How to Form an LLC
Looking for an easy way to form an LLC for your business? We provide step-by-step instructions on how to form an LLC for your business and organisation.
For a long time, small business owners were torn between operating as sole proprietors or in corporations. On the one hand, a sole proprietorship business offered a lot of simplicity regarding tax reporting. On the other hand, personal-liability protection made a corporation an equally attractive option.
This dilemma led to the formation of a Limited Liability Company (LLC) – a business that combines the best of both worlds.
Related: How To Incorporate Your Business
In particular, an LLC is a hybrid entity where its owners are not liable for the firm’s financial obligations. Also worth pointing out is that LLC’s are way more flexible in terms of management and handling taxes than corporations.
Best LLC Services In 2022
If you’re considering starting an LLC, this article provides a step-by-step guide on how to do it.
Related: How to come up with a business name for your company.
How To Form An LLC In 2022
Choose a Location
If you are a new business owner, the best thing is to form an LLC in the state where you live. This way, it will be easier to run operations and file paperwork with the state.
Nonetheless, it is possible to form LLCs in different locations by registering each company in the state where you conduct business. When deciding the ideal location for your LLC, determine how convenient it will be. Also, check whether the state has business-friendly laws for taxation, reporting and recordkeeping.
Decide the Name of Your LLC
After picking a location, the next step is to choose a name. As is the case with other types of companies, you’re not allowed to choose a name that’s already being used by another LLC in your state.
Some states also prohibit the use of certain phrases when naming LLCs. Words such as “bank”, “attorney” and “university” should not be a part of your LLC name.
Another rule of thumb is that the name should end with an acceptable designator. You can choose between “limited liability company”, LLC and L.L.C.
Choose a Registered Agent
When creating an LLC, you must choose a statutory or registered agent. This is the person or company that will be receiving legal mail- such as subpoenas and complaints- on behalf of your company.
While you can act as your statutory agent, it’s usually not a good idea. If you lead a busy schedule, you might miss important notifications. Besides, becoming your registered agent means your physical address becomes a matter of public record!
Instead, use online trusted platforms that offer registered agent services like MyCompanyWorks or CorpNet Incorporation.
File Your LLC with the State
This entails preparing and filing the “articles of organization” with your state’s LLC department. The articles of organization are the basic document that shows you’ve established an LLC. In some states, it’s referred to as a “certificate of organization” or “certificate of formation”.
Every state has specific requirements on what details to provide in this document. But in general, you should include:
- The name of your limited liability company
- The reason for forming your LLC
- The duration of your company
- Whether the LLC will be managed by members or managers
After formulating the articles of organization, you must send them to your state’s filing agency, alongside a filing fee. You can file the document online, via mail or submit it in person.
Different states take different lengths of time to process the articles of organization. Some take weeks, others months.
Other states even offer expedited processing at an extra cost. Once processed, you will get a certificate, which proves that your LLC is officially formed.
Draft an LLC Operating Agreement
This is a unique type of business contract that highlights your LLC’s ownership and members’ roles. It’s similar to corporate bylaws in the case of a corporation.
Six main things should be included in an LLC operating agreement:
- The organization of your LLC- this section explains when the company was created, the members, and the ownership structure.
- Management and Voting Rights – this part describes how the firm is managed and the voting process. As mentioned earlier, an LLC can be managed by either the members or a manager.
- Capital Contributions – under this section, the names of members who have given capital are listed. It also explains how members can raise additional capital.
- Distributions – this part explains how the company shares profits/losses among its members.
- Membership – here, the process of removing or adding a new member is explained in detail.
- Dissolution – this section describes the circumstances leading to the LLC’s dissolved.
Publish a Notice
Depending on your LLC location, you might be required to publish a notice stating your intent to form the LLC. This notice has to be published multiple times over several weeks. You’ll likely have to pay a fee to the newspaper or the state government for this notice. So be sure to check your state requirements for forming an LLC.
Get Licenses and Permits
When forming your LLC, it’s important to check whether your business needs any permits or licenses so that it’s deemed compliant. At the federal level, you might need a license/permit if you operate in these industries:
- Firearms and ammunition
- Fish and wildlife
- Maritime transportation
- Nuclear energy
- Radio/TV broadcasting
LLC license and permit requirements will differ between states and counties. Therefore, check whether there are additional qualifications at your state and local levels.
Set Up Your Accounting
To run your LLC successfully, you need to get your accounting right. Thus, you should look for an accounting system that meets your business needs. This way, you can keep tabs on all your company’s finances, expenses or revenue. Besides, an accounting system makes filing the yearly company tax so much easier.
Best LLC Services
Do I need a lawyer to start an LLC?
NO. You don’t need a lawyer or an attorney to form an LLC. You can prepare the legal paperwork using a professional business formation service, such as Swyft Filings or file it yourself.
How Much Does It Cost To Setup An LLC?
It may not cost you anything if you go through the free online course or hire a company such as Swyft Filings, But any method you choose to form an LLC, you will still need to pay state filing fees. The LLC state filing fees range from $50 and $500. The average filing fee to form an LLC in the United States is $125
How Do You Start Your Own LLC?
You can start your LLC by following the above steps.
How long does it take to create an LLC?
It may take up to 48 hours to complete the process, but this also depends on each state. The time to complete LLC registration may vary depending on the state of your choice.
How hard is it to set up an LLC?
Setting up an LLC is not complicated; it is straightforward, and this can be completed between 24 to 72 hours. However, time may vary depending on your state.
What state is best to form an LLC in the US?
Below is the list of the best States to Start an LLC
Delaware. Delaware is one of the best and has a longstanding reputation for being one of the most business-friendly states in the US.
Nevada. The second on the list is Nevada State; it draws much attention from business owners and small to medium companies who want to avoid paying high taxes.
- South Dakota.
Whether you’re in partnership business or are a solopreneur, creating an LLC can be the perfect way to blend a simple form of organization with liability protection. By following the steps in our guide, you can create your LLC.
If you have a question on how to form an LLC for your business or organisation, kindly let me know from your comment.
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