What is an LLC? How to start a US LLC, the Ultimate Guide

Napoleon

Feb 29, 2024 — 9 min read

A limited liability company, or LLC, is a kind of corporate structure that offers its owners limited liability protection. This implies that the LLC’s owners are not held personally responsible for the obligations and liabilities of the business. Similar to a corporation, an LLC also offers limited liability, and it usually requires some paperwork to set up. However, you do not need to worry because Foundeck can assist you with forming an LLC in the United States.

Excellent liability protection can be obtained for a comparatively small initial investment by forming an LLC. By creating a distinct, legally recognized division between each member and the company as a whole, LLCs safeguard owners. Should your company run into legal issues later on, this kind of protection can shield members’ private assets.

How to Set Up an LLC

Since LLCs are legal company formations recognized by state statutes, the procedures for creating an LLC differ based on the state in which the LLC is registered. All LLCs must, nevertheless, follow a few standard procedures.

1. Select an available business name

Have you thought of the ideal name for your company? Your new company name must comply with several state and federal regulations in addition to being a marketable name that accurately represents your brand.

State Requirements

Any new company wishing to register as an LLC has to think of a distinctive name that is not already in use. This means that registering your company name with the state of your choice will probably be done on a first-come, first-served basis. For this reason, you should do a name search in the state of your choice well in advance of placing your order for t-shirts and business cards. This database, also known as a “business entity search” or “business name availability check” database, is normally located on the website of your secretary of state.

You can find further materials on the secretary of state’s website to assist you in selecting a distinctive and appropriate name. These consist of lists of words that are not permitted and instructions on how a business might legally set itself apart from other company names.

Federal Requirements

Make sure your name is available with your state and that it is not protected against infringement on a national level. You can accomplish this by looking through the trademark database maintained by the US. Patent and trademark office. It is not usable if the name you have selected already in the database.

Marketability

Lastly, make sure the digital versions of your company name are accessible by searching its domain and social media handles.

After confirming that your name is marketable and may be used legally, you might want to reserve it with your state to guarantee that it stays that way until your company is formally formed. Using a name reservation form, you may usually finish the process on the secretary of state’s website. A reservation fee is usually required to reserve the name.

2. Choose a Registered Agent

Any LLC must appoint a registered agent to accept legal and other crucial documents on behalf of the LLC, regardless of the state in which it files. Individuals or businesses that reside in the state in which your LLC conducts business are known as registered agents. For the purpose of performing their obligations, they must be accessible at the registered agent address (which could be a business office) at all times during ordinary business hours.

Registered agents have to be state residents and be at least 18 years old. Choose an LLC manager or member, or if you reside in the state where the LLC was formed, name yourself as the registered agent. If you are creating an LLC outside of your state or are unable to handle the tasks internally, you might want to think about working with a business that offers registered agent services.

Is It Smart to be my Own Registered Agent?

While it is legal for business owners to serve as their own registered agents in every state, there are certain trade-offs that may not be feasible or convenient when self-representing. When choosing whether or not to act as your own registered agent, keep the following factors in mind:

Loss of flexibility: All year long, you must be available at the registered agent address specified during business hours. You can’t take time off for paid time off or to meet with a client, for example.
Privacy: Names and addresses are required of registered agents upon filing, and once submitted, they become public records that are accessible to the public for search and discovery. For home-based enterprises or businesses without a physical address, this can be extremely problematic.
Reputation: Being your registered agent could place your company in a bad light because court documents, like warnings that you are being sued, may be brought into your office in front of customers or staff members.

If you are the only member of a single-member LLC that you are creating, you should consider consulting with an attorney before determining if serving as your registered agent is the best course of action.

Designating a Registered Agent

Depending on who you register, there are many routes to designate your registered agent. For instance, if you intend to act as the registered agent for your company, be sure to have a physical address where you can be reached during regular business hours to pick up important paperwork. PO boxes are not permitted. You will also be required to include your name and registered agent address on the formation documents for your LLC.

If, on the other hand, you decide to designate a third party as your registered agent, you will need to locate a company that can assist your business with regular business hours throughout the year and has a physical address in your state. Hiring a registered agent service will cost you a fee. Provide their details and a representative’s signature on your LLC formation documents as soon as you have hired one.

3. Complete your State’s LLC Article of Organization Form

To establish your company as a legally recognized entity with the state, you must file articles of organization (sometimes referred to as a certificate of incorporation in some states). Usually, each state has its own form that may be filled out online or downloaded from the secretary of state’s website.

Though information-provision requirements vary by state, the following information will likely be requested as you fill out this form:

Your LLC’s name
Your name, address, phone number and email
Your registered agent’s name, address, phone number and email
The name of your LLC’s organizor (i.e., you) and a member of your LLC (if a multi-member LLC)
The submitter’s name, contact information and signature
The date you wish your LLC to form
Your LLC’s purpose
The duration of your LLC

There will also be a filing fee that you need to pay. To pay this fee, you must be ready to send in a check (by mail) or provide credit or debit card information (online).

