Four Steps to Setup a LLC

llc set upSetting up a Limited Liability Company is quite easy. Once you have ironed out the business plan and decided on your members, their roles and responsibilities, then it’s only a matter of legalizing the whole thing. Getting your state’s approval actually only takes one-step but the planning stage is a bit more complex. In order to prevent any mishaps or misunderstandings, it’s vital to get all the details straightened out before filing for anything.

Here are some steps that you need to do before, during and after setting up your LLC

Research on State Laws

Laws regarding setting up LLCs differ from state to state so it’s important to check with your Department of State. In Delaware, you need to head on over to the Division of Corporations office or read about the laws and statutes about LLCs online. There are many different things you need to find out before you begin forming your Limited Liability Company. One vital thing is your state’s annual fee for setting up an LLC. This could eventually make or break your profit margin. Another is your state’s position on taxes and operations regarding your LLC.

Pick a Name 

The next step in setting up a LLC is deciding on a name. A company’s name is valuable for two distinct reasons. First, it’s a marketing tool that gives your clients a peek into what you’re offering and second, it’s vital for legal reasons. 

  • Original. First and foremost, your company’s name must be original. Check out your local county office to see whether your desired name is already taken. It should be original as not to confuse you product or service with another and to avoid any legal problems in the future.
  • Connected to Your Service/Product. Your name should have something to do with the service or product you are providing. Make it catchy and appealing to your target audience. Decide on spelling, phrasing and first impressions. You may also opt to use either a “legal name” or a “fictitious name”. The former is basically your full or last name. A fictitious name can be anything as long as it’s original. Either way, you will be required to record your business name on all legal or government forms and papers. This would also be needed in case you want to apply for a federal employer identification number and other such legal matters.
  • End in LLC. Whether going with a legal or fictitious name, it would have to end in either LLC, L.L.C., L.C., Ltd. Liability Co. or other official abbreviations for a Limited Liability Company. A full list can be fond on Section 105 of the Uniform Limited Liability Company Act. As a business, you can’t use other abbreviations like Co. or Inc.

Fill out Form

After you have all the details of your LLC sorted out, you need to fill out a Certificate of Formation. Sometimes referred to as Articles of Organization, this document is the first step in getting your LLC recognized by the state. Processing this would get you one step closer to having your LLC up and running.

  • Where to get it in Delaware. In Delaware, a Certificate of Formation can be requested from the Department of State, Division of Corporations office. It is also available online at the official State Website.
  • What it contains. Within the document, you have to specify a number of things. First, is the name of your LLC. Next, you have to fill in the address of your business. If you are working from home, you can place here your home address. Your business address may be different from your Registered Agent’s. A Registered Agent is a person or business that would receive important documents in behalf of the LLC. It’s important to get a reliable Registered Agent as they are responsible for all your business’ paperwork. They must have a legal address and be in operation during business hours. A post office box cannot be used as an official address. They must have a physical address. You can become your own registered agent if you have a physical address and would have someone present during business hours. You may also specify in your Certificate of Formation the latest date of dissolution. This is not required but must be a specific date if applicable.
  • Processing. After filling in all the necessary information, all you have to do is file it. This can be done without the aid of an attorney. In the State of Delaware, the normal filing fee is $90. They also ask for a cover letter with your name and contact details for a peed transaction. It’s also possible to file an out-of-state LLC in Delaware.

Operating Agreement

Another vital document, though not one that’s required by law, is the operating agreement. It would be wise to draft one up in the presence of an attorney, though one isn’t necessary. An operating agreement is a document that outlines all the significant aspects of the LLC’s operations. It should include the members’ rights and responsibilities as well as their financial and management statuses. Every little thing should be put into writing as to prevent any ambiguities in the future. This document can also be a basis or reference when disagreements arise among members. Other things that should be included are members’ ownership percentages, capital contributions and on what terms they can leave the LLC.

After all of these steps have been done, you’re ready to start operations on your LLC. Again, look into your state’s laws first before proceeding. It would also be helpful to brush up on the Limited Liability Act of the State of Delaware if you are thinking of setting up there. Also, make sure to keep your members abreast of the status of your LLC as it goes through all the legal channels. Then, it is all a matter of taking care of your company and ensuring you keep all your transactions legal.



About Brian Davis

LLC expert author and advisor. Has advised thousands of entrepreneurs over the last 15 years on which business structure is right for them. Brian is not an attorney or tax professional. If you need tax or legal advice, seek the assistance of a local attorney or CPA.
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