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Home Business
How To Set Up an LLC

How To Set Up an LLC for a Startup? 

The Editorial Team by The Editorial Team
January 18, 2023
in Business
Reading Time: 5 mins read

An LLC or a limited liability company gets multiple taxes and personal assets benefits. It is a business structure that combines a partnership’s simplicity, flexibility, and tax advantages. When you think of starting an LLC, you should know that it can have one or more owners, usually referred to as members. There are no limits to the number of members involved when it comes to creating an LLC. Millions of businesses in the US have adopted this structure and find it ideal for their business. Here is a handy guide to help you understand how to set up an LLC. 

Why Form an LLC? 

Before we talk about the process of how to set up an LLC, let us critically analyze and understand the pros associated with it.

  • Members are not personally liable for any of the actions involved in the company. No one can harm the personal assets of the members. 
  • You should note that LLC is a pass-through entity, and it makes it much easier to file taxes. If the business faces any loss, you can use it to lower the tax returns. 
  • It even allows for flexibility in the higher management and allows the members to manage the business more effectively. 
  • The paperwork required for forming and starting an LLC is much more cooperative. 
  • Starting an LLC gives exclusive rights to the members to use the name of a business entity that exists in the state. 

Let us understand the cons associated with LLCs.  

  • While setting up an LLC is easy, you should also check the fees. The prices may vary depending on place to place.  
  • Besides, transferring membership to the LLC may not be easier. While discussing how to set up an LLC, you should know that some states have strict laws that the structure will have to be dissolved even if there is a minor change in ownership. This perhaps impacts the investment opportunities that the company can avail itself of. 
  • If you pay taxes for the LLC as a partnership, you should know that all members will be considered self-employed. Falling in this category implies that the members will have to look after their own social security and Medicare taxes. 

Critically analyze the pros and cons before jumping to find the process of starting an LLC. 

Read Also: How to Select the Best Small Business Loan

How to Set up an LLC?  

Many small businesses often decide to start an LLC because of the benefits it provides. Follow the steps below to set up your LLC company.  

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Decide on a Name 

The first and most important task is to choose a business name. Make sure you check the state requirements for naming the LLC before deciding on the name. Most states have restrictions in terms of words and will not allow you to choose business names that anyone has previously used. Go through the requirements and finalize the name to proceed to the next step. 

Choose a Registered Agent 

A registered agent is an individual who agrees with and will be willingly attending to the lawsuits and official legal documents on behalf of the company. The registered agent will further pass the documents to the right people or members. 

Preparing the LLC Operating Agreement 

When you want to understand how to set up an LLC, you should first start by working on the LLC operating agreement. It will provide you with the roadmap and directions to running the LLC. Make sure you include everything, from how profits or losses will be allocated to how each member will have rights in the organization or how the business will be governed and supervised.   

Complete Requisite Paperwork 

Without proper paperwork, you can never complete the procedure of setting up an LLC. Each state has its own way or process of handling things. You must file paperwork and sign it properly. Make sure you mention the purpose for which the LLC has been formed and the length of its existence. You will have to pay the fee along with the paperwork. The cost may vary from state to state and could go exceptionally higher in some areas. 

Obtain a Certificate  

The authorities will check the documents and paperwork that you may have submitted. Once approved, you will receive a certificate that the formation of an LLC has been approved. The company exists officially, and you should focus on completing other formalities such as tax ID and business licenses. Both steps can take multiple days depending on a number of factors. Make sure you research in advance the documents that may be required for the LLC’s formation. 

Read Also: Startup Business Loan Options for Entrepreneurs

Register Your Business 

If you are planning to do business in more than one location, you would have to seek permission from the authorities. Register and get the certificate to work in other locations. 

LLCs are flexible and may work well for businesses. Most small business owners see LLCs as relatively easy to set up and find the structure easier to maintain. The problem may occur when there is a dissolvent of a member. We have covered all the steps that you should follow to learn how to set up an LLC. Make sure you submit all the paperwork and create proper agreements before starting your LLC. Keep your LLC active and file annual reports every year. You may even have to pay an annual fee to continue running your LLC for your startup.  

Tags: business agentcreating an LLCstarting an LLCwhat is a limited liability companywhy form an LLC
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The Editorial Team

The Editorial Team

Hi there, we are the editorial team for WomELLE to help you succeed in business. WomELLE is a community working to support women by helping them achieve their business goals through specialty services, leadership, mentoring, and networking. The magazine "WomLEAD" is to help you succeed as an entrepreneur, business owner and leader.

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