To form an LLC in your state, you will need to follow the specific LLC formation procedures and requirements set forth by your state’s business division or secretary of state’s office. Generally, the process for forming an LLC includes the following:
Steps to create an LLC
- Choose a business name: You will need to choose a business name that complies with your state’s naming rules and is available for use. You should always conduct a name search to ensure that the name you want to use is not already in use by another business.
- File articles of organization: You will need to file articles of organization with your state’s business division or secretary of state’s office. These articles typically include information about your LLC, such as its name, purpose, and the names and addresses of the LLC’s owners, known as members. Your state will have a website ending in .gov where you can file these online. You can search for it, make an account if necessary, and fill out the forms yourself.
- Obtain any required licenses and permits: Depending on your business activities and location, you may need to obtain specific licenses and permits in order to operate your LLC. If you’re a licensed electrician, plumber, general contractor, hairdresser or other regulated field, you’ll generally know these requirements better than anyone who works in another industry.
- One special case for very small and new businesses is homemade food for sale, often at markets or during popular events. If you’re planning on opening a business selling food you make yourself, most states have ‘cottage kitchen’ or ‘limited food establishment’ regulations that don’t require everything a restaurant does. You usually still need a permit, but inspections aren’t nearly as strict. The limited food license or permit usually only allows you to sell foods that aren’t likely to spoil- if you wouldn’t eat it yourself after it’s been sitting outside in July for a few hours, you probably need a full restaurant license to make and sell it.
- Create an operating agreement: An operating agreement is a document that outlines the rules and procedures for operating your LLC. It is not required in all states, but it is a good idea to have one in place to provide a clear understanding of the roles and responsibilities of the LLC’s members and to govern the internal affairs of the LLC. In plain English, it says how you make decisions about running the company, including changes in management, selling all or part of the company, and what happens to profits (or losses!).
Even if you’re not required to have one, you should still make an operating agreement, have all members (owners) sign it, and get it notarized. Your rules and procedures will show the business is organized as a Limited Liability Company. This helps reduce your liability compared to a Sole Proprietorship or Partnership if legal issues ever come up in the future.
There are many free operating agreement templates available online. In no particular order, LawDepot, RocketLawyer, eForms, LegalTemplates, and Northwest Registered Agent all have state-specific operating agreement templates.
What shouldn’t you do when creating an LLC?
You should not try to file your operating agreement with your state! It won’t be accepted, and your operating agreement is a confidential business document. Making sure it exists before you need it will protect you in the future.
What else should you NOT do when filing or registering an LLC? Pay a filing service hundreds of dollars to do it for you as your first option. America is based on small businesses and entrepreneurs, and every state makes it as easy as possible to register your new company. If you have an unusually complicated ownership structure you may want to consult an attorney or get assistance. Otherwise, seriously consider if those funds can be better used to get your startup off the ground!
Great, what else?
That should be enough to get you started with the basic legal and regulatory requirements for creating an LLC or sole proprietorship. Once you’re up and running, you also have to make sure you’re keeping track of your income, expenses, accounts payable and accounts receivable, and all the ways money comes in (too slowly!) and goes out (too quickly!) of your business’s bank account. When you’re ready, Real Accounting Solutions can help with that.
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