Business owners often fear the term “legal entity.” Even the seasoned ones experience the same. At times, entrepreneurs ask what an LLC is. If you are one of them, you are in the right place. A lot of businessmen don’t know what a limited liability company is all the more how to start an LLC.
LLCs are legal entities and some rules apply to their names. It has to be unique to avoid confusion with any existing company. The name must have LLC or limited liability company in it. The rules that apply to naming the company as well as in the LLC process vary from each state.
Choose a state
You have the choice to register or form your LLC in any US state. This is regardless of your specific location. In most cases, the home state is the most ideal choice. Local solicitors and lawyers are more aware of their home state laws. It is also convenient for government offices to be near. LLC business owners opt to register in a different state because of lower running costs, setup costs, self-employment tax, and sales tax.
File the articles for organization
File articles for organization with your chosen state. This is the first step towards registering your business. Different states may have different terminology for this document. It can be a certificate of organization or a certificate of formation. You can download the articles from the official website of your chosen state. Filing fees depend on the state. It can be somewhere between $50 to $800. You will also find more details about how to start an LLC on those sites.
Pick a registered agent
You need a registered agent no matter where your LLC is located. You also need a registered office because of the due process involved. The registered agent is the individual who receives all legal and other types of documents on behalf of the business. Examples of these documents include correspondence, subpoenas, and regulatory and tax notices.
Come up with an operating agreement
The operating agreement documents all the LLC’s setup, daily obligations, organizational structure, as well as general rules. In most states, an LLC is not required to come up with an operating agreement. An operating agreement contains other details such as profit and loss allocations, responsibilities of members, and proceedings when a member opts to leave or sell their shares. You also need to apply for an EIN or employer identification number.