The liability protection an LLC offers is a major factor in small business owners’ decision to form one. Due to the fact that an LLC, or limited liability corporation, operates independently from its owners (sometimes referred to as members), the owners are not held personally liable for corporate obligations.
You must submit documentation to the state where your firm is situated in order to establish an LLC. There are a few steps you must do to set up an LLC, regardless of where you live, even if each state has its own laws and regulations.
Step 1: Choose a Name for Your LLC
The majority of states forbid the use of the same name by two distinct corporate companies. Therefore, even if they are in separate places, you cannot have “Joe’s Donuts, LLC” and “Joe’s Donuts, Inc.” as an example. Additionally, several states prohibit businesses from using terms like “bank” in their names.
Step 2: Reserve a Name (optional)
You might wish to reserve the name if the LLC name you’ve chosen is available but you won’t be filing your LLC forms straight away. By submitting a form and paying a name reservation fee, almost every state permits name reservations. State-by-state variations exist in the length of the reserve period, filing costs, and renewal procedures.
Step 3: Choose a Registered Agent
Nearly all states demand that LLCs choose a registered agent (also sometimes called a statutory agent). A registered agent is a person who consents to accept court summonses, subpoenas, and other legal papers on behalf of an LLC and forward them to the proper party within the LLC.
Step 4: Prepare an LLC Operating Agreement
A LLC operating agreement serves as a road map for how your LLC will be managed. It details things like the members’ ownership interests and voting rights, how profits and losses will be distributed, how meetings will be conducted, how the business will be run, the rights of the members in the event that a member passes away or quits, and how the company will be dissolved in the event that it ceases operations.
Step 5: File Organizational Paperwork With the State
The secretary of state is where you file the paperwork to incorporate an LLC in most states, although other states have a distinct agency that handles company filings. While there is a filing fee in every state, the price to form an LLC varies by state.
Step 6: Obtain a Certificate from the State
The state will provide a certificate or other document that attests to the legal existence of your LLC once the formation paperwork for the LLC have been submitted and approved. Once you have the certificate, you may take care of business-related tasks including opening a company bank account, acquiring a tax ID number, and obtaining business permits.
Step 7: Register to Do Business in the Other States (optional)
Many small business owners find that forming an LLC is a popular and adaptable business solution. The majority of states make it reasonably simple to create and manage LLCs. However, it’s crucial to correctly complete the paperwork and have an operating agreement that outlines the members’ obligations.
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