How to Form an LLC Yourself

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.

How to Form an LLC Yourself

Steps for forming an LLC:

  1. Choose a Name for Your LLC

When forming an LLC, you will need to choose a business name that follows with your state’s rules for LLC names. While requirements differ from state to state, typically:

  • 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.”

Required Information

‘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).

 Filing Fees

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.

  1. 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.
  1. 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.

Best Time to Form an LLC 2019

Limited liability company (LLC) is a business structure that provides a business with limited liability (similar to a corporation), but the structure is easier to establish and simpler to maintain.There are many services like a northwest registered agent, Nolo,
Rocket Lawyer,Swyft fillings, Bizfillings, LegalZoom LLC service, and incfile LLC service.

Have you been thinking about starting a business or incorporating a business or existing sole ownership?If so, you might be wondering what is the best time to incorporate or make an LLC. Should you try to incorporate or form it in before the end of the year or wait until next year?

best time to form llc

Below are three tips for determining when is the best time to incorporate or form your business:

  1. If you have liability concerns, incorporate or formright away

If your business is involved in a trade or activities with a lot of liability, then you should incorporate or form an LLC as soon as possible in order to separate your personal finances from your business.In this case, there’s no reason to wait and no need to disclose yourself to anymore liability.

  1. If you will gain significant tax benefits from incorporating, do it as soon as possible

If your tax counselor has told you that you can significantly lower your taxes by incorporating, you will want to get your incorporation paperwork in as quickly as possible.

Of course, keep in mind that your corporation’s ‘start date’ is not retroactive. Any tax advantages you might receive from incorporating begin on the date you incorporate. This means you will generally have to file two business income tax returns for the year:

  • First, for the months that you operated as a sole owner (or whatever your previous body may have been).
  • Second, another tax filing for the months after you incorporated.
  1. If you are looking to simplify your paperwork, incorporate on January 1st

For small business owners that do not have significant liability concerns, 1st January is the most logical start date since it eases the paperwork burden.  Additionally, you do not have to worry about reporting taxes as two different bodies during the year.

Because of this, January is the most engaging time of the year of processing incorporation applications at many Secretary of State offices. In some cases, it can take up to 40-60 days to bring a Corporation or LLC into presence after you submit your filing documents with the state office.

If you are using a document filing service, you can also look into something called a “delayed filing” that lets you complete your paperwork now and then delay your real incorporation date until next year. This lets you effectively select the date of incorporation and your application will be fast-tracked to the front of the line in January.

Conclusion:

If you have urgent need to incorporate or form an LLC (i.e. you have liability concerns or will get significant tax benefits), then you should form your business body as soon as possible.

However, if there is not a specific necessity, look to incorporate in January and give your business a fresh start in the new year.

 

Pros and Cons of LLC Formation

Limited liability companies (LLCs) are the simplest and most economical business structure in the United States. The pros and cons of LLCs include being easy to design and protecting owners from liability. However, LLCs also make obtaining money difficult and can misalign owner tax burdens and their income from the company.

Pros and Cons of LLC Formation

Pros of an LLC

  1. Limited liability

The biggest advantage of a limited liability company is right in the name — it limits your probable liability as a business owner.

Some probable liabilities that LLC owners can be shielded against include:

  • Unpaid business debts.
  • Vendor disputes: If they try to bill more than you incur.
  • Damages: If someone is hurt by your business or on the property you own.

2. Easy to create and administer

It is incredibly easy to create and administer LLCs. In most states, you can complete a new filing online in just a few time, paying with a credit card.

The specific steps you need to take in order to organize include:

3. No restrictions on the number of members or partners

LLCs can get started with any number of members or partners. Although single-member LLCs are common, you can also start an LLC with any number of partners or members — there is no restriction.

4. Unrestricted pay to members or partners

LLCs aren’t restricted in how they pay members or partners. They can also receive more or fewer tax write-offs for business-related expenses and compensations for expenses they pay personally through guaranteed payments.

Cons of an LLC

1. Licensing &filing fees

There is a fee to file a new LLC with a state — generally between $50 and $500. This is an addition to annual filing fees required to keep your LLC in good standing, which varies widely by state and range from $0 to $820.

These filings are controlled by individual state’s secretaries of state. Most can be completed online but mostly all have fees. Some have additional requirements including a registered agent, which charge additional fees in addition to state filing costs.

2. Required self-employment & excise taxes

In addition to filing fees, many states have dedicated businesses levies, excise taxes or franchise. If you create an LLC in another state where you don’t live or do business, you may be taxed on profit in that state. However, depending on the structure of your business, you may also be required to pay self-employment taxes on income, up to 7.5%.

3. Member salaries can misalign tax burden

The IRS doesn’t allow the LLC owners and members to collect salaries from their LLC. Members can still get money out of an LLC, but it’s in the form of draws — a kind of advance on profit-sharing. LLC members are taxed on their respective share of profits, regardless of any payments made to members or partners.

 

How much does it cost to set up an LLC?

Here is a breakdown of the costs for setting up an LLC:

1.You do-it-yourself (DIY), hire a lawyer, use an online incorporation website

If you design your LLC yourself, you will just pay the state filing fees. LLC state filing fees are$50 to $500. You should be aware of advantages and disadvantages of running an LLC.

If you hire a lawyer, you will pay between $1,000 and $1,500.

If you use an online incorporation website, you will pay between $99 and $900 (note: if you pay just $99, you will need to pay extra for your Operating Agreement and Federal Tax ID Number i.e. EIN).

Regardless of which method you choose to form an LLC, you will quite have to pay state filing fees.

