Steps to Forming an LLC: A Comprehensive Guide
———By Attorney Austin Plants at Plants Law Firm
Disclaimer: The content provided in this article is for informational purposes only and does not constitute legal advice. Reading or interacting with this content does not establish an attorney-client relationship. For legal advice specific to your situation, please consult a qualified attorney.
Starting a business is an exciting venture, and forming a Limited Liability Company (LLC) is one of the most common business structures. Whether you’re starting a side hustle or launching a full-fledged business, setting up an LLC properly ensures that you have the necessary legal protections and organizational structure in place. Here’s a step-by-step guide on how to form an LLC and set yourself up for success:
1. Choose a Business Name
The first step in forming an LLC is choosing a business name. It should be unique, easy to remember, and reflect your business’s values. When selecting your name, check for availability by doing a name search with your state’s Secretary of State office to ensure no one else has already claimed it. Additionally, make sure the name includes “LLC” or “Limited Liability Company” to satisfy state requirements.
2. File the Articles of Organization with Your State
To officially form an LLC, you must file the Articles of Organization (sometimes called Certificate of Formation) with the Secretary of State or a similar government agency in the state where you are forming your LLC. The filing fee typically ranges from $50 to $500, depending on the state. This document includes essential details such as:
The LLC’s name
Business address
Registered agent information
Whether the LLC will be managed by members or managers
Filing your Articles of Organization is the official step that legally establishes your LLC.
3. Obtain an Employer Identification Number (EIN)
Once your LLC is formed, you’ll need an Employer Identification Number (EIN) from the IRS. This number is used to identify your business for federal tax purposes. You’ll need an EIN to open a business bank account, file taxes, hire employees, and apply for business licenses. Fortunately, obtaining an EIN is quick, free, and can be done online through the IRS website.
4. Set Up Your Mailing Address
If your LLC is formed in a state where you don’t have a physical business address, or if you don’t want to use your home address, you’ll need to set up a separate mailing address. This could be a P.O. Box, a virtual office address, or a registered agent’s address. If your LLC has a business address in the state, you can use that address as your mailing address.
This step is particularly important if you're out of state and do not want to expose your home address for privacy or security reasons. It ensures that any legal documents or business correspondence are properly delivered to your LLC.
5. Select a Registered Agent
Every LLC must have a registered agent—someone who will receive legal documents, tax notices, and other important correspondence on behalf of the company. If you are forming an LLC in a state where you don't reside, you must designate a registered agent service.
However, if you are in-state, you can either serve as your own registered agent, use a business address, or rely on a professional registered agent service to ensure that all legal documents are managed properly.
6. Draft an Operating Agreement
An Operating Agreement outlines how your LLC will be managed and run. It includes details about ownership percentages, management structure, member roles and responsibilities, and decision-making processes. Even if you're a single-member LLC, it’s still a good idea to draft and sign an Operating Agreement. This document helps you maintain personal liability protection by formally establishing the LLC’s operations.
The Operating Agreement is a crucial document, especially for opening a business bank account. Many banks will require it as part of their account opening process, even for a single-member LLC.
7. Open a Business Bank Account
Once your LLC is formed and you have your EIN and Operating Agreement, you can open a business bank account. It’s important to keep your personal and business finances separate, and having a dedicated business account helps you maintain proper financial records. Some banks may require your EIN, Articles of Organization, and Operating Agreement to open the account.
8. Register for State and Local Taxes
Depending on your business's location and type, you may need to register for state and local taxes, such as sales tax, employment tax, or use tax. This is typically done through your state’s Department of Revenue or Taxation. Be sure to check with your state or local tax authority to ensure you comply with all tax obligations.
9. Comply with Other Regulatory Requirements
Depending on your business’s industry and location, you may need to obtain additional licenses, permits, or certifications. This could include a business license, health permits, zoning permits, and more. Be sure to research your specific business needs and ensure you meet all regulatory requirements for operating legally.
10. Stay on Top of Annual Requirements
Many states require LLCs to file annual reports or pay annual fees to maintain good standing. Be sure to stay on top of these requirements, as failure to file or pay the necessary fees can lead to penalties or the dissolution of your LLC.
Conclusion
Forming an LLC is a straightforward process, but it’s crucial to take each step seriously. From choosing your business name to maintaining compliance with state laws, each step contributes to the legal and operational health of your business. By following these steps, you’ll be on the right path to building a strong foundation for your LLC and ensuring that it’s properly set up for growth and success.
This process can be overwhelming, and you want to make sure everything is done correctly. At Plants Law Firm, we can help guide you through each step to ensure your LLC is properly formed and compliant with all legal requirements. Contact us today for expert assistance!
