LLCs are a popular business entity type that combines tax and structure flexibility with liability protection. If you are a small business owner, consider creating an LLC.
The process for forming an LLC varies by state, but you’ll need to choose a name, select members and file articles of organization. It’s also a good idea to create an operating agreement.
Decide on a name
Your business name is one of the first things you need to decide on when registering an llc. You want to choose a name that makes your company stand out and tells your customers what you do.
Often, a great name for an LLC will come to you in a flash. It may be a perfect combination of the right words and the feel you want to convey.
However, it is important to note that there are many restrictions when it comes to naming your LLC. For instance, you cannot use words like “bank”, “government”, or “insurance” in your business name.
This is why it is a good idea to brainstorm multiple options before making a final decision. Otherwise, you could end up settling on something that isn’t as ideal.
Select the members
Depending on the state where your LLC is registered, it may be necessary to formally select the members in the articles of organization. While this is optional, it makes handling membership changes much easier.
If your business has a manager-managed structure, you will also need to decide whether members will be allowed to make management decisions on their own. The choice will depend on the size of your company, the amount of investment you plan to invest, and other factors.
Regardless of your choice, an operating agreement will govern your company’s internal operations. It will cover the duties and responsibilities of members, and it should be kept confidential.
File articles of organization
Once you have determined the name of your LLC and selected the members, the next step is to file articles of organization with your state. These documents provide information about your business, such as its name, owners and address.
The filing requirements vary by state, so it is best to review the process with a business lawyer before you begin. This will help you avoid legal pitfalls and save you time and money in the future.
Your articles of organization should include your LLC’s name, address and a description of its business. It should also specify the name and contact details of your company’s registered agent. A registered agent is the person authorized to receive legal documents on behalf of your LLC.
Apply for an EIN
If you’re starting an LLC, you’ll need to apply for a federal tax identification number. This number, called an EIN or FEIN, is used by the Internal Revenue Service to identify your business.
An EIN is necessary if you want to file taxes on your company, open a business bank account or apply for a license. It also can help you keep your personal and business finances separate and avoid identity theft.
You can get an EIN by filing IRS Form SS-4 online, via fax or mail. Depending on the method you choose, it could take four to six weeks for the IRS to process your application.
Create an operating agreement
A well-written operating agreement is a great way to protect your business from future disputes. It also establishes the rules for how you will run your LLC.
An operating agreement includes key details about ownership, operations, management and financing. It can be customized to meet the specific needs of your business and state regulations.
It should include a detailed description of the business operations, a separation between members and the business entity, a succession plan and other details. It can also outline how owners and managers are appointed and their responsibilities to the company.
It can help prevent inter-family squabbling and lengthy legal battles down the road by clearly defining how the company will deal with a member’s departure or death. It can also design the way a member’s interest will be distributed, whether in cash or equity.