Here at CorpNet, we are often asked how to form an LLC, also referred to as a Limited Liability Company, when wanting to start a business.
To be clear, an LLC is not a business license; as one cannot obtain an LLC license.
A Limited Liability Company (LLC) is a legal entity that bears similarities to both corporations and partnerships. An LLC is formed under specific state statutes that provide for the creation and regulation of this special type of entity that has come to be commonly used and respected in business.
An LLC can be used to combine the limited liability features of a corporation with the flexibility and tax benefits of a partnership. Owners of an LLC are generally known as “members.” Management and control of the entity resides with the members, unless otherwise provided in the articles of organization of the LLC or within the LLC operating agreement.
An LLC provides the same personal asset protection with fewer hoops to jump through. You can also raise capital with an LLC. Additionally, with an LLC, you can:
- File your business LLC taxes on your personal tax return
- Allocate profit and loss to members of the LLC
- Avoid having to have an annual shareholders’ meeting (unlike a corporation)
New small business owners often assume that forming an LLC is a complicated thing. It’s not, actually, but it is one of the best things you can do to protect your personal assets and your business.
Here are 7 steps to follow as to how to register your new business by filing an LLC application within your state:
- Choose a Name – Your name will be the first thing people see or hear as it relates to your new business, so make it a good one! Next, you’ll want to make sure you’re the only one using that name. You can do that with a free corporate name search in your state.
- Register the LLC and File Your Paperwork – If you’re doing the filing yourself, you’ll need to download your state’s Articles of Organization paperwork and fill it out. If you’re letting a document filing service like CorpNet handle it; you’ll just need to provide basic contact information and a few details about your company.
- Get Your LLC’s Tax ID – Before you can start operating as an LLC, you need an Employer Identification Number. This is like a social security number for your business, and one you’ll need before opening a business bank account.
- Create Your Operating Agreement – This document outlines the rights and obligations of the members of your LLC and lists the distribution of income of the Limited Liability Company to its members. Your LLC Operating Agreement won’t need to be filed with your state, but you will need to keep one on premises, signed, if you have other shareholders.
- File Business Licenses and Permits – Additionally, you should apply for any business licenses or permits you’ll need to operate your business. It’s best to do this before you start operating your business to avoid potential fees or issues down the road.
- Keep Your LLC Compliant – Once you’re operating as an LLC, your work isn’t done for good. Each year, you’ll need to file your annual report. The due date for this annual report depends on where you filed your LLC. For example, if you filed it in Michigan, Delaware, North Carolina, Georgia, Florida, or Texas, there’s a specific date that your annual report is due. In most other states, it’s due on the anniversary of when your LLC was filed.
- Finally, Take Care of Loose Ends – Depending on where you’re based, you may need to publish your intent to form an LLC in a local newspaper. If you form an LLC in New York, for example, you’re required to run that intent in an approved newspaper for 6 consecutive weeks.
Many of our customers prefer the LLC over the S Corporation because they require fewer formalities and less paperwork than the corporation, while still providing that protection of your personal assets, as well as tax benefits. Contact CorpNet.com today and let us help you file your LLC application and make your business reams into a reality!