23 Mar 2023

How to Start an LLC: A Step-by-Step Guide

Disclaimer that this is not legal advice, tax advice, etc.... don't sue me

Starting a Limited Liability Company (LLC) can seem overwhelming at first, but it's a relatively straightforward process that can protect your personal assets and offer tax benefits. Here's a step-by-step guide to help you get started with forming your LLC.

Step 1: Choose a Name for Your LLC

The first step to forming your LLC is choosing a name. Your LLC name should be unique and not already taken by another business. You'll also need to make sure that the name complies with your state's LLC naming rules, which typically require the name to include the words "Limited Liability Company" or an abbreviation like LLC or L.L.C.

Step 2: Choose a Registered Agent

A registered agent is a person or company that is designated to receive legal documents and official government notices on behalf of your LLC. Your registered agent must be located in the state where your LLC is registered and have a physical address (not a P.O. Box). You can serve as your own registered agent, but many LLC owners prefer to hire a professional registered agent service to handle this responsibility.

Step 3: File Articles of Organization

To officially form your LLC, you'll need to file Articles of Organization with your state's Secretary of State or similar agency. This document includes basic information about your LLC, such as its name, registered agent, business address, and the names of the LLC's owners (known as members). Some states may also require you to include additional information, such as the purpose of your business or the duration of your LLC.

Step 4: Create an Operating Agreement

An Operating Agreement is a legal document that outlines the ownership structure, management, and operating procedures of your LLC. While not required by all states, it's a good idea to create one to help establish the rules and expectations for your LLC. The Operating Agreement should cover important topics like how profits and losses will be allocated among members, how decisions will be made, and how new members can be added or removed.

Step 5: Obtain Business Licenses and Permits

Depending on the type of business you're operating and your location, you may need to obtain additional licenses or permits from your state or local government. These could include a general business license, a sales tax permit, or industry-specific licenses and permits. Check with your state and local government offices to determine which licenses and permits your LLC needs to operate legally.

Step 6: Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a unique nine-digit number assigned by the IRS to identify your LLC for tax purposes. You'll need an EIN if you plan to hire employees, open a business bank account, or file federal and state taxes. You can apply for an EIN online through the IRS website, and there is no cost to obtain one.

Step 7: Open a Business Bank Account

Once you have your LLC formed and an EIN, it's important to open a separate bank account for your business. This will help you keep your personal finances separate from your business finances and make it easier to track your income and expenses. Look for a bank that offers business accounts and check the requirements for opening an account.

Step 8: File Annual Reports and Taxes

Most states require LLCs to file annual reports and pay state taxes on an annual or biennial basis. Make sure you know the deadlines and requirements for filing these reports and paying taxes to avoid penalties and fees.

Starting an LLC may seem like a daunting task, but by following these steps, you can establish your business and protect your personal assets.