How to Form an LLC

How to Form an LLC

Starting an LLC is a long-drawn-out process. There are several steps, which begin from choosing a name to obtaining business licenses and permits. The federal, state, and local laws oversee the running of these corporations.
BusinessZeal Staff
Creating an LLC, or Limited Liability Company, is very advantageous to the business for a long-term plan. However, the process is very complex. The person must consult an experienced business attorney to make sure that the business complies with the state's legal necessities for all the steps.

Choosing a Name

Choose an apt business name. In many states, it is a system to append LLC or Limited Liability Company to the business name. The business name must identify the company's products or services. Employ personal and professional creativity when finalizing a name. Consider whether the name will have trademark protection. As having a website is essential, it is necessary to check whether there is an existing domain name already. Search the availability of the selected business name for sameness to existing names. As per trademark law, if a business name is similar to a competitor's name, the competitor's legal rights may be violated. This is called 'trademark infringement' or 'unfair competition'.

Registration

Register the name. This is done with the local, state, or federal government. Due to this, any other corporation, LLC, or limited partnership would not be able to copy the name. When the official business name is registered and the person intends to sell products or services using another name, it becomes necessary to file a fictitious name statement in the state or county.

Operating Agreement

Create and sign an LLC Operating Agreement. This would facilitate structuring the working and fiscal relationships with the co-owners. In this agreement, the following issues are planned:
  • Percentages of the owners in the LLC
  • Share of profits and losses
  • Rights and responsibilities of each owner
  • Future of the business if one owner exits
Although one person is the sole owner of an LLC, it is wise to create an LLC Operating Agreement. Such an agreement guards the limited liability status, heads off economical and management misunderstandings, and ensures the business is dictated by self-rules and not those laid down by the state.

Articles of Organization

Pen down the LLC's Articles of Organization. These are made up of the basic identifying and operating characteristics of the LLC. After filing and approval by the state, these articles legally make the LLC as a registered business entity in the state. The following information make up the articles of organization:
  • Name and address
  • Nature of the business
  • Name and address of the registered agent
  • Name of managers and members
File the LLC's Articles of Organization with the Secretary of State office in the state.

Licenses and Permits

Procure business licenses and permits from the federal, state, and local governments. The permit and license requirements for new LLCs have three basic aims:
  • to identify the business and ensure the person is responsible for self-actions
  • to safeguard the public health and safety
  • to keep track of the monetary issues for tax purposes
There are two types of federal tax registrations. The first is to apply for an Employer Identification Number (EIN), i.e., Form SS-4. This can be obtained online. All LLCs who hire employees have to apply for EINs. The second registration is required if the business is a corporation. A federal license or permit is not required unless the business or product is regulated by a federal agency like:
  • investment advice (the Securities and Exchange Commission)
  • public transportation and trucking (the Motor Carrier Safety Administration)
  • tobacco products, alcohol, and firearms (the Bureau of Alcohol, Tobacco and Firearms in the U.S. Treasury Department)
  • preparation of meat products or production of drugs (the Food and Drug Administration)
There are certain environmental regulations at the federal level. Securities laws require businesses to register the sale of some kinds of ownership interests with the federal Securities and Exchange Commission.