How To Make Your Own LLC

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Whether it be in pursuit of a creative passion or simply because of the desire to be one’s own boss, individuals all across the country are striking out on their own. Starting your own business is a bold step to take. It can also be a complicated and time-consuming process. Oftentimes you’re building a business plan completely from scratch with no prior experience. When first starting out, forming an LLC is the last thing on someone’s mind. 

Producing your product, marketing it to the right people, securing sales, and making a profit tend to be small business owners’ first priorities. These are important goals, but protecting yourself and your business should definitely be among them. The best way to do that is to form an LLC. 

What is an LLC?

Forming an LLC gives you a structure for operating your business. This includes things like making financial decisions, dividing profits and losses, and dealing with new or departing owners. An LLC also allows you to separate yourself from the business, which is extremely important come tax time and to protect your personal assets in court. 

How to form an LLC the old-fashioned way

1. Name your LLC

This may seem like an unnecessary step to include, but it’s not as simple as finding a cute pun or the perfect name for your product. Each state has different rules about naming an LLC but most of them require that you meet at least these two designations. 

  • Your LLC’s name ends with an LLC designator, such as Limited Liability Company or Limited Company, or an abbreviation of one of these phrases
  • The name should not be the same as the name of another LLC or business entity already registered with your state.

In some states, you can reserve a name for a short period of time until you’re ready to file and form an LLC. But, every state differs so do your research to find out exactly what your home state requires. 

2. File Articles of Organization

This is your first real step towards forming an LLC. Articles of Organization are simply a group of documents that outline everything from the name of your LLC to the mailing address and information about the company owners. As with LLC naming regulations, each state has different requirements for exactly what’s needed, but the most common information required is:

  • The name of the company 
  • Description of company’s business
  • The mailing address where the principle place of business will be located 
  • Information about company owners, managers, and officers

Oftentimes, Articles of Organization can be submitted online via a form on the local Secretary of State’s website. You’ll need all your state’s required information and to pay a fee, typically around $100. As always, do your research beforehand to make sure that you are completely prepared. 

3. Choose a registered agent

The majority of states require LLCs to have a registered agent. A registered agent is an individual or business entity that accepts tax and legal documents on behalf of your business. A registered agent is also known as a resident agent or statutory agent. The agent can be a professional service, yourself, or a colleague given they meet the state’s criteria.

4. Decide on member vs. manager management

Most small LLCs choose to be managed directly by their members, but LLCs can appoint one or more people to manage it – somewhat like a board of directors overseeing a corporation. Managers vote on key issues such as taking out a loan, purchasing real estate, or changing strategic plans.

5. Create an LLC operating agreement

Even though most states don’t require it, you should have an operating agreement for your LLC. This is an internal document that establishes how your LLC will be run, including how it will be managed. In the absence of an operating agreement, state law will govern how your LLC operates. All of the paperwork and procedural steps to start a limited liability company can be done online using Nolo’s Online LLC Formation service.

6. Comply with tax and regulatory requirements

Additional tax and regulatory requirements may apply to your LLC. These include:

  • EIN: If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN only if the LLC will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website.
  • Business Licenses: Depending on its type of business and where it is located, your LLC may need to obtain other local and state business licenses. Check with the appropriate state agencies to ensure you are properly registered, licensed, and permitted to do business in your state.
  • Sales and Employer Taxes: In some cases (for example if you will be selling goods and collecting sales tax or if you have employees), you’ll need to register with the appropriate state taxing authority. For more information on LLC tax registration rules, see LLC Tax and Annual Filings Requirements: 50 State Guide.

7. File annual reports

Many states require LLCs to file an annual report with a filing fee. In some states, these fees can be significant – as high as $800 per year in California. See LLC Tax and Annual Filings Requirements: 50 State Guide to find out the rules in your state.

8. Out-of-state LLC registration

To do business in a state other than the state where your LLC was formed, you will need to register your LLC in that state and appoint a registered agent for service of process. For more information on out-of-state or foreign LLC registration requirements, see 50-State Guide to Qualifying Your LLC to Do Business in Another State.

How to form an LLC the new way

Once upon a time, if you wanted to strike out and start your own business, you were all on your own. From service supply to product creation, CFO duties, and managerial tasks, you handled everything. But, thankfully there is a new, better way to set up your business – forming an LLC online.  Companies, like BetterLegal, are modernizing this process for a faster, cheaper, and overall better filing experience. You’ll still have to decide on a name and provide the right documents, but you won’t have to diligently oversee every step. BetterLegal experts will easily help you with that and you can get $30 off their services.

It’s the faster and more affordable way to safeguard yourself and your business. While the emergence of this service may have once been met with skepticism. You can’t believe everything you see online, right? It’s now the preferred way for entrepreneurs to get their businesses off the ground. It allows you, the business owner, to focus on the many other facets of starting a small business, and gives you the peace of mind you need, knowing that your business and personal assets are being protected. And, perhaps the best of all, BetterLegal saves you money by eliminating ridiculous fees and providing upfront pricing. It’s one less thing for you to worry about as you start your business.    

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Alaine Meier is a blogging intern at LadyBossBlogger. She currently attends the College of the Holy Cross and is studying economics and environmental studies.

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