The United States is known to be the land of opportunity. Anyone has the right to pursue a business here if they want to.
Currently, there are millions of businesses in the country. Of these, around 99.9% are small businesses. Every year, new companies open. However, not all of them survive, so making the right decisions is crucial to prevent failure.
How To Start An LLC
One of the most important decisions for a company is the structure of the business. For many startups, the limited liability company (LLC) is an ideal choice. That is because of the asset protection it offers to LLC owners and the flexibility in taxation and management.
So how to start an LLC? Before proceeding to the formation of an LLC, the company has to make sure that it knows what it wants to do and achieve. Here are some of the things it has to do:
- Determine the best business idea through research of the target audience, market demand, and possible competition
- Create a solid business plan, which includes the goals of the company
- Make the company official and legal through the completion of the state registration process
Register A Small Business As An LLC
The advantages an LLC has make it a popular choice among startups. Aside from the benefits that come with this structure, completing the process on how to start an LLC is generally easy and affordable.
Here is a simple guide for new companies:
· Select a state where the LLC will be organized.
The state where the LLC will be registered will have a huge impact on the company. Each state has rules and regulations governing LLCs, so the tax requirements and other compliance obligations may vary.
When selecting a state, most owners consider organizing the LLC in the state where the company’s primary place of business is located.
· Name the company.
States also impose naming regulations. For LLCs, that means the inclusion of a proper designator. It can be the phrase “Limited Liability Company” or “Limited Company.” The use of an abbreviation, such as “LLC,” “L.L.C.,” “LC,” “L.C.,” or “Ltd. Co.,” is also allowed.
Additionally, most states require the company name to be distinguishable. That means an LLC can not use a business name if another entity in the state is already using it. An availability check on the business entity database of the state governing agency can help a small business find out if its desired name is still available.
In most cases, small businesses that are not yet ready to register with the state have the option to reserve a company name for a certain period. Doing this requires the submission of a completed form and the payment of a fee.
· Nominate a registered agent.
All states require LLCs, no matter how big or small, to have a registered agent. They can either be an individual resident or a third-party organization like DoMyLLC.
The registered agent plays an important role. They will receive all legal mail and government correspondence on behalf of the LLC. In short, they are the point of contact with the state. To learn more about what it takes to be a registered agent, read our state-specific articles.
· Register the LLC with the state.
To complete the formation of the LLC, a small business will have to submit the Articles of Organization or Certificate of Formation to the state governing agency. The filing comes with a fee.
The cost of LLC formation and the necessary information to fill out the form will also depend on the state.
· Prepare an operating agreement.
Having an operating agreement is not a state requirement. However, it will be very helpful for a business, even if it is very small.
This document will outline the processes on how to run the business and manage its operations. It will also set out the rights, powers, and duties of each LLC owner.
· Get an Employer Identification Number (EIN) and obtain the necessary licenses and permits.
The EIN of a business serves as its Social Security number. It may be necessary for tax filing purposes. It is also needed to hire employees and open a business bank account.
To get an EIN, the company will have to apply to the Internal Revenue Service (IRS). Knowing how to start an LLC can help small businesses get started. However, doing the tasks may require more time and effort from the company. To make the whole experience hassle-free, it may be best to get help from a business filing service company like DoMyLLC.