Small businesses are booming in 2023. Despite the challenges that have been brought on by inflation and a scattered workforce, it’s still a promising time to launch your own business. Of course, many entrepreneurs are minimizing their risk by registering their business entity as a limited liability company (LLC).
If you look at the statistics from USChamber.com, small businesses represent 63 per cent of new jobs created. Among the millions of small businesses in the United States, around 21.6 million are LLCs.
If you’re looking to start your own, the process is really quite simple. Although certain requirements will be different depending on your location, these are the basic steps to starting an LLC.
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1. Create Your Name
The first thing you need to do is create your LLC’s name. Strategic Positioning is a concept that started all the way in 1969 but continues to ring true for business today. In a highly competitive market, you want to make your brand stand out from the competition and build customer value right away.
When you are making an LLC, you are legally required to include “LLC” or “Limited Liability Company” in the registered name so that it is distinguishable as an LLC. You can reserve the name you have in mind for an LLC for up to 120 days, but it’s best to file as soon as you’ve got the name on lock.
2. Check Out LLC Services
Although it’s not necessarily rocket science to figure out, it can still be a lot of work to get your LLC legally formed. The process can be even more complicated if you are forming it in states with plenty of regulations and challenging requirements like California or New Jersey.
You can look at LLC.org for state-specific steps, but you can also use it to find commercial LLC formation services. This does come with added fees but it simplifies the process and ensures that you meet all compliance requirements. With this method, you can just focus on launching your business and managing operations.
3. Find a Registered Agent
Every business is required to have a registered agent because this is the individual or entity that will be responsible for maintaining communications with the state and receiving service of process. For this step, you can actually choose yourself, an employee, or the business itself to act as the registered agent
That said, it’s usually advised not to choose your business as its own acting agent so you can mitigate risks. You can also employ a commercial registered agent that will give you an added layer of privacy and efficiency as they handle all receiving of tax notices and government communications from a dedicated address.
4. File Articles of Organization
You cannot get your LLC started without filing Articles of Organization. The exact documentation will depend on your state, but you can usually get the proper forms online. Filing fees also differ per state, but you’ll see the amount expected on the
secretary of your state’s website. This is the document that will, upon approval, officially establish your LLC as a legal entity on the state level.
5. Set Your Operating Agreement
Although this step is usually optional depending on where you’re from, it’s better to create an operating agreement once you’ve got your organization papers in order. As we’ve noted in ‘Budget Management: How Important Is It For A Business?’, the success of a business hinges on preparation, analysis of needs, objectives, and debt, and active scenario simulation. Having an official operating agreement to refer back to makes the management process much simpler and can prevent potential disputes in the future.
6. Get Your Employer Identification Number (EIN)
If you are going to run a multimember LLC with more than one owner or you are going to have employees, you will need an EIN. You can get this from the IRS online and immediately get a number. This will be required for future financial transactions related to your business and employee payroll.
To figure out how much you’ll likely need to allot in terms of budget, you will want to check A Comprehensive Guide to Understanding Workers’ Compensation Benefits. Specific factors will come into play depending on what industry you’re in.
7. Settle All Relevant Business Permits, Accounts, and Registration
Finally, you need to get local business permits, property licenses if you have a physical location, state insurance and licenses, and a dedicated business bank account. Again, the specific documents you need will vary per state so you will need to call your local government office or check online from the secretary of the state’s website.