ExecutiveChronicles.com | How to Start an LLC and Set Yourself Up For Success | Assuming that you can’t face a lawsuit because your company is too small is one of the biggest mistakes you can make as a business owner. Up to 53% of small businesses will face a lawsuit at some point, often with devastating consequences.
As a sole proprietorship, the law views you and your company as a single entity. If your business can’t meet debt or legal obligations, your personal property is at stake. The best way to prevent this from happening is to form an LLC. When you start an LLC, your business is a separate entity, meaning personal property and finances have protection against judgments.
If you think starting an LLC is hard, don’t worry! We’re here to walk you through the relatively simple process.
Choose and Reserve Your LLC’s Name
The first thing you’ll need to do is come up with a list of potential names. You’ll want a few of them in case someone has already reserved your first choice in your state.
Most states have databases where you can look up names and see what’s available. You can either register your name now or reserve it for future use if you aren’t ready to file the paperwork.
If you know that you’re going to start a business in the future, it’s best to reserve a name now. You’ll also need to look for similar business names, as choosing a name similar to an existing business could confuse customers.
Find a Registered Agent
Finding a registered agent is one of the more critical steps to starting an LLC. Almost every state requires an LLC to have a registered agent. The RA is a person or business that receives official documents (such as subpoenas and lawsuits) and passes them on to the appropriate person.
Some businesses will do this for a small fee, but in most states, you can choose anyone over 18. It’s best to choose someone you trust if you don’t want to pay a company to do it.
LLC Operating Agreement
This isn’t a requirement in many states, but it’s an important document nonetheless. This document lists the responsibilities of the owner and partners, the structure of the business, how the company distributes profits and losses, and what happens if the business goes under.
Even if this isn’t a requirement in your state, it’s crucial to spend some time on LLC operating agreements. Think of it as a long-term vision and roadmap for your business. It’s a document that you can turn to if any issues arise in the future.
File Organizational Paperwork for Your State
You have to tell your state who your business is and what it does. Articles of organization include the name of the business, the length of the business (either set dates or in perpetuity), the name and address of your registered agent, the purpose of your business, and more.
As the owner, you must sign the paperwork, and in many states, your registered agent must sign as well. You may need a notary public to witness the signing of this document, depending on your state.
Receive Your Documents From Your State
Once your state receives and reviews your documents, they’ll issue you a certificate. This document allows you to open a business bank account, get your licenses, and apply for a business tax ID number.
The process may seem easy, but it can take some time for the state to go over your paperwork and verify your information. It’s best to start as soon as possible.
Start an LLC Today!
Once these steps are complete, you can start enjoying the benefits of starting an LLC. You’ll have personal protection from liabilities, can take out business loans, and could enjoy tax benefits!
The sooner you decide to start an LLC, the better. Whether you’ve just considered starting an LLC or you’re looking for ways to improve your small business, we’re here to help. Bookmark our page and check back often for more informative articles that can help you improve your business.