Because forms for creating a limited liability company, or LLC, are usually available online, form an LLC is a relatively simple process for the do-it-yourself entrepreneur. Although, even though the actual work involved in LLC formation may be easy enough, failure to follow the proper procedures can result in a court’s disregard of the legal existence of the company. Therefore, it’s important to follow your state’s specific guidelines for creating a legal LLC.
Steps for forming an LLC:
- Choose a Name for Your LLC
- The name can’t be the same as the name of another LLC on file with the LLC office.
- The name must end with ‘Limited Liability Company,’ ‘Limited Company,’ ‘L.L.C.,’ ‘LLC,’ or ‘Ltd. Liability Co.’
- The name can’t include certain words prohibited by the state, such as Bank, Insurance, Corporation or City.
2. File Articles of Organization
After choosing a name, you must prepare and file “articles of organization” with your state’s LLC filing office. Some states calling it a “certificate of formation” or “certificate of organization.”
‘Articles of organization’ are short and simple documents. In fact, you can generally prepare your own in just a few minutes by filling in the blanks and checking the boxes on a form provided by your state’s filing office. Generally, you must provide only your LLC’s name, its address, and sometimes the names of all of the owners (members).
You’ll send this document to your Secretary of State along with the applicable filing fee when forming an LLC. Fees range between $40 to $900, depending on the state.Some states may have a corporate tax that is distinct from the filing fee but which must be paid at the time of filing.
- Create an LLC Operating Agreement
However, the operating agreement is not required by the state and can be designed after the legal filings are done. If you are the sole owner of the LLC, you don’t need it. However, if there’s even just one other owner, it’s best to form a written agreement of the terms. Take a help of registered agent for better understanding.
A typical operating agreement includes:
- The members’ percentage interests in the company.
- The members’ rights and liabilities.
- The members’ voting rights.
- How profits and losses will be divided.
- How the LLC will be organized.
- Buy-sell provisions, which define what happens if a member wants to sell his or her interest, dies or becomes disabled.
- Get Licenses and Permits
After you have completed the steps described above, your LLC is official. But before you open your doors for business, you need to attain the licenses and permits. These may include a business license (sometimes also known as a “tax registration certificate”), a sellers’ permit, a federal employer identification number, or a zoning permit. Forming an LLC by yourself is quite difficult task. You should use online LLC formation services like LegalZoom, IncFile or any other.