Monday, June 23, 2014

A Step-By-Step Guide to Opening LLC

Do you think you have what it takes to strike it out on your own as an entrepreneur? If your answer to this question is yes, and a limited liability company is what you have in mind, here's what you need to know about setting up one.

Step 1: Choose a partner (optional)

Most guides would have "Choose a name" (more on this later) as Step 1, but this article would like to argue that choosing your partner (if you want one) is the most crucial. Two heads may be better than one, but if one head is constantly trying to bite the other off, you're better off with just one head. It doesn't matter if your partner is a relative, a friend, or an acquaintance; what's important is that you complement each other on your entrepreneurial strengths and weaknesses.

Step 2: Choose a business name

Limited liability company names are required to be in this format: "(Insert business name here), LLC". Make sure your business name is available by checking with the Secretary of State business name database. Also, choose a name that wouldn't make you feel embarrassed every time you introduce yourself to a potential client or investor.

Step 3: File your articles of organization

The Articles of Organization contains all the basic information about your limited liability company (e.g. business name and address, nature of management, registered agent's name and address, etc.). They must be filed with the Secretary of State via mail for $50 per LLC member.

Step 4: Hire a registered agent

The registered agent is responsible for handling the paperwork in behalf of your LLC. This person must be registered in the same state where you organized your company.

Step 5: Come up with an operating agreement

The Operating Agreement should detail all the rights and responsibilities of all members of the limited liability company. Though this isn't technically required, it is strongly recommended that you prepare this along with the Articles of Organization. That way, any legal disputes between the members can be easily resolved by referring to this document.

Step 6: Comply with other regulatory requirements

Under most circumstances, your LLC must have an IRS Employer Identification Number (EIN). You must also obtain the necessary local and state licenses, as well as pay a membership fee that ranges from $300-$3,000 annually.

Those are the general steps for setting up a LLC. If you need more information, or if you need clarifications on anything, consult with your registered agent.

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