If you are thinking about forming a corporation, you might want to take a minute to weigh your options. Sometimes forming a corporation is not always the best choice for a business. To weigh your options you will want to look at the other options you have when starting a business, such as starting a LLC instead of a corporation.
Many people choose to form a LLC instead of a corporation because the LLC process is similar to the incorporation process. One of the benefits of starting an LLC instead of a corporation is that you will be able to receive the tax benefits of a partnership but the protection of a corporation.
Here are the steps you will need to take when starting a LLC.
Step one:
You are going to need to choose a name for your business. When choosing a business name you will need to comply with any rules that are set forth for choosing a LLC business name. Most states are going to require that you choose a unique business name. You will need to end the business name with an LLC designator, such as LLC or Limited Liability Company. There are also certain key words that cannot be included in the business name, such as corporation, bank, city, or insurance. If these words are included the business cannot be formed as an LLC, instead you must form a corporation.
Step two:
You will need to prepare and file the articles of organization or the certificate of formation, depending on what your state calls it. The articles of organization will need to include specific information on your LLC, such as the name and address of your LLC. Some states require you to include the names of all members of the LLC. You also need to list your registered agent for the LLC, which is usually one of the LLC members.
Step three:
Once you have prepared the articles of organization you will need to file them with the state’s LLC filing office. To file the papers you will need to pay a small filing fee. Most states charge $100 to file the articles of organization, but a few of them, like CA, charge an annual tax on top of the filing fee. CA currently charges an $800 annual tax on top of the $100 filing fee.
Step four:
Creating an LLC operating agreement is not required by law, nor does it have to be filed with the LLC filing office, but it is still something you need to prepare. You need to prepare a LLC operating agreement because the operating agreement defines the rules your LLC will follow. The LLC operating agreement goes into detail about the ownership arrangements, including how profits and losses will be split up among the members. The LLC operating agreement also dictates how the LLC will be managed.
Step five:
This step only needs to be taken in certain states because not all states require you to publish your intent to form a LLC. If your state requires you to publish, your intent to form a LLC you will need to publish the notice in a newspaper over a period of several weeks. Once you have published the intent to form a LLC you will need to file an affidavit of publication with your LLC filing office.
Step six:
The final step is to obtain the licenses and permits that you will need to have to operate your business. You cannot officially open your doors for business until you have completed this last step.
