For startup and entrepreneurial ventures, Limited Liability Company or LLC is a popular structure. It is estimated that more than 30 million LLCs are there in the USA currently. It provides limited liability to the owners of the business and the LLC company setup formed according to the State law. Thus, the rules of setting up an LLC varies from one State to another.
LLCs are popular because of the flexible structure and benefits it offers to the owners. An LLC can opt for corporate tax, instead of being treated as a partnership. It helps to avoid double taxation as it will distribute the profits among the members. Because of these several benefits, even there are states which charge extra to form an LLC. For example, forming an LLC in California need extra charges. Now you may want to know how to set up an LLC?
The current post deals with things to do before and after setting an LLC. First, the discussion will be on the things to do before and then after setting the LLC.
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Things to do before setting the LLC
Pick the State to set up the LLC
It is mentioned in the start that an LLC is formed abiding the rules and laws of a specific state. Thus, selecting the State is crucial. You must set an LLC where you will run the business. It will save the fees and reduce the complexities. If you do the business in different states, you are required to register your business from all. You need to fill up a notice to each Secretary of State by paying separate fees.
Name the LLC
The next thing you need to do is to pick the name for the LLC from the available list. There are some criteria for selecting the name. Here are these.
- The name must end with LLC
- The name must not contain any state law prohibited term
- The name can have words like a corporation, inc., incorporated
- Must conduct a trademark search to avoid other party’s trademark
- Check the availability of getting the “.com” domain with the name
Selecting the right name to LLC company setup is not that easy. Further, if the domain is already registered with a third party, it is tough to get that.
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File the LLC Articles of Organization
Only after filing the “Articles of Organization” your LLC gets the official existence with the Secretary of State. You need to fill forms to start an LLC. Here are the ways to prepare the LLC Articles of Organization.
- Articles of Organization must be short and easy to complete
- Designate a registered agent to get the legal documents
- Need to pay $100 filling Fee and a minimum annual tax in some states ($800 for forming an LLC in California)
- Include a statement on the purpose of the LLC
However, in California, you need to state also that the LLC will run by a single manager or more than one manager. You can get the sample article on the websites of Secretary of State.
Things to do after Setting an LLC
Obtain the license and permits
Often the new entrants and entrepreneurs think that forming the LLC is enough. Unfortunately, that is not the case. Remember that setting up an LLC provides you the foundation for the business, but you need the license to operate the business.
Depending on the kind of business, you need to get the license. However, operating the business without the license may end up paying the fine. These licenses are generally inexpensive, so check with the local authority to see which permit or license you to need for operating your business.
Get an Employer Identification Number (EIN)
The EIN is also known as the Federal tax ID number. It is nothing but a way for the IRS to identify your business and track the transactions. You can consider it as the social security number of companies also. If you are planning to hire employees, then the EIN is essential. However, even if you will not have employees, still, it is better to get it as you don’t need to give your social security number to clients and vendors.
Open a Business Bank Account
Once you do an LLC company setup, you need to open a bank account for the LLC. It will allow you to take the checks on the name of your business. Further, it is legally necessary for the owners of the LLC and corporation to have separate business and private accounts. Thus, a dedicated business account is a must.
Bottom Line
Over here, you have read the crucial things regarding how to create an LLC or Limited Liability Corporation. It is better to take essential information from an expert before your taking legal steps.
You can contact us for expert help in setting your LLC.
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