How to Form an LLC
You probably don’t need to register your business as an LLC.
But there’s one big reason why you might want to form one: limited liability.
It means you won’t be personally liable for your business debts.
Here’s the process to start an LLC…
1. Pick an Available Name
It’s so important to pick a company name that is available and isn’t trademarked.
A trademark is the exclusive right to use a company name.
The company that owns the trademark for a name is the only one who can use it. If you use a trademarked name, you could be sued or forced to rebrand.
It doesn’t matter if the LLC name is available.
You’ll want to run a trademark search to make sure your name is available. Otherwise, you might be registering a company name that you can’t legally use.
Read More: The Smart Way to Name Your Company
2. Register with the State
It's pretty simple.
You'll have to register the LLC with your state.
First, check your state filing fees and minimum taxes to make sure it works.
It can be expensive in states like California or be tricky in states like New York.
You can typically file online at your state corporations’ website.
You’ll likely need:
This is your full company name, followed by "LLC" or “Limited Liability Company”.
For example, "Sprout Law, LLC"
Names of all Members
These are the owners of the LLC.
This is someone to accept your mail.
It can be you or you can hire registered agent service.
It has to be in the state where you're registering.
It can be your personal address. But know that it will be public.
It can be a registered agent service or a mailbox service. It cannot be a PO Box.
Typically, the company will want a "perpetual" duration.
There are circumstances where you may want it limited to a specific period.
Typically, the purpose will be "all lawful purposes".
There are circumstances where you may want it to be limited, like an event.
Manager v Member Managed
Manager Managed=the members designate a manager to be in charge.
Member Managed= the members listed above are in charge.
The default option is for an LLC to be taxed as a Flow Through Entity, like an individual would be taxed.
There may be some situations where it's not the best option, so double check with an accountant.
3. Look for Additional Filings
Read the confirmation paperwork to see if there are additional filings.
For example, in California, you need to file a Statement of Information afterward.
In some states, you need to publish your information in a local newspaper.
4. Check your Renewal
Read your confirmation paperwork to see when you need to renew.
You’ll want to keep up with renewals to avoid late fees and cancellation.
5. Create an LLC Agreement
An Operating Agreement is a great idea when you have multiple owners.
It spells out the process for making decisions, makes sure that work + profits are split fairly, and resolves any issues in the company.