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How to Form an LLC

A limited liability company or LLC is the third major form of business ownership. It has entirely a different organizational structure from the sole proprietorship or partnership. It is set up due to the two main reasons. Firstly the sole proprietorship – partnership forms of organization cannot meet the increased capital demand of commerce and industry. Secondly the company offers the protection of limited liability to the investor.

How to start an LLC:

Formation of an LLC is easy, just you need to comply with some regulations. These legal regulations may vary according to your state or country.

Choose a company name:

  • Similar like any other business, the first and most important step in starting an LLC is to choose a company name.
  • Make sure that the name of your LLC must comply with the rules of your LLC state division.
  • Also the name cannot be the same of another LLC or not already taken by the other limited liability company.
  • Your name must contain the abbreviation LLC or L.L.C or the words limited liability company.
  • The name entity cannot include restricted or prohibited words by the state such as treasury, secret service, FBI, bank, Insurance etc.
  • Do a proper research and then finalize a name that complies with all the above mentioned state regulations.

Create the Articles of Organization: Once you have decided the name the next step is to prepare and file the “articles of your organization”. It is basically a legal document outlining the operating procedures and ownership of your LLC. This agreement or legal document helps you to establish working/financial relationships with your co-owners in a more organized way. A typical agreement includes:

  • Names of the members and their percentage interest
  • The member’s responsibilities and right
  • The process of allocating the profit and loss among the members
  • Voting power
  • How the LLC will be operated and managed
  • Rules of voting, holding meetings

Select a registered agent: Most states required that you designate “agent for service of process” also referred to as a registered agent to manage and handle the correspondence of your LLC. You can nominate any person from your LLC or else you can outsource this job to a service that can handle the paperwork on your behalf.

Receive your LLC certificate: Within 10 to 20 business days (in most cases) you will receive LLC certificate of organization.

Apply for EIN:  EIN is a Federal tax identification number also known as the employer identification, used to identify a business entity. It enables you to make business transactions, hire employees or open a business bank account. EIN can be obtained directly from the IRS free of charge by the owner after the formation of LLC.

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