If you’ve recently started a business then you deserve a big congratulations. Becoming a business owner is an exciting time in your life. But with all the excitement also comes a lot of responsibility.
Starting a new business means there are a lot of things you need to accomplish. It doesn’t matter if you’re starting an architecture firm or launching a blog, one of the first tasks you need to do is make sure your business is set up with the proper business structure.
Most small businesses decide to set up a limited liability company (LLC) because of the liability and tax benefits they provide. If you’re planning to set up an LLC for your business, then this LLC checklist is going to be your guide to success.
Within this LLC checklist, we’re going to walk you through each task that needs to be taken care of when you establish an LLC for your business.
At this point, you’ve probably tossed around a few business name ideas. Now is the time to decide what the legal name of your business is going to be. This needs to be unique, something that no other business within your state is already using. If you’re unsure if a particular business name is taken, the secretary of state website in your state should have a database of all business names currently registered.
For most businesses, the name is going to be a large part of the company's branding. That means it needs to be a marketable name. Something that people are going to remember. This would also be a good time to make sure the domain name for the proposed business name is available.
Most states have their own rules on naming, but most require the legal entity name to include limited liability company or a variation (LLC, L.L.C, etc.).
Now that you’ve picked out a name for your business, it’s time to choose a registered agent. This person or business will be responsible for receiving all legal and tax documents on your behalf.
You can use companies like ZenBusiness or Northwest Registered Agent to act as your registered agent. The cost varies but is typically in the ballpark of $100-$125 per year. Alternatively, you can also serve as your own registered agent.
If you choose to act as your own registered agent, there are a few requirements you must follow:
Before your LLC can become active, you need to file the appropriate Articles of Organization with your state. In most states, you’ll be able to find this form on the Secretary of States' website.
This document is going to include some of the basic information for your company. Different states will have some different requirements, but most will ask for the following:
Once you’re ready to file your Articles of Organization, you will need to pay the required fee from your state. The fees can be anywhere from $40 to $500 depending on the state where the business is being registered.
If you’re forming your LLC in California, Delaware, Maine, Missouri, Nebraska, or New York, your business is required to have an operating agreement.
An operating agreement should detail how the business is going to operate. This includes listing the individual members of the LLC and how much ownership they have. Plus, it will discuss how the company's profits will be distributed. It will also describe the basic responsibilities of each LLC member.
Once you’re taken care of the legal documents, you need to apply for an EIN. Think of this as the social security number for your business. An EIN is required if your LLC has more than one member, has employees, withholds taxes for nonwage income paid to nonresident aliens, or files excise taxes.
Even if your LLC isn’t required to have an EIN, it’s recommended. When you apply for a business bank account, you’ll be asked to provide it.
Applying for an EIN is simple and can be done on the IRS website.
Starting a business is a big accomplishment in your life. By following this LLC checklist, you’ll have the confidence that you’ve properly set up an LLC and that both your business and personal finances are protected.
Yes, starting an LLC is simple to do. All you need to do is follow the steps above in our LLC checklist.
An S-Corp is a tax filing status that your business can elect to have. If you’re generating a certain amount of profits each year, then this could have tax advantages. To better understand if an S-Corp is right for your business, it’s best to speak with a tax and accounting specialist.
In order to set up your LLC, you must file your Articles of Organization with the Secretary of State. You’ll also need to pay the state's Articles of Organization filing fee.
If you’re looking for ways to reduce the tax liability for your LLC, there are a few options available:
Members of an LLC can pay themselves in a couple of different ways. If your LLC is a single or multi-member LLC you can distribute profits that pass through to your individual tax return. If you elect to become an S-Corp, you can either continue to distribute through your individual tax return or you can pay yourself a reasonable salary along with distributing the additional profits.
Yes, it’s important to have a separate bank account for your LLC. This helps enforce the personal liability protection that you receive from having an LLC.
No, you do not need to hire a lawyer to form an LLC. You can simply follow our LLC checklist and have your LLC set up in little time at all.