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How to Initiate an LLC Based Business?

When starting a business, choosing an appropriate business structure is quite crucial. Why? Because it is the business structure that describes how the company operates. How it turns investments into profits for the owners and shareholders. There are multiple business structures to follow for your business. All these business structures offer some particular advantages to the businesses. A business structure that shields the owners of businesses from personally being liable for the company’s liabilities, debt, in other words, is known as a Limited Liability Company.

What is a Limited Liability Company?

LLCs are becoming very common and popular in the United States as well as in other regions of the world. A limited liability company puts limited liability on the shoulders of the owners. With LLC, owners get personal liability protection with fewer regulations to be burdened with. LLCs offer multiple benefits to the owners for the operations of the business. In case the limited liability companies fail or get sued, the owners, personally, are shielded from the losses. Individuals, partners, and other LLCs can be the owners of an LLC. LLC considers its owners as members. A single-member LLC is much like a sole proprietorship, while when there is more than one member, it becomes a multi-member LLC. The benefits these members get in these two LLC are the same.

Benefits of LLC

LLC is a very promising business structure for many individuals and other companies. Why do people choose LLC as their business Structure? Because it offers many benefits to these owners to do business. If you are considering LLC as the business structure for your business venture, you get the following benefits.

  • An LLC will keep you out of the lawsuits and penalties that it itself faces. Establishing an LLC separates the owners from the company.
  • In comparison to corporations and other business structures, a limited liability company has much less paperwork and legal obligations.
  • It helps you avoid double taxation. How? By not legally binding the owners for corporate tax returns. So, with an LLC, you get pass-through tax. Therefore, for LLCs, the companies are subjected to tax only once.
  • LLC, for the business world, is more formal than some other business structures like a sole-proprietorship. This helps you bring more credibility to your business by structuring it as an LLC. This credibility works the same way for customers and creditors.
  • For small businesses, LLCs offer the perfect combination of simplicity for business structure and personal.
  • LLCs offer much more flexibility and freedom for doing business in comparison to other business structures.
  • In an LLC, you can choose the profit distribution ratio for the owners because it does not have to be in accordance with their share ratio.

Considering all these benefits of the LLCs, many prefer it as the business structure for their companies. Registering an LLC is not as complex as one might assume. It surely has its steps to follow and some requirements to complete. This guide explains those steps and requirements, leading to the successful registration of an LLC anywhere in the world. So once you decide on initiating an LLC, you can follow this guide to successfully set up an LLC.

1. Selecting a State for Business

LLCs use state statute as rules and regulations for the initiation as well as the operation of the company. States, autonomous in their nature, can have different rules and regulations set for the LLCs to follow. So when you decide on initiating an LLC, the first thing you need to do is to consider the state. Choose a state with more friendly business laws. When expanding an LLC to different states, you need to register a foreign LLC. Do not consider only the state you live in for the registration of an LLC.

2. Choose a Name

Once you decide on the nature of the business your LLC is going to perform, and the state from where it performs that business, you need to choose a name. The selection of names for the business is quite a strategic task in its nature. Here again, the state where you register is important as different states have different rules for naming the Limited Liability Companies. Still, there are some guidelines that can help you name your LLC for any state. You have to use “LLC” in the name of the company using the LLC business structure. You cannot choose names creating confusion between the business and government agencies. To choose a name for your business in accordance with state laws, you can use free business name search and business name lookup tools.

3. Selecting a Registered Agent

Once you choose a name, you need to find an agent who can deal with the documentation on your behalf. Even when LLC business structures offer much freedom, they still have much documentation to go through. When you hire a legal agent, he is responsible for the documents like filing documents and legal summons. States require businesses to hire a registered agent from that state to initiate and operate an LLC. Registered agents help you operate your Virtual Office in USA’s states.

4. Filing with the State

Once you select an agent with valid registration in the state of your preference, you need to file with the state for the registration of the Limited Liability Company. Articles of organization or certificate of the organization are the formation document that helps businesses file with the state. The articles of organization, along with the state filing fee, is what gets your LLC registered.

5. Management Structure

There are two primary structures to follow for your newly registered Limited Liability Company. Member-managed management structure puts the management in the hands of the members (Owners) of the LLCs. On the other hand, the manager-managed LLC chooses one or more managers for the management of the company.

6. LLC Operating Agreement

An LLC Operating Agreement defines the roles and responsibilities of the members/owners and the ownership structure. This legal document is not a necessity for most states to register an LLC. However, such documentation is always helpful in maintaining harmony among the owners. This document helps in defining the powers and responsibilities like organization, management, distribution, and voting. So, if you are initiating a single member LLC, you should consider a single member LLC Operating Agreement.

7. Employer Identification Number

EIN (Employer Identification Number) is essential for the existence of a business entity. States use this number to identify the LLCs and other companies. EIN lets you act as an employer within the legal bounds set by states. You will need this number to hire employees and perform financial transactions on behalf of the LLC.

8. Registering in other states

Once you register your LLC in one state, you can expand your LLC as a foreign LLC in other states as well. This strategy often helps Limited Liability Companies to expand beyond state borders by maintaining the outstanding perks of being an LLC. This is not a compulsory step for the registration of an LLC. Instead, it is more of an option for the LLCs that consider expansion as a possibility. 

9. Additional Points to Consider

To get your LLC up and running after its successful registration, you still need to consider a few more things. What is most important after registering your LLC is the registration of the assets, products, or services your LLC deals with. This is done for the purpose of sales and uses tax. This includes registration of any employees your LLC hires. States might vary on these laws. You need to comply with all the legal responsibilities to which your choice of state binds you. For hiring new employees, there are some further responsibilities that you need to consider in order to perform operations within the legal bounds set by states. For instance, you need to hire employees least at minimum wage, and also those employees must be legal to hire and offer work to.

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