If you’re tired of sitting on your big entrepreneurial plans and want to make your dreams a reality, you’ll probably want to set up your own limited liability company, or LLC. Limited liability companies function in a number of different ways, most importantly shielding you from personal liability in times of legal crisis.
LLCs are an essential part of entrepreneurship and help you calculate your personal taxes in different ways, in addition to providing a structure to erect a business and start on your way to making your dreams of owning a business a reality.
If you think it’s time to set up a limited liability company for yourself, there are a few basic steps you’ll want to take first. In addition to filling out the necessary paperwork and researching the type and structure of your LLC, you’ll want to take these four steps to create a solid and long-lasting limited liability company.
Choose Your LLC’s Name
Choosing a name might sound simple, but it’s also one of the most critical decisions you’ll ever make for your new business. A business’ name has a substantial impact on the customers who interact with it and choosing a great name can help you stand out from your competition, as well as follow state and local ordinances.
Many states don’t allow two businesses of the same name to operate within their state, and many also don’t allow words such as “bank” “insurance” or “city” to be in your business’ name. Choosing a name that fits the values and purpose of your business will help you attract customers and allow you to facilitate unique and creative branding down the road, so choose carefully!
Reserve Your Business’ Name
Some business owners make the mistake of choosing their LLC’s name then waiting weeks, or even months, to file the appropriate paperwork to formalize their business and its more technical components. In the time it takes you to file the proper paperwork, someone else could swoop in and take your business’ name.
Make sure you reserve the name you’ve chosen for your business so that this event never occurs. Every state allows you to reserve the name early with only a simple filling out of a form and paying for the reservation fee. You may have to renew your early registration from time to time, but this mostly depends on the state you live in.
Decide on Your Registered Agent
Nearly every state requires that those forming an LLC name a registered agent, which is also sometimes referred to as a statutory agent. This agent is someone who agrees to receive lawsuits, subpoenas, and other official documents on behalf of the LLC and pass them along to the appropriate individual at the LLC. Your registered agent can be basically anyone you want it to be.
Most states allow any individual over the age of eighteen to act as a registered agent, even an employee or agent of the LLC. You can even contact a company that will provide you with a registered agent for a small fee, though this isn’t necessary.
Prepare an Operating Agreement
An LLC operating agreement is the document that overviews how your LLC will function, both in the grand scheme of your business and on a day-to-day basis. This operating agreement will include ownership interests and voting rights for certain members, how profits and losses will be allocated, and how meetings will be held.
This operating agreement is not always filed with the state, and some states don’t even require one to be filled out and completed, but it’s a great document for your personal records and will act as a guide for years and years down the road as you run your LLC. An operating agreement is also crucial for business owners because it defines their rights and responsibilities in order to mitigate later disagreements.
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