for your business. Like your 9-digit Social Security Number, an EIN is also a 9-digit number, to be used strictly for your business. If you have employees or plan to buy and sell through your LLC, you’ll need to use your EIN to distinguish your business from your Social Security Number.
4. Create an operating agreement. If your LLC has more than one member, you’ll need to create an operating agreement that defines the rights and responsibilities of each member. This agreement spells out each member’s share of the business, the management of capital accounts, profit distribution, and tax responsibilities. Such agreements can be amended at any time by the LLC’s members. File a copy of this agreement with your state, if required.
5. Secure required licenses and permits. You’ve paid the fee for organizing your business to your state, but there other fees that must be addressed. Your state may require the filing of an annual report with a fee paid with your filing. Your county or municipality may require you to obtain a “use license” to conduct business locally. You may need to collect and pay sales taxes if you are selling tangible goods and pay employee taxes to the state, but only if you have employees.
Selecting a name for your business ensures that your name is legal and available. Your state may require that your register your business name separately or automatically register it when it accepts your articles of incorporation. To trademark you business name you can file an application online with the U.S. Patent and Trademark Office. Consider working with a business broker for business management advice.