In the lifespan of your business, you may reach that critical crossroads where you must decide, once and for all, whether it makes sense to establish yourself as a Limited Liability Company (LLC). Getting incorporated as an LLC may not make sense for every business, especially considering the distinctive benefits each type of entity enjoys.
Nevertheless, if you are preparing yourself for an LLC filing, you’re likely looking for a bit of direction. In this post, we’ll emphasize the most critical parts of setting up an LLC. If you’re ready to take that leap into the world of incorporation, here are a few LLC filing tips you should bear in mind as you get started.
Pick the Right Name
It should be no surprise that a company’s name can play an integral role in its long-term prospects, helping drive interest and maintain customer retention. But in addition to the marketing capability of your business name, you need one that fits within your state’s rules. Certain words may not be included (as they could create a false impression of your company), and your name must be unique within the state you’re filing in. Think long and hard about your business name, especially since it will be forever tied to your company once you file.
Research Filing Fees First
When starting an LLC, you’ll be required to pay filing fees when you submit your Articles of Organization. This total depends on the state you’re registering in, and it’s worth looking into what fees you’re expected to pay out before you nail down your LLC filing. This is especially true if you have a startup that is tight on cash. Some states require filing fees that are several hundred dollars, and you’ll want to budget for these before pulling the trigger to incorporate.
Ensure You’re in Compliance
Just when you thought all the filing requirements were satisfied, you may encounter yet another step in forming your LLC. Chances are, you’ll have to satisfy a wide variety of internal and external compliance requirements before you can operate your LLC. These may include additional tax documents, annual reports, shareholder meetings or a system of bylaws. The last thing you want is to be forced to halt your operations to get in compliance with federal and state law. So check and double-check your compliance requirements before you sign your LLC filing on the dotted line.
If you need assistance, Incfile provides a Business License Research Package that can help you identify exactly what licenses you need to apply for and what paperwork you need to file.
Know Where You’re Operating
You must select a state in which you’ll file your company as an LLC (typically, this is the state where you will mostly operate, for financial and convenience reasons). If you’re planning on conducting business elsewhere, you’ll have to take additional steps to protect yourself. LLCs that operate across multiple states have to register in all states where they expect to work. In the interest of planning ahead, don’t forget to take the necessary steps to keep your business on the up and up no matter where you’ll be working.
For more LLC information specific to your state, visit our handy go-to guide.
Consider Your Management Style
Once you decide to form an LLC, you still have to make some critical decisions regarding your business structure. One of these details is the management style of your LLC: You can choose between a member-managed or manager-managed setup. The former is a structure in which all your LLC’s members participate in management and operation, while the latter involves appointing an individual or team who manage it (but may not be members of the company themselves). Both scenarios have their benefits, but in both cases, the sooner you know which you prefer, the better.
Draft an Operating Agreement
Not every state requires you to create an Operating Agreement when you establish your LLC. However, this document — which traditionally details the ownership, roles, rights and responsibilities of your members — is best applied when implemented up front. You can always change certain provisions as necessary, but since forming an LLC doesn’t require hiring an attorney, you should get details in writing as soon as possible to prevent disputes down the line — or force you to default to the operating rules of your state.
Take Taxes Into Account
The decisions you make regarding your company’s structure and membership as an LLC will directly impact how the Internal Revenue Service (IRS) treats your company. Whether you are considered a corporation, partnership or even a disregarded entity can drastically affect your tax process. Before you file, familiarize yourself with the repercussions of each of these and determine which category you’re destined to fall into when tax season comes around. This little bit of preparation can eliminate the chance of an unpleasant surprise down the line.
The above isn’t an exhaustive list of everything you need to know to get your business ready for an LLC filing, but it is a good primer on some of the key elements you should consider. Incorporation is a big step for any business. So, regardless of how big or small your company is, it’s essential to take your time and proceed with care. At Incfile, it’s our mission to help you build your business for future success, and that includes incorporation.
We’re here you to guide you through every step of the process, providing you with the critical resources you need to reach your potential. To learn even more about how our services can make starting or managing your business so much easier, just visit our website to get started today!