If you're starting a small business in the United States, one of the first decisions you'll need to make is how to structure your company. A popular option for many entrepreneurs is to set up a Limited Liability Company (LLC). In this blog post, we'll walk you through the the three easy steps to set up an LLC, from state registration to federal registration, and the paperwork you'll need to file.
What is an LLC?
An LLC, or Limited Liability Company, is a flexible and relatively simple business entity that combines the benefits of a partnership with the limited liability of a corporation. LLCs provide protection of personal assets for the members and offer flexibility in terms of management, taxation, and ownership structure. They can be taxed as a partnership or corporation, and can have an unlimited number of members, who can be individuals, other LLCs, or corporations. Overall, LLCs are a popular choice for small business owners who want protection of their personal assets while maintaining flexibility in managing their business.
1. State Registration
The first step in setting up an LLC is to register your business with the state where you plan to do business. Each state has its own rules and requirements for LLC formation, so it's important to research the specific requirements for your state. In general, the steps to register your LLC with the state include:
Choosing a name for your LLC that complies with state rules
Filing Articles of Organization with the Secretary of State's office
Paying the required registration fee
Obtaining any necessary licenses and permits for your business
2. Federal Registration
In addition to registering your LLC with the state, you may also need to register with the federal government. In most cases you will also need to apply for an Employer Identification Number (EIN) from the IRS. The EIN is used to identify your business for tax purposes and is required to open a bank account, hire employees, and file tax returns.
3. Formalities and Paperwork
Once you've registered your LLC with the state and federal government, there are a few formalities and paperwork requirements you'll need to meet to maintain your LLC status. These may include:
Drafting an Operating Agreement: This document outlines the ownership structure, management, and operations of your LLC.
Holding Member Meetings: LLCs are not required to hold annual meetings like corporations, but it's a good practice to hold regular member meetings to discuss business operations and make decisions.
Filing Annual Reports: Most states require LLCs to file annual reports or pay annual fees to maintain their good standing.
Conclusion
Setting up an LLC can be a straightforward process, but it's important to follow the specific requirements for your state and comply with federal regulations. By registering your LLC with the state and obtaining an EIN, you'll be able to open a bank account, hire employees, and file tax returns. And by meeting the formalities and paperwork requirements of your LLC, you'll be able to maintain your liability protection and ensure your business is operating in compliance with state and federal laws. Make sure to consult with your legal and tax advisors as your situation may vary.
We know starting your business can be stressful, that’s why we offer a one-stop shop for choosing the right entity, getting registered, and setting up your bookkeeping. Schedule a free consultation today.