Several small business owners will choose to set up their business as an LLC (limited liability company) because of the liability protection that an LLC provides.
An LLC is unique because it exists independently from its owners or members, which means that as the owner you will not be responsible for any debts your small business sustains.
Forming an LLC, however, is a bit more complicated than just filing paperwork with your state. To ensure that your LLC is fully legal, there are several hoops that you will first need to jump through.
Here are five steps for opening an LLC:
- Choose A Name
The vast majority of states do not allow two separate business entities to share the same name. To make sure that you aren’t accidentally copying any other businesses’ name in your state, search for existing business names on the internet to confirm that your proposed name is indeed available. Choosing a name that is entirely unique will ultimately help you steer clear of any trademark or infringement issues.
- Select A Registered Agent
The next step for starting an LLC is to select a registered agent (or statutory agent), who is the person who will agree to receive all official documents, subpoenas, and lawsuits on the behalf of your LLC. There are certain companies that will provide registered agents for a relatively small fee.
- Prepare Your Operating Agreement
The operating agreement for your LLC is essentially the description of how your LLC is going to be run. It needs to specify several things, including the voting rights of members, the ownership interests, how profits (or losses) are going to be allocated, when and where meetings will be held, and how the company will be dissolved should it go out of business.
Even though operating agreements are usually not legally required by the state, they are still an essential document to have for defending your rights as a business owner later on in the event that you run into any legal problems down the road.
- Get A Certificate From The State
After the documents for your LLC have been approved and filed, the state will now issues a certificate that serves as confirmation your LCC exists. The moment you get this certificate from the state, you will be able to take care of general business matters (such as opening a bank account for your business, getting a tax identification number form the IRS, and so on).
- Register In Other States
If your LLC will be doing business in other states, then you may or may not need to register your LLC with those states (depending on the state laws). You will need a registered agent in each state that requires you to register.
Opening An LLC
As a whole, an LLC is a very flexible and popular option for setting up a small business. It’s just important that you know what steps you need to follow to make sure you are in the clear legally wise.