Question: What Steps Do I Take to Start an LLC?

Answer:

What's an LLC? Why Start an LLC?
You may have heard about the term "LLC" (short for "limited liability company," not "corporation") as a business form. LLC's are formed in a specific state and they have become very popular in recent years because they are easier to form than a corporation but they provide similar liability protections as a corporation.

Let's assume you want to start an LLC as opposed to starting your business as a sole proprietor or forming a partnership or corporation. Read more about the LLC as a business type.

Where do you start?

Do I need an attorney to help start my LLC?
Good question. An LLC is easy to start, only requiring a simple application to your state and payment of a fee. An attorney will charge you a lot of money for this simple task. But you may want to hire an attorney to make sure the process is followed correctly and to help you with your LLC operating agreement, which governs the day-to-day operations of the business.

Read more about pros and cons of an attorney in LLC startup.

Begin with a business name and location
The first step in starting any business is a business name. Everything legal or financial in a business is dependent on the business name. Before you form your LLC, you will need to select a business name and search to make sure the name is not being used in your state. If you don't plan on forming your LLC right away, you should also reserve the business name to save it.

If you form your LLC quickly, you won't need to do a separate name reservation or registration.

Read more about how to select and register a business name.

You will also need to decide on a business location for your LLC application. If you aren't sure where your business will be located, you can use your home address and change it later.

Decisions to be made for your LLC
Several more pieces of information might be needed to form your LLC. Not all states require all of this information, but you should have made the decisions anyway:

• Number of members You will need to determine how many members (owners) the LLC will have. You can register your LLC with a single member or multiple members. Read more about LLC members
• Date of formation Decide on a starting date. It can be the beginning of a year or any convenient date.
• Management Decide who will manage your LLC and be responsible for day-to-day decisions and legal matters. Your choices are a manager or one of the members. Most new LLCs designate one member to be the manager. Read more about member-managed vs. manager-managed LLC's.
• Registered Agent You will need to designate a registered agent for your LLC. A registered agent is the individual designated to receive and send legal documents for the business. Your registered agent should not be your attorney; it should be one of the members or the manager. You will need the name and address of your registered agent.

File Articles of Organization
Once you have made all the decisions, you are ready to file the necessary application for your LLC with your state. The document is called Articles of Organization (or, in a few states, the document is called a certificate of organization). Here is a detailed article on how to file articles of organization.

After you file Articles of Incorporation
There are still a few tasks left to do after your articles of organization are filed:

• Get an Employer ID number (EIN), even if you don't have employees or don't expect to have them. You will need an EIN for many tax and legal forms. Read more about how to apply for an employer ID number.
• You will need a business checking account in the name of your LLC. You may want to get this checking account to write the check for the LLC application, but most banks won't let you get a business checking account without an EIN. Read more about why you need a business checking account.
• Create an Operating Agreement, which sets out all the details of how the business will be run day-to-day and answers the "what happens if" questions. An operating agreement is essential if your LLC has more than one member, but it's even important for a single-member LLC, because the operating agreement can designate what happens if you cannot operate the business. It's a good idea to get an attorney involved in creating an operating agreement. By the way, this document doesn't need to be filed with your state, but it should be available if any auditors want to see it.

One final task, if you want to operate in multiple states
If you want to operate your LLC in more than one state, you must register as a foreign LLC in every other state where you plan to do business or you have a business location. If you have an online business, you don't have to register, unless you have a tax nexus (presence) in the state.

As you can see, it is easy to set up an LLC. Just make a few decisions, file Articles of Organization with your state, get an EIN and a business checking account, and you are ready to go.

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