LLC cost

2. Hire a Registered Agent

A Registered Agent is a person or company who agrees to obtain Service of Process on behalf of your LLC. Service of Process is the delivery of any legal documents pertaining to a lawsuit.

If you don’t have a street address located in the state where you are designing your LLC then you will need to hire a Commercial Registered Agent. Annual fees range $100 to $300.

It doesn’t matter if youdo-it-yourself (DIY), hire a lawyer, use an online incorporation website. You have the same choices as mentioned above.

3. Pay for an Operating Agreement or getting one for free

Depending on how you design your LLC, your Operating Agreement will either cost money or be included in your package.

If you do it yourself, you will most likely need to purchase an Operating Agreement online. Fees range $50 to $200.You may also be able to get one freefrom online.

If you hire a lawyer, this will most likely be part of the package deal, unless your business is very complicated or requires special agreements among the LLC members. Fees range $0 – $500.

If you use an online incorporation website, it’ll either be included (if you purchase a mid-level or high-level package), or you will need to pay extra. Fees range $50 to $100.

4. Federal Tax ID Number (EIN)

You will need to get a Federal Tax ID Number (EIN) in order to open your business bank accounts. Your EIN will also be used for filing taxes, obtaining finances, and obtaining credit cards to name a few. The IRS provided a free service for obtaining a Federal Tax ID Number.

If you do it yourself, your EIN will be free from the IRS.

If you hire a lawyer, this should be covered in their fees. Some will charge extra, through fees could be $50 to $100 depending on their hourly rate.

5. Annual LLC Fees

Most states have an annual LLC fee as a requirement in order to keep your LLC in a good position. If you do not pay your annual LLC fee on time, your state may vanish and shut down your LLC.

Annual fees range between $0 to $800, with the average fees coming out to $101.

What is a Registered Agent?

A registered agent is a person or company appointed to receive service of process and official mail on behalf of a business. Each state requires registered business bodies (corporations, Limited Liability Companies, Limited Partnerships, etc.) to appoint a registered agent on its formation documents.

Does a business need a registered agent?

A business that is required to have a registered agent, but fails to appoint and maintain one, can face some serious complications. A company that doesn’t manage a registered agent runs the risks of fines, penalties, and possible default judgments in favor of the other party (in the case of a lawsuit). A business might even be suspended or ended (administratively dissolved), and not be allowed to conduct business in other states. Please read why do we need registered agents?

What do registered agents do?

What is a Registered Agent_

Most state statutes require registered agents to be available during normal office hours (9 to 5) to accept official notices and service of process and notify the responsible party when accepting these legal documents. Professional registered agent services will inform you electronically within minutes of receiving a document on your behalf.

  • Inform you when your business’ annual reports are due to the state.
  • Provide you with widely business knowledge.
  • Free accessories to help you file business forms with the state and track your business’ status.

Registered agent requirements

State statutes require that registered agent fit the following requirements:

  • The registered agent must have an office where he can receive and accept service of process.
  • In many states, a registered agent must either a resident in the state where he works as a registered agent, or he must have a business that offers registered agent services and maintains an office address in that state (P.O. boxes are not acceptable).
  • Be available to accept legal documents and official mail during normal business hours ( 9 to 5).

Advantages of registered agent

The main advantages of a registered agent are given below:

  1. Privacy

Working with a registered agent creates a layer of privacy between your business and the public because of their information, and not yours is listed on the creation of documents. If you were ever served but working with a registered agent service, they would accept the paperwork on your behalf, ensuring you maintain a sense of privacy.

  1. Peace of mind

A registered agent service can provide peace of mind, so you can:

Focus on running and increasing your business- You can know that your important business documents will be received and saved. To form an llc yourself is a tedious task. A registered agent will help you to complete all the tedious legal task. The registered agent has the complete information Best Time of Year to Form an LLC and What is the best state to form an LLC?

Keep your personal and business mail separate.

  1. Compliance with the law

Send you regular reminders for state filings-This will ensure that you stay up to date on all your LLC necessity.

Help you in finding state-specific accountants and legal professionals- Most businesses need accounting or legal assistance at some point during their designing. Here is the list of best state to create an llc.  You can take LegalZoom legal help for business or incfile legal service.

Keep backup copies of your company documents-In the case of theft, natural disaster, or other unexpected losses, you will have a backup of all your important organization papers.

What is an LLC (limited liability company )

A limited liability company (LLC) is a corporate structure whereby the owners are not personally liable for the company’s debts or obligations.

Limited liability companies (LLCs) are a hybrid type of entity that has characteristics of a corporation, partnership or sole ownership. A key benefit is that owners have limited liability when it comes to the debts and liability of the organization. Click here to find pros and cons of LLC, best time to form LLC .

what is LLC

Steps forsetting up a Limited Liability Company (LLC):

 Attain a copy of your State’s LLC articles of Organization Form

You will receive this form online from your state’s Secretary of State website or office. When you contact them, also ask if the state (or county) in which you are setting up requires you to post a notice in the newspaper.

2. Choose a name for your business

When setting up an LLC, you will need to choose a business name that follows with your state’s rules for LLC names. While requirements differ from state to state, typically:

  • 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.

3. Fill out the required information of Organization Form

This is generally a simple process, as the only things you need to inform the state about regarding your LLC are items such as name, head office address, its business purpose, the registered agent for receiving any legal documents, and the names of the initial members.

  1. Submit your Articles of Organization Form

You will send this document to your Secretary of State along with the applicable filing fee when setting up an LLC. Some states may have a corporate tax that is distinct from the filing fee but which must be paid at the time of filing.

  1. 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.

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.
  1. 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.

Legalzoom.com, incfile.com, rocketlawyer.com, northwestregisteredagent.com are the few popular online LLC formation service.