Before you can even begin to think about forming a LLC you need to know what one is. A LLC is a limited liability company and it is one of the many different structures that you can choose for your business. Here are some quick facts that you need to know about a limited liability company so you can get a better understanding of what one is:
A type of business ownership that combines several features of both the corporation and partnership structures
- Is not a corporation or a partnership, is actually a hybrid
- Is sometimes called a limited liability corporation, but this is not correct. The correct terminology is a limited liability company
- Owners are called members rather than partners or shareholders
- Number of members is unlimited and can be individuals, corporations or other LLCs
- Harder to set up than a partnership, but easier to set up than a corporation.
When it comes to setting up a limited liability company one thing that you need to know is that they are now allowed in all fifty states, it used to be that only some states allowed them. But another thing that you need to know when it comes to setting up a limited liability company is that there are only two main things that you have to do:
Articles of Organization
- Operating Agreement
Here are six steps that you can follow to form a limited liability company for your business:
Choose a business name. This is the first thing that you need to do because without a name you cannot have a business. But when choosing a name for your business so that you can form a limited liability company you are going to need to find a business name that is not already in use in your state and one that also complies with your specific state's limited liability company business naming rules. In order to get the information that you need to know for the name requirements for your business for your specific state you are going to need to contact the Secretary of State's Office of Corporations in your state. But for the most part you can name your LLC's business just about anything that you want as long as it doesn't include the words `bank', `insurance', `corporation', or `city'. But the name of the business will have to end with `LLC' or other designations of `LLC' that are approved by your specific state.
File Articles of Organization with your state. In order to form a LLC you are going to have to file a document that is called "Articles of Organization" with your specific state. In order to file these documents you are going to first need to get the forms that are required for this purpose. The best place to go and get these forms is your state's Secretary of State's Office of Corporations. The reason for this is that this office has some fill in the blank forms that you can use for this purpose. But the best thing is that these forms are very straight forward and require nothing but simple information that can include but is not limited to the name of your business, your business's address, officers' names, etc.
1. Limited Liability Company 101
This website is the best resource for everything that you need to know about LLCs, including what one is, the differences between an LLC and other forms of business and how you can go about starting an LLC.
3. Limited Liability Company Overview
This is a do it yourself law website that gives you the opportunity to file the forms that are required for an LLC. The website provides you with everything that you need for a really low fee.
4. How to start an LLC for Website
This is a variety of answers that have been given to one question by other people. But this website provides you with plenty of useful information from a normal person's point of view.
5. The Basics on How to Start an LLC Business
This gives you a very brief description of what you are going to need to do in order to start an LLC. But it also talks about what an LLC is and the advantages and disadvantages of an LLC.
7. Business Buying FAQs
This website belongs to a lawyer that helps people form LLCs and other types of business. It also offers advice on what you need to do to form an LLC and how to buy other businesses.
8. Checklist: Starting a Limited Liability Company
This article provides you with a brief checklist that you can use to ensure that you have completed everything that is required to form an LLC. It also gives you a brief description of each step.
9. Limited Liability Company
This article provides you with everything that you need to know on LLCs, including what one is, the benefits of forming one and what you need to do to form an LLC.
Pay your fees. In order to form a LLC you are going to need to pay a fee to file your Articles of Organization in your state, and all states require you to pay this fee. Depending on what state you are filing the Articles of Organization in the fee will vary from $100 to a $1,000.
Create an LLC Operations Agreement. This is the only other thing that is actually required for you to do in order to form an LLC. This document does not need to be filed with any office, but it still needs to be created and kept with your other business records. The reason for this is that you are going to need it if there are ever any legal or financial issues that arise at a later date. But this document is simply an agreement among all of the people who will be managing the LLC, so if it is just you then you are the only one who needs to sign it, but if there are others everybody needs to sign it. But in addition to it being an agreement this document is also going to lay out the structure of the business and the rights and responsibilities of each party. But this does not refer to regular employees, only members of management.
Publish intent to form an LLC. This is not going to be required in every state so you will want to make sure that you look into whether your state requires it or not before you publish your intent. The best place to go to look into this is your Secretary of State's Office because they can tell you if your state is one that requires you to publish a notice in your local newspaper that you intend to form an LLC.
Obtain business license and permits. Once you have gotten everything done your LLC is considered set up and it is also now officially an LLC, so that means it is now considered an actual business. So what you will need to do is to start acting like a business. But in order to do that you are going to need to get a business permit, a federal tax ID, and any local zoning permits that are required by your county. Once you have gotten all of this stuff done you are then considered legally open for business.
Now that you know the basics of starting and forming an LLC here are some other things that you should keep in mind to make this process even smoother.
Many people find that hiring a business tax lawyer is actually beneficial when forming an LLC. The reason for this is that a business tax lawyer already knows everything that needs to be done, including what paperwork needs to be filed, where to file the paper work, and how much it is going to cost. Basically they know all of the ins and outs of forming an LLC. So by hiring an attorney to help you with this process you are going to be saving time and effort that would be put forth by you. Not to mention the fact that your documents will be formally organized, meaning nothing will get lost or misplaced.
Make sure that you have a business plan already written out. Every small business needs to have some kind of business plan and even though this is not required for to form an LLC it is still good to have on hand. The reason for this is that if you are going to need any type of financing or any other kind of help many lenders are going to require you to submit a business plan, just like all other types of businesses. So by having it ready to go before you form an LLC you are staying ahead of the game.
When writing your business plan make sure you include the following topics:
Executive Summary - one page overview of the company. Basically this is going to provide the reader with the highlights of your entire business plan, so it would be better to write this last so you know what to include.
- Objectives - identifies the different business goals that you are going to want to achieve for your business. Keep in mind that these goals should be attainable and allow room for growth within a certain measurable time period.
- Mission/Vision Statement - this basically shows investors the essence of your company. Basically you are going to tell people what your business does and how it adds value to your customer's life. Keep in mind that you want to keep this brief and to the point you are trying to get people's attention and show them that you are different then your competitors.
- Company Summary/Ownership - this gives your investors a look at the daily operations of your business. You can include information on your employees or your plans to expand in this section as well.
- Start up expenses - this is what you are going to need to pay out in order to get your business up and running, these are only one time expenses and include things like permits and licenses among others.
- Market Analysis - this covers what your potential customers are going to be and how you are going to be able to market to them.
- Industry Analysis - this covers the future of the industry, past trends and where the current industry stands.
- Competitors - who is your competition and how do you plan on setting your business apart so that you are better than they are
- Marketing Strategy - what you are going to do to appeal to your customers, what approaches you think would work best. Also want to include how you are going to price your product and what sales approach you are going to end up using
- Financial Plan - include how you plan on financing your business. If you are looking for financing you want to include how much money you will need. Include financial statements as well, projected balance sheet, cash flow statement and an income statement