The Step-by-Step Guide to Creating a Limited Liability Company

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Depending on how you want to structure and run your business, a Limited Liability Company (LLC) may provide the benefits you’re seeking. A Limited Liability Company that is set up properly can offer you and your business tax benefits and additional liability protection. Of course, an LLC that is not set up properly could have the opposite effect. Here is a guide on how to properly set up an LLC. 

Table of Contents

• What is an LLC?
• The Step-by-step Guide to an LLC
  • 1) Decide on a business name
  • 2) Register a “Doing business as” (DBA) name
  • 3) Decide on a Registered Agent
  • 4) Figure out your State’s LLC Articles of Organization Form and prepare it
  • 5) File the LLC Articles of Organization Form
  • 6) Decide the terms of your Operating Agreement and create a draft
  • 7) Obtain business licenses and permits in the name of your LLC
  • 8) Open a bank account in the name of your LLC
  • 9) Fulfill any publication requirements

What is an LLC?

A limited liability company (LLC for short) is a business structure that provides a number of benefits. It combines the personal legal liability protections of a corporation with the pass-through taxation of a partnership or sole proprietorship. According to state law, an LLC is not a corporation; rather, it is a type of organization that offers its owners limited liability in many jurisdictions. The freedom that LLCs offer to business owners is well recognized. Depending on the context, an LLC may choose to use corporate tax regulations rather than classified and taxed as a partnership. In some cases, LLCs may be set up as not-for-profit entities.

The Step-by-step Guide to an LLC

1) Decide on a business name

The business name can be the most important aspect of your business in an era where branding seems to be everything. While the product or the service offered are always going to take priority, you will have to ensure that your business name is brandable as this will make your marketing efforts more efficient. There are also legal requirements that your business name must meet. 

For example, if you are registering your business as an LLC you will need to indicate that your business is in fact an LLC by incorporating “LLC” in the name. You can also utilize “limited liability company” in the name instead of the “LLC”. There could be other requirements that vary by state so you should check your state’s LLC naming requirements. 

Finally, once you decide on a name you’ll need to find out if the business name you want is actually available. If the name is already in use by another LLC, this may prevent you from registering it as the name for your LLC or could cause confusion or legal complications for you.

2) Register a “Doing business as” (DBA) name

Most LLCs conduct business using their legal names, but if you intend to use a name other than that of your LLC, you must file a DBA (“doing business as”) name registration. A DBA name is a name other than the one your LLC has formally registered as its business name. It is also referred to as an assumed name or a trade name. If you intend to use a DBA name, check with state officials to find out the procedure you’ll need to follow since not all states demand that a DBA name be registered.

3) Decide on a Registered Agent

It is required by most state laws that an LLC designate what is called a “registered agent”. On behalf of the LLC, a registered agent accepts official or legal papers (such as subpoenas and compliance-related documents). The registered agent forwards these documents to the LLC after they are received.

The requirements for being a registered agent are straightforward. Anyone age 18 years or older is eligible. The other main requirement is that the registered agent is available at a location in the state where the LLC is registered during regular business hours. 

While you can register yourself as the registered agent of your LLC, it might be more convenient to have someone else handle this role. Many choose to work with a separate business that offers registered agent services for a fee. This company offers a free first year of registered agent services.

4) Figure out your State’s LLC Articles of Organization Form and prepare it

You must submit articles of organization to your state when forming an LLC. The majority of states refer to the document by the name “articles of organization,” although your state may use a different name, like “certificate of formation.” The rules and steps for forming an LLC are listed for each state and can vary. Generally speaking, you will need to supply the following basic information: 

• Your company name 
• The location of your main place of business 
• The registered agent’s contact information, as well as the agent’s signature in some states 
• The organization’s goal 
• The manner in which your LLC will be run 
• The time frame for the LLC 

One or more business owners or organizers must sign the document after these procedures are finished. The company or filing office in your state should be able to provide you with an easy-to-fill-out copy of the articles of organization. You might also be able to download a blank version of the form online in several states. While the details needed differ from state to state, you often only need to supply your LLC’s name, address, and the names of its members.

5) File the LLC Articles of Organization Form

Before submitting your articles of organization to your state, carefully review them. Additionally, there is a filing cost that you must pay, which varies according to the state in which you’re forming your business. You’ll receive a certificate from the state proving your LLC is legitimately registered once the state approves your formation documents. Utilize it for additional essential duties like opening a business bank account and obtaining a tax ID number with the Internal Revenue Service (IRS).

6) Decide the terms of your Operating Agreement and create a draft

The specifics of each LLC member’s financial, legal, and managerial rights are outlined in the operating agreement. More specifically, it can specify who contributes capital to the business, how members leave the LLC, and how profits will be allocated. In essence, it must include all pertinent details about how your LLC operates. Even though many states do not require an operating agreement, you still need to draft one. It is especially important for LLCs with more than one member (owner) to ensure that everyone understands their obligations. Even single-member LLCs gain by putting the specifics in writing.

7) Obtain business licenses and permits in the name of your LLC

The business permits and licenses you may need to operate your LLC must be obtained after you have registered your LLC. The types of permits or licenses you’ll require will rely on the regulations set down by your state and local governments as well as the sector of business you are in. 

Make sure you pay attention to the deadlines for renewing your license or permit as failing to do so could cause your LLC status to be revoked. 

8) Open a bank account in the name of your LLC

It’s crucial that your LLC has its own bank account so you can keep business money separate from members’ personal money. After all, you are registering your business as an LLC to limit the ties it has to any owner(s) (personal connections), hence the “limited liability” portion of LLC. The papers needed to open a bank account for an LLC will vary between banks. To find out the paperwork needed for opening an account for your business, contact your local bank.

9) Fulfill any publication requirements

You could be obligated by some states to issue a notice about the creation of your LLC in your local newspaper. Check with your state’s business filing office for more information regarding the text of the notice, how often it must be published, and any other requirements that might be applicable if your state has such a publication requirement.