If you’re ready to take the plunge, you can form your own LLC. You don’t need legal expertise; all you have to do is follow our 5 step guide. Obey the laws of your state, then fill out a few forms, and you’ll be the proud creator of your own Limited Liability Company in no time.
- Form an LLC without a lawyer!
- Choose a name, a state and a registered agent.
- File your paperwork
You don’t need a lawyer to form a Limited Liability Company (LLC). An LLC is one of the most popular ways to organize a business. It combines the limited legal liabilities of a corporation with the flexibility and liberties of a sole proprietorship and general partnerships. It is the preferred method for limiting personal liability from lawsuits and debts when it comes to structuring small and medium sized businesses. As in most cases with business formation the laws governing LLC creation are left to the power of individual states. Despite the possibility of fifty different ways of doing things, laws governing LLC’s are very much the same from one state to the next. Most states make forming an LLC easy to do. Here are the five simple steps you must follow to create your Limited Liability Company.
1. Choose Your Company Name
Choosing a business name has both a personal and legal dimension to it. The legal part is fairly simple. The name must be original. It cannot be similar or close enough to be confused with the name of an already formed company. The official name of the LLC must end with the words Limited Liability Company, Limited Company, LLC, or an abbreviation of either of those phrases.
The personal side of choosing the company name is one of aesthetics and meaning. It’s best to choose a name that’s definitive and helps with branding. It is possible to form an LLC, but do business under another name. Many states allow this arrangement, so long as no subterfuge, fraud or tax evasion involved. Such an arrangement adds a layer of technical problem, operational issues and possible legal entanglements, however. Most business owners prefer to keep things as simple as possible and merely choose a name that works for them.
2. Pick A State
You must choose the state where your LLC will be formed. As mentioned earlier, many states have similar laws governing LLC formation and operation. The choice of states is usually a matter of location and costs. Most businesses prefer to create their legal entity in the state where they will physically do business. Most states don’t require that compliance, but the majority of them require all companies doing substantial business in their jurisdiction to register with the state. Along with these considerations are the matter of taxes and fees. Most business fees are similar in every state, but tax liabilities may differ. Once again, most states require you to pay them taxes if you do substantial business within their jurisdiction, whether your business was formed in their state or not.
3. Choose Your Registered Agent
Each LLC must appoint an individual or business representative to send and receive legal documents on the company’s behalf. That person or business must have a physical street address within the state. Some states actually allow private companies to act as registered agents for businesses that cannot locate a registered agent on their own. The owners and creators of the LLC are allowed to be the registered agent for their own business.
4. File Your Articles Of Organization
Articles of Organization are required by law. They are usually filed with the secretary of state but can sometimes be the responsibility of another office. The articles are sometimes called the certificate of formation or certificate of organization. They are usually created by simply filling out a form that includes:
- The Name of the LLC, along with its address
- The name of the Registered Agent, along with their address
- The names of the LLC owners
- The purpose of forming the LLC
In most states you can complete the filing for the Articles of Organization online. The filing fee for the Articles is usually around one hundred dollars, but can be anywhere from fifty to five hundred dollars. Most states take no more than forty-eight hours to officially form your LLC. It may take days or weeks to actually receive the LLC documents.
5. Make An Operating Agreement For Your LLC
Within your Articles of Organization you must detail how your LLC will operate. This is properly called an operating agreement. Most states don’t require it, but it gives the company a road map to follow in daily and ongoing business decisions. If you don’t give specific details, you will be assumed to operate in a manner spelled out by state law. This can lead to legal jeopardy in some cases, so it’s best to be as specific as possible where it matters. The LLC owners should meet with other principal stakeholders to create an official way of operating the company. The agreement can include elements such as:
- Members Rights
- Members Profit Sharing
- Management Rules
- Company Acquisition and Liquidation Rules
These rights and guidelines are meant to safeguard the company’s interests. Their inclusion protects the company from being superseded by the state or by the whims of individual members. Once you’ve included your operating agreement and filed your articles of organization, the state will review your documents. If everything is in order and approved, the owners will receive an official certificate issued by the state, making you a legal LLC ready for business.
Decide How Your LLC Will Operate
As an official LLC you should take care of a few basic steps.
- An Employer Identification Number (EIN) – If you’re not operating your LLC as a sole proprietorship, you’ll need an employer identification number. Colloquially it’s like a social security number for a company. You must use the Internal Revenue Form SS-4 to get the number. There is no fee to pay. You must wait for you LLC to be officially formed before you can get the number.
- A decision about Member or Management Operation – Most LLC members choose to run their companies themselves. Alternatively they can choose to have the company managed by one or more outside entities, called managers. It is usually larger LLC’s that choose the management option.
- Issue A Notice – Let the world know you’re open for business. Publish in trades and online locations pertaining to your products and services. Doing business is what forming the LLC is all about. It’s okay to be bold about announcing it.
