How to Start an LLC
A limited liability company (LLC) is a safe and adaptable corporate arrangement for small business owners. In this article, we will walk you through all the steps required to create an LLC.
1. Select your State.As an LLC owner, the first thing you must do is choose the state in which you will run your company. For the majority of new company owners, the most logical course of action is to incorporate the LLC in the state in which they reside. If your corporation should have a physical appearance (i.e., a shop or office) in other jurisdictions, you must file a foreign limited liability company in each state where you plan to do business.
There are certain circumstances under which you may wish to incorporate your LLC in a state other than your home state. Some states, such as Delaware and Nevada, have business-friendly policies that can appeal to prospective LLCs. However, registering your LLC in a different state (or several states) can entail extra costs and paperwork.
2. Choose a NameChoose a name that is legal in your state and accurately represents your company. While there is no exact formula for selecting the best name, you should choose something that is distinct, easy to remember, easily spelled and pronounced, suggests the products or services you sell, and distinguishes you from your competitors.
In order to register your LLC with the name you want, you must first check to see if the name is available in the state where you want to register it. You must search the secretary of state's database of registered names to see if a name is available. For a small fee, most states have an online database that you can search. Additionally, some states will allow you to reserve a name for a limited time prior to registration to ensure that no one else takes it while you decide whether or not to use it.
3. Submit "Articles of Organization"It's time to file the LLC state form, also known as "Articles of Organization," now that you've made the big decisions. The Secretary of State processes LLC formation documents in most states. The name of your LLC, the name of your registered agent, and a signature are all required at the very least.
4. Assign a Registered AgentA registered agent is required for every LLC. This is usually the same person who is the managing director or owner of a small LLC. This is usually the same person who is the managing director or owner of a small LLC. Although the member or owner of an LLC can act as the registered agent, some members prefer to delegate that responsibility to another person or company. Simply put, the registered agent is the person who receives official legal and tax correspondence on behalf of the company.
5. Make an Operating AgreementIt's critical for new LLCs to draft an Operating Agreement, especially if there are multiple members. The purpose of an LLC Operating Agreement is to lay out the owner and operator guidelines for your company and to act as the LLC's bylaws. The agreement should spell out how ownership, voting power, responsibilities, meeting protocol, and what happens if one of the parties wants to sell their ownership rights outright.
The Operating Agreement is crucial because it establishes the foundation for how your business will operate and gives your LLC credibility. In the absence of a written agreement, every state has a set of basic operating rules for LLCs that govern your company's operations. While having default rules is convenient, it's critical to have an Operating Agreement tailored to your LLC to avoid misunderstandings or disagreements among owners.