How Do I Start An LLC?

September 24, 2020
Business Basics
How Do I Start An LLC?

If you are a new business, may be asking yourself why you need an LLC. Or you may be thinking about setting up an LLC to make your business more attractive to outside investors, to reap business tax benefits, and to add legal protections.  But, getting started as an LLC can be overwhelming and confusing, especially while trying to maintain your growing business. To help you out, here is a step-by-step breakdown of what an LLC is and how to start one:

What is an LLC?

An LLC or Limited Liability Company is a business ownership structure in the United States and other countries that classifies companies and company investors with limited liability. LLCs are considered to be hybrid entities that are in equal parts a corporation and a partnership in terms of financials and tax organizations. A company that is an LLC essentially separates owners and other investors from being personally liable for any debts or liabilities that the company incurs. Whereas if the LLC had previously been a sole proprietorship or partnership, those who were invested in the company, including owners, were solely responsible or liable for any debts that the company may have incurred. This means that when a company is not an LLC or incorporated, the personal assets of those financially invested in a company could be affected in the instance of company bankruptcy, insolvency, or liquidation.

What is the First Step in Forming an LLC?

One of the first steps in forming your LLC will be securing a business name. A business name is extremely important as it tells a lot about who your company is and what solutions it solves. If you have yet to identify a business name, you can consider searching for public companies with a name search tool. You’ll also need to confirm that the name has not been trademarked through the U.S. Patent and Trademark Office. Once you can confirm that the name is not already accounted for, you can begin branding your business. Branding is a significant part of forming your LLC because it provides a visual representation of your business identity. A brand is usually an image or logo with accompanying business colors (or themes), brand name, font, and other features. A brand is useful so that customers recognize your business easily. When you are ready to register your LLC, you’ll need to decide in which state business will be conducted for tax purposes. This determination will also indicate the paperwork that needs to be filled out as well as what is required to maintain compliance once your LLC is formed. This is a very important first step as the state in which the business resides will determine the future of your LLC. No matter where your business is located, be sure to prepare the following information:

You’ll also want to have a business address, phone number, and logo. can help you in creating this information with our step-by-step guides. Establish a virtual business address and virtual phone number to get you up and running faster!

Complete the Necessary Documents

Once you have completed this first step, then you can go about submitting the documents to the state. There are a number of documents that you will need to prove to the state that you are prepared to operate as an LLC. The most important documents that you’ll need are a business Operating Agreement and Articles of Organization (which are sometimes unified into one document), and the state registration form that is required. The Operating Agreement and Articles of Organization might sound complicated, but really it is a breakdown of how your business’ governance will operate, the stipulations of the liability limitations, and the powers, rights, and obligations of the investing members. These documents should also break down how voting will be conducted, and how dividends would be paid out. This way, the state knows what is to happen in the instance that there is an issue with the company. Once all this paperwork is submitted, you will also need to obtain an employer identification number (EIN) as this number places a unique identifier on your business that the IRS will recognize for tax purposes.

Understanding the Fees

There are two distinct fees that are required when starting an LLC: the LLCFiling Fee and the LLC Annual Fee, which will vary in cost depending on the state.The LLC filing fee is a one-time fee that you must pay to the state to form the LLC. This fee is simply to support the state in processing your LLC file. This amount may vary from state to state, but on average it is $131 (USD). The LLC Annual Fee, on the other hand, is a recurring fee that is paid annually or biannually (once every two years) to the state that the LLC is registered in to maintain compliance and to stay in good standing. The annual fee is always required regardless of the LLC’s operation and income.

Other Steps To Consider in Starting Your LLC

Once you have filed the paperwork and paid the fee, then you are good to go and only need to await further communication from the state. In the meantime, you can get going with some other items, such as setting up a business bank account, payment processor, purchasing accounting software, and getting a business credit card. You’ll also want to set up the business website and other virtual profiles like the Google business profile and social media accounts. Once you have this information prepared, you are ready to launch your LLC! This is the most exciting step because you finally get to branch out into the world and share your passion with others. NewLLC's step-by-step guides can provide recommendations for selling your product or service, marketing and advertising, business planning, accounting, and taxes.

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