How to Start an LLC

How to Start an LLC

A limited liability company (LLC) is the American form of a private limited company. An LLC combines elements of a partnership and a corporation. LLCs allow for greater liability protection without the complexities of a traditional corporation.

LLC Formation combines core elements from Corporations and Partnerships. The basic structure of LLC formation is:

  • The owners have limited liability for the entity’s debts and obligations, similar to a corporation; and
  • The income or losses from the business are passed through to the owners, similar to a Partnership.
  • Distinguishing Elements of LLC Formation .

An LLC sets itself apart from a Partnership in the following ways:

  • A formal document, often called Articles of Organization, are filed in the state where the LLC is Incorporated; and
  • The owners of an LLC are not personally liable for the debts and obligations of the entity.

It is different from a corporation in the following ways:

  • The entity is not taxed; instead, profits and losses flow through to the owners;
  • It has less administrative requirements than a corporation as it lacks shareholders; and
  • It does not have an unlimited life in most jurisdictions and may need to be dissolved upon the death of an owner.

Navigating the complexities of LLC Formation can be time consuming and daunting.  Contact us today for help.

How to Start an LLC

Starting an LLC requires several distinct steps and levels of verification.

Choosing a Name

The first step in understanding how to start an LLC is choosing a name. This may sound simple, but different states have different requirements and restrictions. Before you have your heart set on a name, it’s important to familiarize yourself with these state specifications as well as the already existing business names.

Choosing a unique name is a way to ensure your business isn’t confused with others in its field. Likewise, you should consider branding and marketing options when you choose your name. If you want to utilize a website domain, make sure the domain is available before you register your business. Additionally, you have the option of reserving your LLC name if you don’t intend to act on it right away.

Choosing a Registered Agent

A registered agent is a necessary part of starting an LLC. Essentially, a registered agent receives legal documents meant for the LLC and then distributes them to the proper personnel at the LLC. A member of the LLC can fill the role of registered agent but there are also businesses that can provide this service if that is more agreeable.

Creating an LLC Operating Document

An LLC operating document defines how the LLC will be run. Rather than covering daily operations, the LLC operating document covers big picture issues and how they are settled between the various members. Issues like how to handle partner death, going out of business, voting, or the allotment of profits and losses.

This is not a legal requirement, but is a good way to state precedent before various issues arise down the road.

Filing the Articles of Organization with the State

The articles of organization list basic information to be filed with the state. These typically include information such as the name of your LLC and its address, its purpose and length of existence, as well as the name and address of the registered agent.

The articles must be signed by the individual forming the LLC and in some cases by the registered agent as well. Filing the articles will cost a small fee.

The LLC will then be issued a certificate by the state that permits the creation of the LLC. After this, the LLC has formal permission to begin running as a business.

Doing Business in Other States

If you intend for your LLC to operate in multiple states, more paperwork must be filed that registers the LLC within each state it will be operating in. It should be noted that each individual state will require a new registered agent located in that state.

Sources

How to Start an LLC in 7 Steps by Jane Haskins, Esq. for Legalzoom

How to Form an LLC by Diana Fitzpatrick, J.D. for NOLO

How to Start an LLC by Geoff Williams for U.S. News and World Report

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