Ever heard of the corporate veil? It’s the protection afforded to LLC company owners that dictates that the business’s debts and liabilities do not fall on them. That’s why many people opt to start these entities. If you’re about to do the same thing, here is what you should keep in mind as you make this step:
What You Must Research Before Embarking on LLC Formation
LLC formation requires that you do some groundwork by catering to the following categories.
- Naming: Each state has its own rules on what you can and cannot name your business. So, you need to check with your jurisdiction on this. But for the most part, the LLC incorporation requirements are the same. Nobody else can use the same name, and you cannot confuse people into thinking that you provide governmental services.
- Representation: Did you know that you have to have a person or company tasked with receiving your legal documents? In some states, the secretary of state takes on this role. But where this is not the case, you must appoint a person or affordable company formation services of your choice as your registered agent. You can hire the best LLC service like Zenbusiness to ensure you get reliable services throughout the year. Are there any downsides to not having representation? Yes! You would violate the law. Besides, you can miss out on important documents, putting you at risk of losing court battles or even being considered non-compliant.
- Operating Agreement: While you do not necessarily need this business incorporation document, having one will not hurt. If anything, it can help you avoid problems resulting from disagreements with other business owners. Moreover, it helps you protect your assets, especially when running a single-member organization. Please note that businesses that do not have such an agreement fall under the arm of the government and have little or no say about the outcome of their wrangles. It’s advisable to take matters into your hands and decide the LLC company rules you want to live by rather than waiting for fate.
- Tax Payments: You can always choose how to pay your taxes, which is an added benefit of opening such an entity. To deviate from the default choice, you have to select an option and communicate this to the government in writing. Before deciding on any way forward, be sure to consult your accountant and attorney or the best LLC services like Rocketlawyer on the best option for your business. Also, note that taxes will be payable at the state and the federal levels.
- Banking: Your protection will only be enforced if you couple it with measures to solidify it. Not having a separate account for your LLC company needs can mix finances, which would have you between a rock and a hard place. It makes accounting much harder and gives creditors room to come after what you own. To avoid this, consider business banking options and choose an institution that aligns with your business needs.
- An EIN: Not every LLC company will need one, but this will not be negotiable if you want to hire people or own the business with other people. Luckily, you do not pay a fee to access this service. Once you fill in the forms and send in an application, you should get a response immediately or within a few weeks of submission, depending on the mode you use. This number will be significant when remitting LLC company taxes to the authorities.
- Permits: You will need to get some licenses before you can start operating your business. For example, if you are in the food catering business, public health officials must visit your shop and inspect it for any public health violations. If they deem you fit, they will present you with a license to conduct such business. You must research what business formation permits apply to you, the application processes, and the responsible authorities.
Forming an LLC Without an LLC Service
You have two options when starting your business. You can do it alone, or you can hire the best LLC service as we will cover later. Suppose you choose to do it without affordable company formation services, you will need to:
- Research the rules applicable in your state and ensure you meet the stipulated requirements;
- Come up with a name for the LLC company and ensure that nobody else has used it. Some states allow you to reserve it, while others only allow you to use it immediately;
- Decide who will receive your documents and notices on your behalf. You can rely on cheap LLC formation packages for this role, Please note that this will be official documentation, and you must decide even before starting the formation process;
- Fill in the business formation documents and ensure every detail is accurate before sending the documents to the state;
- Draft an operating agreement and ensure you do not leave any loopholes that aggrieved parties could use to their advantage;
- Secure a taxpayer number once you have the approval from the authorities to start your business.;
- Get LLC company permits and start operating;
- File your reports.
Using LLC Services
Instead of doing it by yourself, you can always rely on LLC formation services. These are companies run by experts who have helped thousands of people start businesses like yours. Instead of going through all the steps above, you can cut it back to a few steps. All you need to do is provide the critical details about the business, and someone on the other end of the line will take care of the submission. The LLC creation services fill in the details, double-check the documents, send them to the authorities, get a response, and send them back to you. Most of these companies even offer registered agent services for free for the first year after formation. That takes a lot of work off your hands and enables you to focus on running the business. Depending on the chosen business formation package, you can even get a service that handles annual reports on your behalf.
LLC formation services are much faster and much more reliable than doing it by yourself, especially for newbies. Plus, they are much cheaper than hiring lawyers and offer more than just formation services.
Are there any other benefits to LLCs? Sure! They are also more flexible, less formal, and face less scrutiny from the government than their alternatives. So, why not form one?