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Office working looking at an Excel spreadsheet. Image by Tim Sandle
The business advice firm Venture Smarter has been considering the optimal advice for people wishing to set-up as sole traders. This is especially in relation to five steps to help someone looking at setting up a Limited Liability Company (LLC).
An LLC is a business form applicable to the U.S., designed to protects the owner from personal responsibility for any business debts or liabilities. Most LLC’s are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.
The business advice provided to Digital Journal includes:
Choose A Unique Name for Your LLC
Choosing a suitable business name for your LLC is an essential first step in starting your business. It is important to choose a name with no patent or not taken by other entities in the state where you plan to register.
Furthermore, it is useful to choose a name that accurately reflects your business’s products or services, and that is easy to remember and pronounce. A verification should also be made as to whether the business name is prohibited by the law from being registered.
Choose the State for your LLC
The next step after selecting a name is to choose the state where you want to form your limited liability company. Based on the state you’ve chosen, the cost to start an LLC will be different.
Most businesses choose a state where they’re located, but there are some exceptions. For example, if a prospective businessperson is planning to do business in multiple states, they may look for a state with favourable tax laws and business regulations.
Each state’s requirements and procedure for forming an LLC are different, so it is recommended that people research the specific rules for their chosen state.
Interested parties will normally need to file Articles of Organization and pay a filing fee to register their LLC with the state. Some states may also require people to publish a notice of your LLC formation in a local newspaper.
Nominate a registered agent
Everyone looking to start an LLC must choose a registered agent. A registered agent is the representative of your company who is designated to handle legal and administrative documents on the LLC’s behalf. This includes important documents like tax forms and lawsuits.
The registered agent must have a physical address in the state where your LLC is formed and be available during regular business hours.
Get articles of organization for your LLC
For the LLC to become a legal business entity, there are some legal documents you must file with the state agency through your registered agent. One of those documents is called Articles of Organization, also known as a Certificate of Formation in different states.
Certificate of Formation (or Organization) is one of two documents filed with the SOS or other designated person for an LLC to become legal and recognized by law as a separate entity from its members and managers.
To file the Articles of Organization, the business is required to provide a filing fee and submit the document to the Secretary of State’s office in the state where the LLC is formed. The second document needed describes the company’s capital business structure and rights.
Create an LLC Operating Agreement
Operating agreements are documents that govern the operations and management of an LLC. Although not a basic requirement by law, it is highly recommended that LLCs create one.
These agreements contain operating rules for the LLC members or owners, capital contributions, and buy-sell arrangements, among other things.
Operating agreements also protect the LLC’s limited liability status, by demonstrating that your LLC is a separate legal entity from the small business owners.
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