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How to Set Up an LLC in 7 Steps

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Setting up a whole new company requires some legal actions, like choosing the format of your business and its official registration, to be taken. A limited liability company or LLC is a common organizational and juridical form for doing business. So, an LLC registration is the basis for building a successful company.

Before you start, find out how to register LLC. A little research and reading on the subject are the first steps to take, and the next ones are listed below.

1. Choose the Business Name

To create a new company, start from the very beginning – from picking up the correct name which reflects your business appeal. This is probably the most difficult step to take. While every other move is highly detailed and regulated by law, the flight of thought can be endless and somewhat painful.

But no need to worry! There are some tips that’ll help you with business name creation:

  • Simplicity. A business name shouldn’t be overloaded;
  • Representation. The name should reflect the sphere the company operates in;
  • Memorability. The name should be catchy and easy to remember;
  • Uniqueness. Otherwise, the name just won’t be registered.

After the invention of the name, it’s essential to reserve it for a short period of time.

2. Choose the State

The decision regarding the state in which the company will operate will affect its future. There are lists of the best states for registering as an LLC available online. Things to consider when choosing a state:

  • State tax regulation system;
  • Attitude to business and investments within the state;
  • Your home state;
  • If you want to go interstate with your business.

3. Choose the Registered Agent

A registered agent is a licensed company or an individual that professionally provides services in registering as an LLC and its future administration. This legal entity has received a license to submit applications on behalf of its clients. The activities of registered agents are strictly regulated.

How to choose a registered agent:

  • Analyze the prices;
  • Evaluate its professional level;
  • Evaluate staff qualifications;
  • Pay attention to the number of enterprises that use this company’s services.

Remember that the agent must be registered in the state your business operates in.

4. Compose the Article of Organization

An Article of Organization is a formal legal document you need to fill in to establish an LLC at the state level. The certain general criteria it must comply with vary from state to state and are determined by each state independently. Therefore, visit the website of the Secretary of State you chose for the Article of Organization form and more details.

In general, the paperwork required includes:

  • Business name and address;
  • History of creation and activity of the company;
  • Information on the registered agent (name, address);
  • The designation of the company;
  • The mechanism of operation, internal structure, and organization.

It must be signed by the owner and, in some states only, the signature of the agent is required. An Article of Organization can be sent via mail, e-mail, or submitted personally.

5. Draw Up the Operating Agreement

An operating agreement is concluded between the founders of a company, even if it is a single-member LLC. The main purpose of the operating agreement is to create a legal entity.

The founder(s) also undertake to determine:

  • the procedure for joint activities and participation;
  • the conditions for the transfer of their property to the LLC.

The details of LLC operating agreements vary considerably, depending on a number of factors, which generally include but are not limited to:

  • Financial implications;
  • Participants;
  • Organizational form;
  • Participants assets;
  • Income distribution.

In short, an operating agreement is an internal document that establishes how your LLC will be run and managed.

6. Taxation Identification

An LLC is a legal entity that is obliged to keep accounting and tax records and submit annual reports. LLCs are different. There are companies with a large number of employees and those which have a small staff. Anyway, if there’s more than one member in the company, they must get an Employer Identification Number (EIN), a tax identification number of the organization.

If the LLC is a single-member company, an EIN can be replaced with an individual social security number.

7. Open a Business Bank Account

Having a business bank account can bring many more benefits than it seems at first glance. With its help, it’s possible to perform business-related operations, such as paying taxes and rent and accepting money from customers and counterparties. Thus, there is a division between personal finances and the company’s finances.

The documents required depend on the bank.

Conclusion

If you’re puzzled over how to create an LLC on your own, take advantage of these instructions. Follow it step-by-step, and you’ll avoid legal problems in the future.

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About Shane Avron

Shane Avron is a freelance writer, specializing in business, general management, enterprise software, and digital technologies. In addition to Flevy, Shane's articles have appeared in Huffington Post, Forbes Magazine, among other business journals.


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