When you start a new business, one of the most important decisions before you is what kind of legal structure you will choose. The structure you choose for your company can impact everything from how you’re taxed to how complicated it is to operate the business.
For many small business owners, the limited liability company (LLC) structure provides an appealing option against getting sued. The LLC allows you to minimize personal liability, and to exert more control over how you are taxed. Compared with Corporations, LLCs are generally easier and more affordable to start.
But what about the timeline? Should you expect the LLC formation process to be long and drawn out? Or is it something you can handle more or less immediately?
As you can probably imagine, the answer varies quite a bit from one person to the next. There are several steps required to form an LLC, and some of those steps will involve the state processing your paperwork. As such, timelines are a little bit fluid. In some states, processing time for a new LLC can take up to a month. In other states, you can pay a little extra for next-day or even same-day processing.
There’s not always much you can do to speed along the state’s processing. What you can do to expedite your timeline is ensure you know what steps are involved, and complete those steps as efficiently as possible.
One thing every business owner has to do before launching an LLC is decide on an official, legal name for their business.
While the stipulations can vary by state, it’s generally expected that you pick a name that’s not in conflict with other businesses in the state. An online database may be available to you, though again, it can vary by state. You must also ensure that the name of your business denotes that it is an LLC.
If you wish to do business under different brand names than your chosen legal name, that’s certainly an option, and can be handled at any point after you form the LLC. No need to worry about that at this juncture.
Another important step is to choose a registered agent who will represent your LLC. Basically, this is a trusted person who you appoint to receive business, legal, and tax documents on behalf of your LLC.
In most states you can serve as your own registered agent or appoint one of your employees, though it’s quite common to hire someone, e.g., a service like Northwest Registered Agent.
The next step in the process is to put together an operating agreement. You can think of this as a basic road map for how you’ll conduct your LLC. Specifically, your operating agreement should include:
– The roles, ownership interests, and contributions of your LLC’s members.
– Information about how profits will be divided between LLC members.
– Details about how you will admit new members or handle the departure of a current member.
It’s important to note that an operating agreement is not required by law, so in some cases it may be tempting to skip this step in order to accelerate your timeline. However, a good operating agreement is important for avoiding conflict between members, and can ultimately help your LLC run more smoothly over the long term. Also note that this document is strictly internal, so don’t worry about filing it with the state.
This document, on the other hand, actually is required by the state. In fact, filing your articles of organization is effectively what creates your LLC.
It’s always wise to double check state-specific guidelines, but generally, the LLC articles of organization will detail:
– The name of your LLC.
– The address of your LLC.
– The name and address of your registered agent.
– The duration and purpose of your LLC.
– Whether your LLC is managed by its own members or has an external manager.
Typically, you’ll also need to make certain that this document is signed by one or more founding members of your LLC.
This is also the point in the process where there may be a little bit of a delay, as different states will have different timelines for handling your paperwork. Also note that there are minor fees involved here, varying by state. The cost of filing your articles of organization can range from $50 to $200.
You’ll also need to make sure you get an employee identification number, which you’ll use to file taxes on behalf of your LLC. You can get your number on the IRS website, and it doesn’t cost you a thing.
One of the main benefits of the LLC structure is that it is a way to keep your personal assets separate from your business assets. As such, you’ll want to get started with a business bank account before you start operating your LLC in earnest.
Depending on your state and depending on the type of business you’re establishing, you may also need to obtain different licenses or permits. Some examples include:
– Seller’s permits
– General business licenses
– Industry-specific licenses
This is also the point at which you can register any DBAs (or “doing business as”) that you want, allowing you to run your business under brand names different from your legal LLC name.
There are multiple steps involved with developing your LLC, and the timeline can be somewhat variable depending on the state you’re in. However, simply knowing what the process entails can be an important way to accelerate the timeline and get your LLC up and running quickly.
Amanda E. Clark is a contributing writer to LLC University. She is a graduate of Eastern Michigan University and holds degrees in Journalism, Political Science, and English. She became a professional writer in 2008 and has led marketing and advertising initiatives for several Fortune 500 companies. She has appeared as a subject matter expert on panels about content and social media marketing. She regularly leads seminars and training sessions on trends and tactics in professional writing.