As a young entrepreneur, there is no better time than now to learn how to start your own LLC. Businesses throughout the country are booming, and it could be an excellent time for you to take the leap and start your dream company. Unfortunately, all too many business owners are intimidated by the fact that they are unaware of how to do so. However, this process does not need to be nerve-wracking. This post will detail how to start your own LLC and why doing so could help save you money.
Reduce Self-Employment Taxes
If you have long worked for yourself as an independent contractor, you are likely very familiar with self-employment taxes. Many are taken back by how much they owe in self-employment taxes this year. An excellent counter to this would be to learn how to start your own LLC, as LLCs could reduce your tax burden significantly.
In short, self-employment taxes are high primarily due to Social Security and Medicare. When you work as an independent contractor, you must pay these taxes in full. However, if you were to register a business as an LLC, you could reduce your tax burden substantially. That’s because you can set your LLC up so that you only pay taxes on the salary that you pay yourself, versus the entire net income of your business. Doing so could result in a tax savings of thousands of dollars per year.
How To Start Your Own LLC
If you’re interested in learning how to start your own LLC, the steps listed below provide an excellent overview. LLC requirements vary from state to state. The paperwork you submit and the fees you pay will be different for each state in which you file. Business owners must register as an LLC in every state in which they conduct business. As a new business owner, this will likely be your home state but keep in mind that as the company grows, you’ll need to repeat the steps below for every state in which you conduct business.
- Choose the state in which you’d like to file. Again, for many first-time business owners, this will be the state in which they are located. Those with online businesses who have no physical brick-and-mortar locations have a bit more flexibility in where they can file and could consider registering their LLC in states such as Nevada, Wyoming, and Delaware.
- Name your LLC. Most states require the company to have “LLC” at the end of their name. You can search your state’s database to ensure the name you choose is not already in use.
- Select a registered agent. This person acts as a third-party liaison for all business correspondence. You should pick someone who you can trust. The registered agent you choose must have a physical address in the state in which you file.
- File the paperwork needed to become an LLC. Although each state has their own forms, business owners should expect to file Articles of Organization. Additionally, business owners should create an Operating Agreement before conducting business.
Save Money As An LLC
By registering as an LLC, entrepreneurs can find themselves saving money. This, in turn, will give them more money to reinvest in their business.