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7 Key Steps to Forming a New LLC

#business accounting#forming an LLC#new business formation

Written by prositesfinancialJun 11 • 4 minute read

forming an LLC

If you have a small business of any kind, there are many reasons you might want to form an LLC. LLCs are eligible for more expense deductions than individuals, and they also provide significant liability protection. The acronym LLC stands for Limited Liability Company. An LLC exists as a separate entity from its owners, which protects the owners from liability of business debts. LLCs provide some advantages over regular corporations in that they can be easier and quicker to set up and don’t have quite as many reporting requirements.

Where To Begin LLC Business Formation

The first step to forming an LLC is to file the correct forms with the state you will be doing business in. Each state has different regulations and procedures. There are several common steps that you will need to follow in each state.

1. Select a Unique Name

In general, you will not be allowed to use the same name as another business that is registered in your state. For example, if someone three counties away from you in a different city happens to have a business with the name you want to use, you will probably not be able to use that name

You can use the web to search for businesses in your state with the name you want. Be sure to use an actual corporate business listings website that is specific to your state, rather than just typing it into a search engine. This way you’ll turn up the actual names of businesses who have registered in your state rather than simply finding websites for some of them.

Choosing a unique name is important for other reasons as well. For instance, having a name that is too similar to another company may create confusion between your brand and that of another company. It can also help to prevent running into any trademark issues down the road.

One last thing to check is whether the website domain name you want for your proposed business is available. You can do this through DNS registrar services. Prevent the headache of registering a business name only to discover that most of the good URLs around that name have already been taken! We’ve listed this last because your URL doesn’t necessarily need to be the exact name of your business. There are many creative approaches to website URL selection that can help if you find your first choice has already been taken.

2. Reserve Your Business Name Right Away

Most states have a provision that allows you to reserve your business name before filing the actual LLC registration paperwork. This way, you can lock it in and ensure no one else takes the name while you are busy with the registration process. This can also be useful if you are planning to start a business in the foreseeable future but are not quite ready to begin yet.

Typically, to register a name in your state, you will need to pay a registration fee up front. Of course, the specific amount of the fees, the amount of time in advance that you can reserve names, and the name renewal policies will be different in each state, so be sure to check the specifics for your state.

3. Select a Registered Agent

If you are the only employee of your company, this will most likely be you. But if you have other employees, you will need to pick someone to represent the company in the receiving of legal forms such as subpoenas, lawsuits, or other official documentation. This person will then be responsible for relaying the forms on to the appropriate person.

In general, anyone in your state who is over the age of 18 can serve as a Registered Agent of an LLC. This can be an officer or member of the LLC. If you don’t have anyone internal to the company who you would like to accept the documents, there are also dedicated companies that provide Registered Agent services to LLCs.

4. Create an LLC Operating Agreement

An LLC operating agreement is a plan that describes the proposed operations of your LLC. It describes how the company will be run. It also includes details about things like company voting rights, ownership interests, how the business will be governed, how meetings will be run, and what will happen if founding members of the LLC pass away or if the LLC itself goes out of business.

5. File Your LLC’s Organizational Documents

While the exact details of this process will be different in each state, these are a few of the common requirements for articles of organization:

  • The founding purpose of the LLC
  • The name and address of your selected Registered Agent for the LLC
  • The length of the existence of the LLC, if not perpetual
  • The name and address of the LLC

The founder must sign each of these, and in some states, the Registered Agent must also sign them. You will usually submit these documents to the Secretary of State, but some states have dedicated departments to handle these filings.

6. Get a Certificate From Your State

Once your LLC’s organizational and registration documents have been accepted and processed by your state, they will issue a certificate confirming that your LLC officially exists. Once you have obtained this certificate, you will then be able to get things like your LLC’s tax ID number, bank accounts, and business licenses.

7. Register in the Other Applicable States

This last step is only necessary if your new LLC will be doing business in multiple states. If so, you will need to repeat the above steps for each state you plan to do business in. Be sure to check what each state requires and submit documents accordingly.

Overall, LLCs can provide many benefits that you could not otherwise obtain as an individual business owner. While the above steps may sound complex, in reality, it tends to be fairly straightforward, and there are many services available to help you.

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