{"id":11955,"date":"2022-10-05T01:01:01","date_gmt":"2022-10-05T06:01:01","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=11955"},"modified":"2022-10-04T11:00:26","modified_gmt":"2022-10-04T16:00:26","slug":"entrepreneurs-heres-how-to-start-your-own-llc-and-file-taxes","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/entrepreneurs-heres-how-to-start-your-own-llc-and-file-taxes\/","title":{"rendered":"Entrepreneurs: Here\u2019s How to Start Your Own LLC and File Taxes"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Whether you\u2019re a small business owner, side hustler, freelancer, or gig economy entrepreneur, <\/span><a href=\"https:\/\/flevy.com\/blog\/what-are-the-benefits-of-starting-an-llc\/\"><span style=\"font-weight: 400;\">operating your business as an LLC has numerous benefits<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><img decoding=\"async\" class=\"alignright size-medium wp-image-11958\" src=\"http:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc1-278x300.png\" alt=\"\" width=\"278\" height=\"300\" srcset=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc1-278x300.png 278w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc1.png 499w\" sizes=\"(max-width: 278px) 100vw, 278px\" \/>First, as suggested by the name, the primary advantage of an LLC, or <\/span><a href=\"https:\/\/www.investopedia.com\/terms\/l\/llc.asp\"><span style=\"font-weight: 400;\">Limited Liability Company<\/span><\/a><span style=\"font-weight: 400;\">, is <\/span><b><i>limited liability <\/i><\/b><span style=\"font-weight: 400;\">for individual members.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, an LLC is a hybrid business entity that combines the best features and tax benefits of a sole proprietorship, partnership, and corporation.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Fortunately, unlike a decade ago, LLCs are now much easier and cheaper to set up; additionally, thanks to numerous tools, filing taxes for an LLC is also quick and easy. This straightforward guide will walk you through how to do both tasks easily and effectively.<\/span><\/p>\n<h2><b>How to Start Your Own LLC: A 4-Step Guide<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Although LLC formation laws, requirements, and regulations may vary slightly from state to state, the main steps to forming one are:<\/span><\/p>\n<p><b>Step 1: Name your LLC<\/b><\/p>\n<p><span style=\"font-weight: 400;\">This is usually the most creatively-involved step of the LLC formation process because you have to come up with a unique and on-brand business name.<\/span><i><span style=\"font-weight: 400;\">\u00a0<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">To avoid overthinking this step and getting stuck on the idea of <\/span><i><span style=\"font-weight: 400;\">\u201ccoming up with the best business name possible<\/span><\/i><span style=\"font-weight: 400;\">,\u201d dedicate only 15 minutes to brainstorming a list of viable business names, then narrow it down to your favorite five that meet the following criteria:<\/span><\/p>\n<p>NOTE: Naming conventions and regulations may vary from state to state, but your LLCs business name should be.<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Unique and not used by another LLC\/company\/business<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Include the phrase LLC, Ltd, or Limited Liability Company (for example, \u201clandscaping maestros LLC\u201d)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Not misleading\/misrepresenting the business<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">From here, you only need to choose a name for your LLC and roll with it; after all, you can always run your LLC under a <\/span><a href=\"https:\/\/www.entrepreneur.com\/encyclopedia\/doing-business-as-dba\"><span style=\"font-weight: 400;\">\u201cDoing Business As (DBA) trade name<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><b>TIP:<\/b><span style=\"font-weight: 400;\"> While it is not mandatory, it is always a good idea to check domain name availability for your preferred business name, especially if you intend to establish an online presence, perform a business and trademark name search, and file a DBA\u2014if so desired.\u00a0<\/span><\/p>\n<p><b>Step 2: Choose a registered agent<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Technically, you can act as a registered agent and your LLC\u2019s official point of contact because all you need is a physical address in whatever state you want to register your LLC. This option can work if you want to start a <\/span><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/single-member-limited-liability-companies\"><span style=\"font-weight: 400;\">single-member LLC<\/span><\/a><span style=\"font-weight: 400;\">. However, the option can be a hassle later. Here is why:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Registered agents should always be available to receive official correspondence during regular business hours. Unless you can always be available, without fail, it is best to appoint a <\/span><a href=\"https:\/\/www.legalzoom.com\/articles\/what-is-a-registered-agent\"><span style=\"font-weight: 400;\">registered agent<\/span><\/a><span style=\"font-weight: 400;\"> who will always be available to accept legal correspondence and service of process papers.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Research is the only full-proof way to choose the right registered agent; most states have a list of registered private service companies. Additionally, Forbes has a list of <\/span><a href=\"https:\/\/www.forbes.com\/advisor\/business\/best-registered-agent-services\/\"><span style=\"font-weight: 400;\">Registered Agent Services<\/span><\/a><span style=\"font-weight: 400;\"> providers.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a pro tip, and if you can afford it, work with a registered agent who offers a full suite of legal services, such as filing your official paperwork \u2014for a fee. It makes things so much easier.<\/span><\/p>\n<p><b>Step 3: File the official paperwork\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Your LLC becomes a legal entity when you file your articles of organization \u2014 called <\/span><i><span style=\"font-weight: 400;\">certificate of formation or organization<\/span><\/i><span style=\"font-weight: 400;\"> in some states\u2014 with your Secretary of State and pay the filing fee.