6 Must-Do Steps When Forming Limited Liability Company
The history of Limited Liability Companies dates back to the 1980s. As the name suggests,this business entity type offers limited liability to its shareholders who are not personally liable for the company’s debts. Compared to other business entities, this form is easier to form and run. LLCs can offer dozens of different services, and some of the best ones are listed here. This article provides some tips on how to start LLC, the essential documents that each LLC needs to have. So, how to start LLC?
Essentials of Forming Limited Liability Company
How to form a limited liability company? Apparently, when you first start your own business, it needs to have a name. With regards to LLCs, it is essential to check if the name you want to have is still available. Even if another company with your prefered name is located in another city or a state, you have to make some changes to have an original name. So, you should always check with the state the availability of that name.
Hhaving an original name would not be confusing for people and it will immediately remind them about your LLC. So, you need to be careful with that decision.
Select the Location
After deciding the name, it is equally important to choose the location of the business entity. You can decide based on your personal preferences. For example, in small countries, people tend to open LLCs in cities, or in the capital. While opening and registering LLC is not a serious issue, it can require some extra documents. So, take this into consideration.
In simple terms, a registered agent is the person who agrees to receive some documents on behalf of the business entity itself and pass them to the corresponding person. In reality, you can be your own company’s registered agent, too. On the other hand, it is important to know that having a physical address in the city/state you created your LLC. Also, registered agents can be anyone who is older than 18, even if they are a member of the LLC.
You need to be extremely careful with the choice of your registered agent because you trust many “formal” documents to them. If you consider yourself being the registered agent, you need to know that getting outside the office during the working hours is not permitted. Besides, if any document gets lost, most possible it would be your fault, as you are the one responsible for them.
There are many great services providing registered agents, so you can even find them on the Internet.
Open a Business Bank Account
Now it’s time to do something a little more substantial: create a company bank account.
The firm should have its own bank account, whether it is an LLC or a S Corp.
You shouldn’t use your personal bank account for business, so you’ll need this separate account to keep track of things and guarantee that the courts recognize your firm as a legitimate commercial concern.
All of the money your company makes should be placed into this account, and all of the money your company spends should be taken from it.
This operating agreement is a document that describes how the company will be run. It includes some information such as how you are going to hold your meetings, the business would be controlled, the rights and responsibilities of the members and what more. While many LLCs can even not have this agreement, it is strongly advised to come up with that agreement, as it will help organize your work faster.
The main purpose of Operating Agreements is to ensure the LLC’s protection. In order to come up with the best suitable agreement for your business entity, you may refer to a lawyer, who will give a professional solution to the problem. You can learn more about how a lawyer can help your Limited Liability Company with LegalVision.
Getting a certificate from the state is one of the final steps of how to start LLC process. This is the time when the state officially recognizes your entity’s existence. Usually, a state certificate includes information about the name, address of the LLC, the main purpose of the company, what it offers, the date of the establishment, and sometimes how many members it has, etc.
You can even get your state certificate by contacting them via the Internet, to their official websites. The respective person will fill it out and send it to your mail.
Get your EIN
Most LLCs do need to have an EIN, which stands for Employer Identification Number. You can think of this as an identification card. If you want to hire soome employees, having an EIN is crucial. Also, when opening a bank account, most banks will ask for that number. So, it is better to have it, especially when it won’t take much money and effort from yourself.
Summing up, although depending on your country, the key steps might vary, this article provided some of the key steps that each person needs to follow when opening an LLC no matter where they are.
How to start LLC without learning about paying taxes? As previously stated, taxes may be both an advantage and a drawback for LLCs. Unless you want to be a corporation, you will pay self-employment taxes. It means that any earnings will go through to the owners. Then they will then pay taxes on the gains on their personal tax returns. The problem is that these taxes are far higher than they would be if firm profits were taxed at the corporate level rather than being passed down to the owners. When establishing how your LLC will pay taxes, it’s crucial to evaluate your individual position. And it’s a good idea to seek help from your accountant so you don’t end up paying larger taxes than you would otherwise.
David is a dynamic, analytical, solutions-focused bilingual Financial Professional, highly regarded for devising and implementing actionable plans resulting in measurable improvements to customer acquisition and retention, revenue generation, forecasting, and new business development.