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When starting a business, you should identify the kind of legal structure you want for your business. The legal structure you choose affects many things, including personal liability, filing of taxes, and other special requirements.
Among the many legal business entities we have in the United States, an LLC is the most popular. This is because it allows shareholders, partners, and business owners to limit their personal liabilities to the business.
It also offers flexibility and tax benefits compared to other legal business entities. You can form an LLC anywhere in the United States, but how do you start?
Here are simple steps to form an LLC in the U.S.
1. Pick a Name
Even though picking a name for your LLC might be a simple task, it is not. You need to ensure that the name you pick fits your brand development strategies and meets all set requirements.
For instance, you must make sure you have picked a unique name. No other business should be using the same name in your state. In addition, you should not include words that might indicate the industry your business is in, such as hospitals.
You are also required to make sure that you have added Limited Liability Company, LLC, Limited Company, or any other abbreviation that tells people that your business is an LLC. The name should also not include government agency words such as FBI.
2. Get a Registered Agent
You will be required to get a registered agent to form an LLC. This is a requirement in all American states. It does not mean that you should pay a person or company to act as your registered agent.
Any person above eighteen years of age can act as your registered agent. You can even name your employee, friend, family member, or even yourself as the registered agent. However, the registered agent should have a physical address.
The address should be operational during business hours every day. This explains why most people get an accountant, a company, or an attorney to act as their registered agent. Doing this will cost you about $250 every year.
3. File Articles of Organization
The next step requires you to get articles of organization forms from the Secretary of State’s office. Different states have different procedures and requirements.
However, the most common information required includes:
- Your company name.
- Your business office (or business place) address.
- The reason for forming an LLC.
- Details of the management of your LLC.
- Your registered agent’s name and address.
- Your LLC’s duration and when (if) you will end it.
- Publication in a local newspaper (a few states require this).
Make sure to confirm with the Secretary of State to ensure that you understand all requirements in your state. This form is also referred to as a certificate of organization or formation in some states where specific requirements apply. Make sure to find out more of the state where you register your LLC.
4. Provide Your Operating Agreement
An operating agreement is required in some states in the U.S. However, most states have laws that govern how you should run your LLC. An operating agreement is a document that shows how you will run your LLC. You can describe it as a roadmap to your LLC’s governance.
This does not mean that you should not prepare an operating agreement even if your state does not require you to provide one. It is essential for those starting their LLCs with co-owners or partners.
In addition, you should not confuse this document with your business plan. While your business plan outlines the goals, strategies, and projections of your business, an operating agreement shows how your LLC will be managed.
5. Get an EIN and Open a Bank Account
The final steps involve getting an EIN (Employer Identification Number) and opening a bank account. You might not need to get the EIN if you do not plan to have employees. It is, however, important for those who want to separate their business and personal taxes.
You can check the IRS website to find out if you need the EIN. You will not be charged for registration. You might also need to open a business bank account, even though this is not a requirement.
Again, opening a bank account for your business is essential for those who want to separate their personal and business finances. It is also important to ensure that you have protected yourself from personal liability in case your company is sued.
Start Today and Grow
As you can see above, starting an LLC is not complicated. The steps discussed above are simple and anyone can get started no matter the state they are in. Get started today and grow your business.