How to Start an LLC

How to Start an LLC


In a previous post, we discussed different business entities and what it’s like registering your business as a C Corporation. Here, we’ll be talking about why a limited liability company (LLC) could be a better fit for your business depending on your needs and flexibility.

An LLC is essentially a hybrid entity, combining both the limited liability of a corporation with the pass-through taxation of a partnership/sole proprietorship. Not only do you get better legal protection, but you don’t have to go through the trouble of filing a separate corporate tax return like you would with a C corp.

That all sounds great, but why should I choose an LLC?

When choosing a business entity, you might think navigating through all the legalese is a bit of a migraine, and you wouldn’t be exactly wrong. However, if you’re interested in what an LLC has to offer, its biggest draw is the fact that your business assets and personal assets remain separate.

This means you don’t have to use personal assets or declare personal bankruptcy to declare business debt, safeguarding your own personal finances intact if things start getting bumpy for your business.

Cool! Now how do I get started?

First things first, you’ll want to obtain your employer identification number (EIN), a unique number that identifies your business for tax purposes. You can apply for your EIN online on the IRS website, over the phone, or via fax.

Register with the State Government

As with registering your business for a C corp, you also want to register your LLC with the state government and pay a fee to file your Articles of Organization with your secretary of state.

The Articles of Incorporation will provide the government important information about your business such as its registered agent, principal place of business, and business purpose. All of this information, including your address, will made public.

You’ll also need to take into account how much stock your LLC will issue. This might affect funding and how much you’ll pay in taxes, so you may want to tap an attorney to guide you through the process.

Select the proper election when filing federal taxes

Once you’ve filed your business name and Articles of Organization with your state government, you need to figure out how federal laws will affect your business.

You can choose to be taxed as an LLC or a C Corporation. We recommend you check with your accountant before selecting a tax structure.

Create an LLC Agreement

Since you’ve already tapped an attorney to help you file your Articles of Incorporation, you might as well request her help with creating an LLC Agreement. This operating agreement outlines the roles, responsibilities, and ownership between founders, which prevents future problems if your co-founders decide to deviate from your already-agreed terms.

The LLC agreement also sets the stage for investors since it will address how members will vote on company decisions and distributions. Since you want to make sure that your company’s profits are distributed fairly and can be reinvested in your business, take your time in smoothing the cracks and knocking out any loopholes in your LLC agreement.

Congrats! You have an official company!

Time to pop some champagne! But before you celebrate too hard, plan ahead for the goals you want to accomplish in the near future. If you need help along the way, we can help you figure out what type of company is the best fit for you, decide where you need to register, and complete all the paperwork.



    On The Blog