How Do I Establish an LLC?

by Team ZenBusiness

- November 7, 2019 11:39 am

The liability protection, tax savings, and easier paperwork have made limited liability companies (LLCs) a very popular way to form a business, but how do you go about establishing your own?

Fortunately, there are fewer steps and more flexibility in forming an LLC as opposed to a corporation. The process varies somewhat by state, but below you’ll see the basic steps you’ll need to follow in most states (for a state-by-state guide, look here):

1. Secure a Name

Deciding on the perfect name for your LLC can be a fun and/or challenging process, but whatever name you come up with will need to conform to the laws in your state. Although these vary, most states will ask your LLC name to follow these rules:

  • Your company must end with “Limited Liability Company” or an abbreviation of the term, such as LLC, L.L.C., Ltd., or something similar. Your state decides which abbreviations are allowed. Of course, most states aren’t keen on you putting the word “Incorporated” in your name if you’re not a corporation.
  • Your name must be unique. That is, you can’t have the same name as any other business in your state. Fortunately, nearly all states have a place on the Secretary of State page where you can enter your proposed business name to see if anyone else has claimed it.
  • Avoid restricted words. As you might imagine, many state laws on this subject are there to keep business owners from deceiving the public. Consequently, words like “bank,” “college,” and other words describing an institution will often require you to produce paperwork to back up that claim. Similarly, if you want to use words like “doctor,” “engineer,” and other words suggesting certain professions, the state may require proof that one or more members of your LLC are licensed in those areas

2. Appoint a Registered Agent

A business may have multiple addresses and/or owners, so the state needs to be able to have a definitive person and address to contact for official business, including serving papers if the business is sued. This person is usually called a “registered agent” and must be available at a set address during normal business hours. Criteria for who can serve as your business’s registered agent vary a bit by state, but generally it doesn’t have to be one of the LLC’s owners; it can usually be a business entity or a resident of the state.

Because many business owners don’t want their home address to become public record and/or don’t want to have to be available during business hours to be compliant with the state, they will use a registered agent service. This is one of the low-cost services ZenBusiness provides.

3. File Your Paperwork with the State

To officially launch your LLC, you’ll need to file the necessary paperwork, usually called the “articles of organization,” with your state. The information requested varies by state, but most will ask for the names and addresses of the LLC members and the name and address of your company’s registered agent. All states charge a fee for filing (you can check on your state’s filing fee on our map).

4. Make an Operating Agreement

Although it’s strangely not a legal requirement in most states, an operating agreement is the most important document for your LLC because it lays down the rules for things like how it will be run, what the percentage of ownership is for each member, and what happens if the business is disbanded or an owner leaves or wants to sell their portion of the company. Banks will usually want to see your operating agreement before allowing your LLC to open an account, and potential investors will also likely want to see this document.

5. Get an EIN and Register for Tax Requirements

An Employer Identification Number (EIN) is a unique number assigned to your LLC by the IRS, a bit like a social security number for your business. You’re required to have one unless you have a single-member LLC without any employees. ZenBusiness can help you with this, too.

Speaking of the IRS, you’ll need to find out what taxes your business is responsible for. This will vary quite a bit depending on things such as whether you have employees and/or are selling physical goods. Start by going to Comptroller of Public Accounts website for your state; you’ll usually be asked to register with them, and there you can find out more about your LLC’s tax requirements.

Although these are the basic steps that most LLCs will have to follow, there are potentially other requirements (such as business licensing and publishing requirements) based on your type of business and where it’s located. It can all get complicated, but that’s where ZenBusiness comes in. LLC formation is included in all of our plans, and you’ll pay less than you would with other business formation providers while getting other great services to help your business run smoothly, stay compliant, and cut down the red tape.

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