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">States have specific conventions about what to include in Articles of Organization and how to file these articles, but the most basic information needed is:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The business name and ownership information<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Business address<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A statement of business purpose<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Registered agent name and address<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Duration\/dissolution statement \u2014only required in some states<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Management structure \u2014whether managed by members or a designated manager\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Operating Agreement \u2014while an <\/span><a href=\"https:\/\/www.nerdwallet.com\/article\/small-business\/llc-operating-agreement\"><span style=\"font-weight: 400;\">operating agreement<\/span><\/a><span style=\"font-weight: 400;\"> is not mandatory in all states, having one is important because it sets out how your business operates.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Check requirements, including submitting and filing fees, which vary from state to state, with your Secretary of State website.<\/span><\/p>\n<p><b>Step 4: Apply for EIN and meet your tax obligations<\/b><\/p>\n<p><span style=\"font-weight: 400;\">If you\u2019re establishing a single-member LLC, you do not have to apply for an EIN; you can use your social security number instead.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, applying for an EIN is a good idea, even if you\u2019re a solopreneur, at-home business owner, or freelancer, especially if you intend to create a revenue-generating LLC or employ people\/collaborate with other business entities in the future.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">An EIN creates a further distinction between you and your LLC, allowing you to open a separate business bank account, get your business the local and state licenses it needs to operate, file taxes, etc.\u00a0<\/span><\/p>\n<figure id=\"attachment_11957\" aria-describedby=\"caption-attachment-11957\" style=\"width: 300px\" class=\"wp-caption alignright\"><img decoding=\"async\" class=\"size-medium wp-image-11957\" src=\"http:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc2-300x275.png\" alt=\"\" width=\"300\" height=\"275\" srcset=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc2-300x275.png 300w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc2.png 640w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><figcaption id=\"caption-attachment-11957\" class=\"wp-caption-text\">Source: IRS<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">You can use the <\/span><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/employer-id-numbers\"><span style=\"font-weight: 400;\">IRS website to apply for an EIN<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">After getting your EIN, you can use it to open a business account for your LLC and start operating and filing income taxes, which is the final step of running a successful LLC.<\/span><\/p>\n<h2><b>How to File LLC Income Taxes<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">How you file your LLC income taxes depends on your structure. For:<\/span><\/p>\n<p><b>Single-member LLCs<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Single-member LLCs can file taxes as <\/span><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/sole-proprietorships\"><span style=\"font-weight: 400;\">sole proprietorships under Schedule C<\/span><\/a><span style=\"font-weight: 400;\"> \u2014the IRS considers <\/span><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/single-member-limited-liability-companies\"><span style=\"font-weight: 400;\">single-member LLCs disregarded entities<\/span><\/a><span style=\"font-weight: 400;\"> for taxation purposes.<\/span><\/p>\n<p><b>Multi-member LLC<\/b><\/p>\n<p><span style=\"font-weight: 400;\">On the other hand, multi-member LLCs can file taxes as a <\/span><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/llc-filing-as-a-corporation-or-partnership\"><span style=\"font-weight: 400;\">partnership<\/span><\/a><span style=\"font-weight: 400;\"> using Form 1065, Schedule K-1, and Schedule E.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These are the main steps and things you need to know about starting an LLC and filing taxes once your LLC is registered and established.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In parting, on taxation:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">One of the best benefits of operating as an LLC is that you can write off most business expenses, up to 20% of the LLCs income.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For example, as an independent content creator and freelance writer, I\u2019ve found that by connecting my LLCs business account to Keeper Tax and then using <\/span><a href=\"https:\/\/www.keepertax.com\/freelancer-invoice-template\"><span style=\"font-weight: 400;\">KeeperTax\u2019s invoice template<\/span><\/a><span style=\"font-weight: 400;\"> to bill clients, I can easily use the app to write off as many as 23 expenses when filing my LLC taxes.<\/span><\/p>\n<p><img decoding=\"async\" class=\"aligncenter size-full wp-image-11956\" src=\"http:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc3.png\" alt=\"\" width=\"693\" height=\"468\" srcset=\"https:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc3.png 693w, https:\/\/flevy.com\/blog\/wp-content\/uploads\/2022\/10\/llc3-300x203.png 300w\" sizes=\"(max-width: 693px) 100vw, 693px\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Whether you\u2019re a small business owner, side hustler, freelancer, or gig economy entrepreneur, operating your business as an LLC has numerous benefits.\u00a0 First, as suggested by the name, the primary advantage of an LLC, or Limited Liability Company, is limited liability for individual members.\u00a0 Moreover, an LLC is a hybrid business entity that combines the&hellip;&nbsp;<a href=\"https:\/\/flevy.com\/blog\/entrepreneurs-heres-how-to-start-your-own-llc-and-file-taxes\/\" rel=\"bookmark\"><span class=\"screen-reader-text\">Entrepreneurs: Here\u2019s How to Start Your Own LLC and File Taxes<\/span><\/a><\/p>\n","protected":false},"author":17,"featured_media":11958,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-11955","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/11955","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=11955"}],"version-history":[{"count":2,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/11955\/revisions"}],"predecessor-version":[{"id":11960,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/11955\/revisions\/11960"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/11958"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=11955"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=11955"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=11955"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}