How To Set Up An LLC
The laws for setting up an LLC can vary from state to state but the steps are very similar. The best place to start your LLC is on our simple step-by-step LLC guides.
Step 2) Name Your LLC
First things first— you need the right business name in order to register your LLC with the state. Naming your new business goes well beyond creative branding. You could have the most catchy name in Connecticut but if it isn’t unique and legal, you can’t use it.
In order to form an LLC successfully, you have to be sure no one else in your state is using your name and that it meets state guidelines.
If you need help coming up with a catchy name, try our business name generator. You can use this tool to generate both business names and domain names.
You can also search Godaddy for available domain names.
Step 3) Choose A Registered Agent
When you fill out your LLC registration forms, you will also need to list your registered agent in most states. A registered agent is sometimes called a resident agent, statutory agent, or agent for service of process.
A registered agent will be responsible for receiving important legal documents on behalf of your LLC. A registered agent’s most important job is to accept service of process (legal summons) in the event of a lawsuit.
Many entrepreneurs choose to hire a registered agent service to help with this part of their business. You can also appoint a friend, colleague, or yourself. In most states, your registered agent must meet these requirements:
- is 18 years or older
- has a physical address in the state where business is conducted
- is available (in person) during normal business hours
To learn more, read our What is a Registered Agent article.
Step 4) File Your LLC With the State
This is the step we’ve all been waiting for— it’s time to officially form a limited liability company. You can do this on your own, with the help of a lawyer, or through a professional LLC filing service.
Most states offer online filing and fees for registering your LLC will vary from state to state.
To learn exactly how to complete this step for your LLC, just select your state.
Step 5) Create an LLC Operating Agreement
Creating an LLC operating agreement is the only way for you and your members to legally define your roles and lock down your LLC’s management and ownership structure. Having this document in place will also give you something to return to if there’s a dispute.
An operating agreement isn’t filed with the state— it’s stored in your company records. The operating agreement should outline:
- each member’s responsibilities.
- how new members will be admitted.
- how existing members may transfer or terminate their membership.
- how profits and dividends are to be distributed.
To learn more, read our What is an LLC Operating Agreement guide.
Step 6) Get an EIN
The Employer Identification Number (EIN), or Federal Tax Identification Number, is basically a social security number for your company. Your EIN allows the IRS to keep track of your business’s tax reporting.
To learn more, read our What is an EIN article on Howtostartanllc.com.
How to Maintain LLC Status
If you and your members follow the four basic guidelines below, your LLC has a very high chance of keeping its limited liability status over the long haul and in court should an issue arise.
- Transparency: Be fair, ethical, and responsible, and don’t conceal or misrepresent the state of your LLC to the state, federal government, creditors and vendors.
- Funding: There should be enough inbound cash flow/capital to keep the LLC afloat rather than just racking up huge amounts of debt to cover expenses.
- Distinction: The LLC’s financials should in NO WAY mix with personal income of founders or members – get an EIN, set up an official bank account, and keep the data separate.
- Management: While not mandatory, it’s HIGHLY recommended you have an “Operating Agreement”, which is a formally written and signed contractual agreement on finances, management, responsibilities, etc. Without one your LLC is subject to default state/federal rules which may not be as beneficial. And, with no Operating Agreement, you’re failing to leverage the flexibility LLCs were created for!at’s called pass-through taxation.
What is the Difference Between a DBA and an LLC?
LLC vs Sole Proprietor: Which Should You Choose?
LLC vs Corporation
How is an LLC Taxed?
Member-Managed vs. Manager-Managed LLCs
Single Member LLC Taxes
What is an EIN?