How To Form An LLC

How To Form An LLCEntrepreneurs and small businesses often use an LLC for their business model because it combines the basic benefits of corporations and partnerships. If you are looking to establish a limited liability company, you might be surprised by how easy the process really is. We have already answered the question “What is an LLC?” Now we will look into how to form an LLC so you can be prepared for what’s to come.

Step 1 – Choose A Business Name

This is arguably the most exciting and most important step in starting a business. The name you select for your small business will impact your marketing strategies, logo design, and the general impression people have of your company. The Small Business Association provides a number of great tips for choosing a business name that will point you in the right direction. You just need to make sure your name meets these requirements:

  • Your business name cannot be the same as another LLC in your state.
  • The name must include an indication that the company is an LLC (“Carie’s Cakes, LLC” or “Garage Guys, Limited Company”).
  • The business name cannot contain words prohibited by your state (“bank,” “insurance,” etc.).

If your chosen name fulfills those requirements, you should be set for success.

Step 2 – File Your Articles Of Organization

Your articles of organization are part of a simple document that states your business name, address, and members. You will file this with the Secretary of State or a similar organization for your state, along with a small filing fee. If you work with a business attorney to set up an LLC, he will take care of all this for you.

Step 3 – Create An Operating Agreement (For Multi-Member LLCs)

If your LLC consists of multiple members, you may want to create an operating agreement that defines the role of each member and sets the rules of operation for the business. This is not a requirement for establishing a business, but it is highly recommended. Your operating agreement should also indicate how your profits and losses will be allocated so you can properly distribute the money you earn and the debts you incur for the business.

Step 4 – Obtain Licenses And Permits Related To Your Industry

If you work in an industry that requires licenses or permits to operate, you will need to obtain them before you start working. These will vary by business, so you will need to research the requirements for your niche.

Step 5 – Hire Employees And Start Working

If you need employees to run your business, you can hire them at this time. Otherwise, you can begin working through your LLC as soon as all of the paperwork is finalized.

Be sure to check out the pros and cons of starting an LLC to ensure that this is the right business model for you.