4. Submit your LLC Articles of Organization Form

The requirements for submitting articles of incorporation vary by state. You can fulfill the particular requirements of the state in which you incorporate your LLC with the aid of an LLC filing service.

Here are a few state submission criteria, for instance:

Georgia: You must complete the online form on the secretary of state’s website in order to file your articles of incorporation in Georgia. Click “create or register a business” and “domestic limited liability company” after first creating an account and logging in. To submit the form, fill it out, including your credit card information, and adhere to the instructions.
Maryland: Register on the state’s online business express platform. In order to pay the $100 filing fee and the 3% credit or debit card processing fee, submit your form using this portal and include credit or debit card information.

Determine the requirements for submitting your articles of organization in your state. This information is often available in the form’s instructions or on the screen where you access the form online.

5. Create an Operating Agreement

An operating agreement is a necessary component of LLC formation even though it’s not required in every state, particularly if you’re starting a new company with several members.

Each LLC member’s managerial, financial, and legal duties are covered under the operating agreement. It establishes explicit guidelines that each member must follow throughout the LLC’s operations right away. As a result, it provides the following advantages:

Defense against state regulations: The majority of states have default guidelines for how an LLC must conduct business. These guidelines could be at odds with what your LLC needs and what your members want. An operating agreement gives your LLC the authority to supersede those regulations and establish its own as it is a legally-binding document.
Conflict avoidance and resolution: You can reduce the likelihood of misunderstandings and disagreements among members in the future by establishing clear guidelines for your LLC’s operations, members’ rights and obligations, ownership percentages, and other details. Additionally, an operational agreement provides instructions or clarity for addressing disagreements among your members.
Verified division of personal and commercial assets: The LLC form of your organization and the ownership percentages of each member are verified by your operating agreement. By doing this, in the event that the LLC is sued, members may be shielded from personal liability for company debts or those of other members.

A good operating agreement outlines the following key concepts:

How profits will be distributed.
Each member’s ownership percentages.
Each member’s initial contribution to the LLC.
How members can leave the LLC if desired or needed.
How the LLC can be dissolved.
The LLC’s accounting methods.
Members’ voting rights and responsibilities.
How and when meetings will be held.
The procedure for one member buying out the ownership percentage of another.

You can use one of the free operating agreement templates offered by the majority of LLC registration services to write your agreement. We strongly advise you to speak with a business counsel to make sure the agreement suits your LLC’s particular requirements before having all members sign it, though, as it is a legally-binding document. Access to legal advice is offered by numerous LLC creation services.

6. Keep Your LLC Active

The little expense of maintaining the company’s registration with the state is among the most interesting advantages of creating an LLC. To fulfill this goal, an annual report must be filed. However, if you forget to report to the state that your business is still active and in good standing, it could cost you a lot of money and will likely result in the forced administrative dissolution of your LLC. Most states require you to file an annual report on time, and you may also need to pay an annual fee.

Visit the website of your secretary of state to review your state’s annual filing and fee requirements. Mark your calendar at least one month in advance of the filing deadline to help prevent needless late fees. Prior to the annual filing deadline, some states will additionally notify your registered agent. Look out these notifications.

Next Steps to Finish Creating your LLC

Obtain an EIN: A federal tax identification number, or employer identification number (EIN), is a useful tool for maintaining legal separation between your personal finances and the funds and assets associated with your newly formed LLC. It is also used in the administration of taxes. Utilizing an EIN is a safer option than utilizing your social security number, which you should save for personal use, even though it may not always be required depending on the size and structure of your business.
Get proper business licenses: The state may need you to seek a business license and pay licensing fees for your LLC, depending on the industry in which it operates. Find out the conditions, costs, and deadlines for business licenses by contacting your state. Numerous states have a page on their websites devoted to giving this kind of information. The websites for the licensing, commerce, and consumer affairs divisions are a few examples of these kind of pages. Keep in mind that, typically once a year or twice a year, you must renew your company license(s). Make careful note of recurring deadlines and schedule calendar reminders far in advance to prevent your company license from expiring. Your LLC’s legal existence may be in jeopardy if necessary licenses are not renewed.
Keep personal and LLC assets separate: Forming an LLC that provides appropriate limited liability protection requires careful consideration of how to divide corporate assets and finances from your personal accounts. Getting an EIN is a great way to start the process of separating legally. Establishing a business bank account to handle your company’s finances is also a wise step. Before opening a new account, many banks demand that you have an EIN. You can withdraw members’ (or your own) contributions once your business bank account has been opened, in accordance with the payment schedule specified in your operating agreement. This account can also be used to cover company expenses like projected taxes.

Winding up

If you are interested in starting an LLC, Foundeck can be a valuable resource. We provide guidance and support throughout the process, from setting up your LLC to managing your company’s finances and taxes. With their help, you can feel confident that your business is set up correctly and is compliant with all regulations. Whether you’re just getting started or are looking to expand your business, can help make the process easier and less stressful. For more information, visit Foundeck.