Setting Up an LLC

Many people would love to start their own business but do not know how to go about it legally. Nowadays, setting up an LLC is mostly opted for by a majority of business entrepreneurs, who consider this step as better way to manage personal liability risk.

What is an LLC?

A Limited Liability Company (LLC) is an attractive alternative for the purpose of incorporation of a small business, as it renders the limited personal liability of a company. As a result, it has become the most favored and easy way to set up a business entity for small entrepreneurs. However, setting up an LLC is a slightly more complicated as compared to a sole proprietorship or a business partnership firm. But its operation is quite easy as compared to running a corporation, and it is well known for its taxation and limited liability features.

It is a pass-through entity which enables it to pass profits and losses to its members, who then can record the profits and losses in their personal tax returns. This would nullify the need for the limited liability company to pay corporate taxes like that of a partnership firm. With regards to the liability feature, the LLC protects its members from any kind of personal liability which is related to the debts incurred or actions and decisions taken by the company. The company may file bankruptcy without any member worrying that his personal property can be taken over or away to pay off the company's debts and liabilities.

Guidelines on Setting up an LLC

Now comes the part about how to form an LLC. There is a common misconception among people that setting up an LLC is a very complicated procedure and takes a lot of time. This is one of the main reasons why they prefer to start a partnership firm. But the reality is that the setup is quite simple, and in no way as complicated as most people think it to be. You just need to follow some basic steps to set up your limited liability company instantly. The first thing you need to decide on is an appropriate name for your company. But simply ensure that the name that you have chosen is in accordance with your respective state's rules and regulations regarding LLCs.

Secondly, you are required to prepare and file your company's articles of organization, which is essentially needed according to the regulations. In order to file the articles of organization, you need to fill in the form which is available at your respective Secretary of State's Office of Corporations. When you do so, the LLC name that you have decided on will automatically be registered, provided that it is valid and according to the law. The next step would be to pay the required fees which may range from $100 to even $800. The variance in fees is generally due to the annual tax in addition to the filing fee, which is imposed by few states.

After doing this, it is recommended to prepare an operating agreement, which is not obligatory or required by law, but is nevertheless significant as it comprises the members' rights and responsibilities. This document might as well indicate allocation of profits and losses, and several other crucial information and criteria.

Another requirement by a majority of states is to have your purpose and plan of setting up an LLC published in local newspapers. You may be required to do so many times in few weeks, after which an affidavit of publication has to be recorded in the filing office. The last step after which you may commence your business is the requirement to obtain essential permits and licenses as per the state's regulations. These permits and licenses would legally enable you to carry out your business functions. Few of such permits are the business license, employer identity number, zoning permit, and seller's permit.

If you need some more information on setting up an LLC, you may avail the services of reputed LLC business advisers, who may even do all the documentation formalities, preparation, filing, and so on.