How I Started an LLC: What to Expect, What I Did, and How You Can Too
Follow these basic steps, and you'll be well on your way to becoming an entrepreneur!
Starting your own business is a daunting task. There are so many things to think about and plenty of things that can go wrong.
One question I often hear is, "What's the first thing I need to do?"
When you set out to start your own company, what's the first thing you should do?
This guide will take you through the steps that I took when setting up my LLC and how these steps may vary depending on what kind of business you want to run.
Along the way, I'll share some of my favorite resources for getting started on building your empire.
What is an LLC?
An LLC (limited liability company) is a new business structure that combines partnership and corporation elements.
In an LLC, profits are passed through to the members and are taxed as individual income. Members do not have any personal liability for the company's debts unless they sign personal guarantees or otherwise agree to be personally liable in its operations.
The LLC does not pay federal income tax on its profits but instead pays for its taxes through Self-Employment Tax.
LLCs can be structured so that members are limited to passive investment in their business (i.e., no managing roles). They may take on employees, but non-members cannot be investors without much risk.
If you're ready to start your own business, this guide will walk you through every step of starting up your LLC, from naming your company to filing paperwork with your state and getting an EIN (Employer Identification Number).
Why You Should Consider Creating One
When starting a business, the first thing you should do is decide how to structure your company. You've probably heard of two structures for businesses: sole proprietor and LLC.
Sole proprietorships are the easiest to set up and maintain, but they have more restrictions.
An LLC is more complex, but it offers protection from personal liability.
If you're thinking about starting a company, you'll eventually need to form an LLC or a sole proprietorship.
In this post, I'm going to outline the differences between these two structures so that you can make a better decision for your company.
Naming Your Business
Naming your business is a crucial step that most people miss. You need to get creative with the name and give it some thought.
Many people think they need to come up with a catchy name first, but this isn't true. Later on, you can change the word if you don't trademark it or anything.
However, once you have a domain name, it's harder to change your company's reputation than if you start without one.
That being said, I usually take the time to be creative and write down a few names for my company before settling on one. Sometimes I find inspiration by browsing different blogs or websites for cool business names.
And sometimes, it's just a matter of sitting back and letting my brain do its thing and see what pops up when I'm not thinking about it too much!
Another thing to consider when naming your company is whether or not the name is available online. If so, someone else may already own the URL for your desired domain name!
The Paperwork You Need to Set Up Your LLC
I can't emphasize enough how important it is to keep records of your business dealings. The easiest way is to create a file on your computer with all the pertinent paperwork when you first start.
You'll want to be sure to keep your original LLC papers, as well as copies of any correspondence you have with the government. You should also save any invoices or receipts for things like rent and utilities necessary for your place of business.
It may not seem like it now, but this will come in handy if something goes wrong down the line and you need evidence that everything was handled correctly from day one.
If you're starting a formal business in a new country, you'll need to register with that country's appropriate authorities (like an Internal Revenue Service). If you're running an online-only company, then there's less physical paperwork involved than if you were opening up a storefront.
Articles of Organization
The first document you need to file is called the Articles of Organization. The Articles of Organization (also known as an "AO") is filed with the secretary of state in your state.
You'll need to research where you should submit this form and make sure you have the appropriate information before submitting it.
Every state's Secretary of State website offers a variety of helpful resources, so it's best to start there. In general, you'll be required to include the following:
- Name of company
- Type of LLC (such as professional services)
- Date when LLC was created
- Address for your business
- Registered agent's address if different from business address
- Corporate name and number or federal tax identification number
- Statement that organizer does not know anything which may disqualify corporation from obtaining a certificate of good standing from Secretary of State
Articles of Incorporation
The first step in starting your own business is to file articles of incorporation. The pieces of incorporation are the legal documents that form your company and establish it as a separate entity from you, the owner. You'll need to file these articles with the secretary of state's office in your state of residence.
It doesn't matter what kind of business you're trying to start. When you file for articles of incorporation, you will be asked for some basic information about yourself and your business. These include:
-Your name
-The name and type of company
-An assumed name (if applicable)
-A list of the types of shares issued by the company
-The number and class of shares allocated for each share type
-The names and addresses of all directors or managers
Operating Agreements
If you start an LLC, you will want to create an operating agreement.
An operating agreement is a document that gives the company's owners (shareholders) the guidelines they need to operate their business. It outlines the company's structure and how it is managed and funded.
This document should be created before there are shareholders to sign it. The agreement should detail who owns what shares, how much each owner pays in annual membership fees, how often meetings occur, and how decisions are made.
This can help avoid conflict later on about who owns what and what percentage of ownership each person has.
The benefits of starting an LLC
One of the first steps to take when starting your own company is registering your business with the state. Registration includes a simple online form or a local county office in some states.
An LLC, or Limited Liability Company, offers you liability protection from your assets and property if someone were to sue you for damages related to your company's actions.
The LLC also gives you more flexibility in setting up company ownership and management structures.
When you file for an LLC, there are two options for taxation: pass-through taxation or double taxation. A pass-through means that the LLC is not taxed separately from its owners. Double taxation means that the LLC is taxed like a partnership, and then its owners are taxed again on their share of the profit.
An LLC protects you from any potential personal liability in case of lawsuits or other legal action against your business.
You will have more legal protections than a sole proprietorship or a corporation because an LLC protects members from personal debt and possible liability incurred by the company itself (i.e., debt incurred by suppliers).
It also allows you to transfer any profits into another entity without paying taxes on gain via an S corp election.
Done for your service plans
If you need help getting started, many online companies offer "done-for-you" services. These services come at an initial cost, and some require a monthly fee to maintain.
There are many benefits to this type of service, such as having someone else create your company's website and handle the legal requirements for you.
The best way to decide if a done-for-you service plan is right for your needs is to consider how much time you can dedicate toward getting your business off the ground and how much money you want to spend upfront.
The benefits of Done for you service plans
Starting your own business is a daunting task. There are so many things to think about and plenty of things that can go wrong.
One question I often hear is, "What's the first thing I need to do?"
When you set out to start your own company, what's the first thing you should do?
Some people would rather not worry about researching all this information themselves. They would like someone else to do it for them!
That's where done for your service plans come in! Here’s where to Form a Business Today & Starting at $49!
Done for you services offer an easy way for new entrepreneurs to build their businesses without worrying about all the details involved in starting a business.
They offer templates and step-by-step guides that make it easy and affordable!
It may sound too good to be accurate, but these plans help make starting a business a reality for people who don't know where to begin!
What Happens Next?
You've signed up for a business name, picked a domain name, and maybe even registered your DBA. What's next?
There are two options for setting up your LLC: an active LLC or a dormant one. The difference is whether or not you'll be doing business from the get-go.
If you're not planning on using your company to make money right off the bat, it may be more advantageous for you to file for inactive status. This will allow you to file taxes without having any revenue coming in.
I recommend going with this option if your goal is to experiment with different ideas before finding the right one permanently.
The other option is an active one, which means that you'll be filing taxes and getting things set up as if it's already a fully operating company.
If you have plans to start generating revenue from day one, this is the best option for you. If you would like to fund your LLC this is How I Received Free Government Grants for My Small Business!
I started with a dormant LLC to play around with what my business would look like without actually making any money yet; then, when I found my niche, I switched over to active status to take advantage of all the tax benefits.
The bottom line is that starting your own company requires a lot of determination, hard work, and luck.
There are many ways to get started and resources available to help you along the way. Make sure you take your time researching before making any decisions.
And don't be afraid to ask for help when you need it. This will make the whole process much more manageable.
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