A limited liability company (LLC) is a popular form of business for partnerships and sole proprietorships because of the attractive tax and legal incentives and the degree of personal liability protection it offers. An LLC is easy to establish, and although many lawyers, accountants and special companies are ready to do it for you, many of them only deal with the first stage, and the subsequent ones fall on the shoulders of the owners. You will save nerves and money if you do everything yourself from A to Z. To do this, study the steps below.
Steps
Step 1. Study the laws of your state
To do this, you will need:
- Follow the link to the Limited Liability Company Center. The center provides an excerpt of the laws of each state governing the LLC. An extract of title, chapter, and section of law is used to locate the required law within a major state or federal code.
- Select your state from the list and required statements of law governing the LLC.
- Copy the statement and enter it into the search box of your favorite search engine. For best results, enclose the extract in quotation marks.
Step 2. Decide in which state you are going to open an LLC
Most businessmen set up an LLC in their home state, but this is not required. Follow these guidelines when deciding on the location of the institution:
- Home state. If you live in the United States and intend to do business in your home state, experts advise you to apply for an organization here, since many laws require you to register an LLC at the place of business. Doing business usually means buying or renting office space and having a staff. You can check the laws of your state to learn how to do business properly and to make sure you need to register an LLC here.
- Other states. If you are going to do business over the Internet, and you do not have a physical office in any state, then when choosing the place of registration of an LLC, you can proceed from the attractiveness of tax incentives. For more information on out-of-state business opportunities and tax incentives, see the Jennifer Reuting’s article on choosing a state in which to incorporate.
Step 3. Study the laws for requirements and restrictions in the name of the business
Such laws may vary from state to state, and requirements and restrictions may be as follows:
- The name must end with designations such as "Limited Liability Company", "Limited Liability Company" or an abbreviation of one of the two.
- The name should not be the same as the LLC already registered in the given state.
- The name must not contain certain prohibited words such as "bank", "trust" or "insurance".
Step 4. Choose a title
Choose a name that does not conflict with applicable laws in your state. Here are some guidelines for what the title should be:
- Characteristic
- Memorable
- Easy to pronounce
- Talking about the services and goods provided
- Distinguishing you from the competition
Step 5. Make sure the proposed LLC name is not used
If you plan to register an LLC in one state and do business in another, you should check that your name is available in both states, as state laws may require you to register an LLC where you do business. Following the link.
Step 6. Select a process agent
A procedural agent is a person who participates in legal proceedings on behalf of the company, if any. The procedural agent must be an adult resident of the state in which you intend to register the LLC. The procedural agent can be yourself, your lawyer, or a specially hired person. To find a procedural agent, use a search engine convenient for you. Also, you can take a list of companies that specialize in the provision of procedural agent services from the office of the secretary of state. You can find the website of your state secretary of state by following the link Law Office of Travis Bowen, PC's website.
Step 7. Submit the articles of association and articles of association of your company
In many states, you are allowed to do this over the internet. Just follow the instructions on the State Secretary of State's website. To do this, go to the Law Office of Travis Bowen, PC's website.
Step 8. Prepare the project and sign the operating principles agreement
A Principles of Business Agreement is a contract between LLC partners (owners), which negotiates items such as the original partners and their share in the company, distribution of profits and losses between the owners, the right to vote, the procedure for accepting new partners and removing old ones and rules of conduct meetings. You can download a free draft of such an agreement by following the link Limited Liability Operating Agreements page. Just select your state from the list of links.
Step 9. Obtain a Firm Registration Number ("EIN")
Unless you are the sole owner of your LLC and plan to pay taxes as a non-legal entity entity (you will include business income and expenses in your personal income taxes), you will need to obtain an EIN. If you want to get a number online, follow the link here. You will receive your EIN immediately after submitting your electronic application. For more information on the EIN, go to Understanding your EIN.
Step 10. Complete Tax Form ("IRS") 8832, if applicable
An LLC is a federal society that is not recognized by the tax authority as a payer of income tax. Therefore, you will need to determine if your LLC is a partnership, a corporation taxable association, or should not be treated as a separate legal entity. If there are more than one owners, then the LLC cannot but be considered as a separate legal entity. If you fail to complete Form 8832, your LLC will automatically be classified as a partnership if there is more than one owner. If it has only one owner, then the LLC will be classified as an entity that is not a legal entity. For more information, see Form 8832 on the IRS website.