A Comprehensive Guide to Setting Up an LLC

By Archana Rao | September 10, 2024

Starting a business can be an exhilarating journey! You’ve done your research and think an LLC fits your vision, but are you sure it’s the right choice?  We know how challenging understanding the legal landscape can be, especially when it comes to choosing the right structure for your business. So let’s talk about LLCs and why it might be the choice for you.  

 

What is an LLC?

An LLC is a business structure that offers the excellent liability protection of a corporation that everyone wants, but without the tax burdens. Another big benefit is that the owner's profits are only taxed once, unlike in a corporation where they are taxed twice. 

 

Advantages of Forming an LLC:

  • Limited Liability: Your personal assets are safe from business debts and lawsuits.
  • Flexibility: LLCs offer more flexibility in how they are run compared to a corporation.
  • Pass-Through Taxation: Profits and losses are only reported on the owner’s personal tax returns.
  • Credibility: Being an LLC can make your business look more trustworthy to customers, suppliers, and investors.

 

5 Key Steps to Setting Up an LLC

  1. Choose a Name
    • Pick a unique name that stands out for better brand recognition.
    • Your business name must include "Limited Liability Company" or "LLC.”
    • Make sure your chosen name is not identical or confusingly similar to existing business entities registered in your state.

 

Trademark Considerations: Before you finalize your LLC’s name, check if the name or logo is already taken by someone else. This helps avoid legal issues and protects your brand identity. You can search the United States Patent and Trademark Office (USPTO) database or get help from a lawyer.

 

  1. Designate a Registered Agent

Every LLC is required to have a registered agent to receive legal documents and mail on behalf of the LLC. You can act as your own registered agent (provided you meet the necessary state specific requirements), designate another individual, or hire a registered agent company. The agent typically must:

    • Have a physical address in the state where the LLC is registered.
    • Be over the age of 18.
    • Be available during business to receive important documents.

 

  1. File a Certificate of Formation

To make your LLC official, you need to file a certificate of formation, which may be referred to as the “articles of organization” or a “certificate of organization,” with your state. This document includes information about your business such as:

    • The LLC's name
    • The registered agent's name and address
    • The location of the business.

At this stage, many business owners choose to retain professional services to make sure all the required documentation is submitted correctly and to free up their time to focus on the other necessary parts of starting a business.

Whether you choose to enlist the help of professionals or submit the paperwork yourself, most states allow you to file your certificate of formation online.

 

  1. Create an Operating Agreement

Having an operating agreement is recommended for LLCs, even those that have only one member. An operating agreement serves as the rule book of your LLC. It lays out how the business will be governed, what the ownership and tax structure is, and what happens when it ends.

 

Having a well-defined operating agreement can help prevent disputes among members and provide clarity on how the business will be run.

 

  1. Obtain an Employer Identification Number (EIN) and a Business Bank Account

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique nine-digit identifier assigned by the Internal Revenue Service (IRS) to businesses for tax purposes. While single member LLC without employees can choose to use their Social Security number instead of an EIN, an EIN can help protect your private information. In addition, many financial institutions will ask for an EIN when setting up business bank accounts and for other financial transactions.

 

Don’t Forget!

Once your LLC is set up, you need to keep it in good standing by:

  • Filing annual reports
  • Paying annual fees
  • Following state and federal tax obligations.

Depending on the nature of your business, you may need specific permits or licenses. Check with your state and local authorities to make sure you are following the necessary regulations and requirements.

Forming an LLC is a manageable process when approached with proper planning and attention to detail. By following the steps outlined in this guide and seeking professional guidance when needed, you can establish a solid legal foundation for your business and enjoy the benefits of limited liability, flexibility, and credibility. As always, check your state specific requirements for additional details.

For a complimentary initial consult, you can reach us at (206) 429-5222 or schedule an appointment at https://nazzarolaw.com/schedule.

DISCLAIMER: The materials and information contained in this article are for informational purposes only. These materials do not constitute legal advice nor does engaging with this website create an attorney-client relationship. Accordingly, you should seek legal counsel from an attorney knowledgeable about the specifics of your situation before taking or refraining from action. Nazzaro PLLC has attorneys that are licensed to practice law in Washington, Texas, Washington D.C., California, and New York.

Posted in Business Essentials