How do you form an LLC?
The LLC or limited liability company is one of the most popular ways to structure a new business in America.
A flexible and simple alternative to corporations, LLCs allow business owners to protect their personal assets,
minimize taxes, and streamline their administrative responsibilities.
But how do you go about actually forming an LLC?
There are two ways: you can form one yourself, or you can hire a service to do it for you.
Let's take a look at both options and help you decide how to go about
forming your own limited liability company.
One: Do it yourself. If you want to save money, you can form an LLC on your own
Forming an LLC does not require lots of complicated paperwork
and you can easily find all of the necessary forms online.
Every state has different laws, but most only require one official form to be filed: The Articles of Organization.
Simply pay the fee, file your Articles of Organization form with the Secretary of State, and you will be set.
The Articles of Organization require three primary pieces of information:
One: a name for your LLC.
You must not only choose a good name for your business,
but it must follow specific guidelines set by the state that you are forming in.
You'll also need to do a name search to make sure the name is available and not being used by someone else.
Two: You will need to declare someone the Registered Agent or point of contact for the LLC.
You can hire a professional service for this role,
or you can choose someone within the company to act as the Registered Agent.
Three: You must decide who will act as the manager of the LLC.
There are two options. The first is member-managed where all the members of the LLC manage the company.
This is good for small organizations where everyone is involved in the day-to-day operations.
The second option is manager-managed where individuals are appointed to manage the LLC.
This is appropriate for larger organizations
where not everyone is involved in the day-to-day affairs of the business. That's it.
Once you have filed your articles of organization and paid the fees you have formed an LLC at the state level.
Then you'll need to get an employer identification number or EIN from the IRS.
Also known as the federal tax identification number, your EIN is like a social security number for your LLC.
You should also create an operating agreement to establish ownership terms and member roles.
This foundational document is the core of your LLC and will help you maintain your
organization as well as further establish your LLC as a separate legal entity.
Two: Hire a professional service. The second way to form an LLC is nearly identical,
with the difference being that you pay to have a company form the LLC for you.
This secondary company will act as your LLCs Registered Agent and file the required legal documents.
Of course, you'll have to pay more money upfront to hire a service,
with a fee ranging from 50 to 150 dollars. In most situations, however,
this is a small price to pay for the convenience and benefits provided by a professional service.
A hired registered agent helps you stay organized by keeping your business mail separate
and is available at all regular business hours to accept official mail
and legal papers on your LLC's behalf.
A final and important additional benefit of using a service is privacy.
A professional service will provide a level of privacy by withholding your personal name and home address
from the LLC's contact information.
There are many reasons you might not want your personal information
easily accessible and associated with your business.
Hiring a professional LLC formation service is an easy way to accomplish this.
Now that you have seen the different ways you can form an LLC,
take some time to research your options and establish a solid foundation for your business activities.
Every state has different laws and many professional services are available to help you along the way.
Click on the links in the description below to research the top 5 professional formation services,
or get more information on how to form an LLC on your own.
We offer a host of free templates and tools to help accelerate your small business
from operating agreements to business plans, all free of charge.
Visit us at howtostartanLLC.com