Simple Steps on How to Get an LLC for Your Business

An LLC—or Limited Liability Company—is a type of business wherein the owners are not personally liable for the debts and losses of the organization. It’s perfect for business owners who want to separate their company assets from personal ones via pass-through taxation.

Thinking of establishing your own LLC but don’t know where to do it? Nevada is one of the best states to do so because it doesn’t require these companies to pay income or corporate taxes. That means turning a bigger profit for your bank without being personally responsible for its liabilities.

Today, we’ll go through the simple steps of the LLC formation process. Keep reading to see how you can build your company in this convenient but prestigious business structure.

Why Choose an LLC?

An LLC is an excellent business structure to go for if you want to protect yourself from debts and lawsuits your company might face in the future. That way, you don’t tarnish your good name, thanks to limited liability.

This is in contrast to sole proprietorships and partnerships, two business entity setups wherein the owners are personally liable in the goings-on of the business.

Another reason to consider starting an LLC is pass-through taxation. If you build a corporation, you might fall victim to double taxation or being taxed twice on the same source of income. With an LLC, the taxes simply “pass through” the business and go to the members instead. So, taxes are paid only once, never as corporate tax. 

In short, an LLC strikes a balance between limited liability and pass-through taxation, making it way easier to manage than other business entity setups.

LLC Formation Process: A Step-by-Step Guide

1.   Research and Naming Your Business

When you’re absolutely sure you want to put up an LLC, it’s time to name your business. You can’t just name your business whatever you want. It has to be suitable to what your company does and compliant with the state’s naming requirements. 

For example, in Nevada, LLCs must have the abbreviation “LLC” in their name. You can also opt for other forms of this, such as “Ltd.” Or “LC.” It’s also pertinent that your business name won’t be confused with government organizations like the State Department or the FBI. Finally, you must ensure that your registered name isn’t similar to any other existing LLCs.

2.   Figure Out the Legal Requirements

When you’re ready with a business name, consult with an attorney to understand all the legal requirements for your next steps. They will also discuss any licenses and permits you need to obtain for your new LLC. Here are just some of the papers and permits you need to figure out:

•   Articles of Organization
•   Employer Identification Number
•   Operating Agreement
•   Business licenses
•   Sales tax permit (if you sell goods)
•   Health and safety permits (depending on your industry)

3.   File Your Articles of Organization

The Articles of Organization form is the paperwork you submit directly to the state to legally register your LLC. This is where you declare your business name, the purpose of your business, the management structure, and other details. Then, you submit the form to the Secretary of State and wait for their approval and your Certificate of Organization. 

Note that there is a filing fee for this, but it differs per state. Expect to pay anywhere between $50 and $500 for this.

4.   Draft an Operating Agreement

An Operating Agreement isn’t always required for LLCs, but it’s a great way to put the rights and responsibilities of people within your company in writing.

This document outlines the company’s organizational structure, regulations, distribution of profits, work agreements, exit strategies, and other rules and details of operation. It’s pretty much your guide for how to run your company.

5.   Designate a Registered Agent

Then, you must find a registered agent to be your liaison to the state government. These agents ensure that you’re always on top of your tax obligations and paperwork for the state. They are also in charge of your legal communication for summons, annual report reminders, and more.

You can hire an agent through a professional service or recruit one on your own, as long as they are reputable and have prior experience.

6.   Be Aware of All Tax Implications for Your LLC

Lastly, before you start running your business, make sure you understand all the tax implications of having an LLC. Obtain an Employer Identification Number to help your future employees with their taxes. Ensure that you understand how to pay your own self-employment taxes, too.

Common Pitfalls to Avoid When Starting an LLC

While the steps above are quite straightforward, there are still some common mistakes business owners make during their Limited Liability Company registration. Here are some of those pitfalls and how you can avoid them.

•  Applying as an LLC in the wrong state: The laws and regulations for LLCs differ depending on the state and jurisdiction they are filed in. If you don’t do enough research, you might end up registering your company in a state that demands extremely high taxes. To avoid this, do your due diligence in researching the best states for business formation. For example, consider Nevada, where you don’t have to pay state corporate tax.

•  Not investing in professional guidance: Establishing your own LLC is no walk in the park. If you’re not confident you can do it on your own, don’t even think twice about getting a professional to help you out. Consult with attorneys, tax experts, and business formation specialists to help you process everything and draw up your paperwork.

•  Filing the wrong taxes: Before registering your business as an LLC, make sure you understand the tax implications of your company so you don’t file the wrong taxes. The best way to avoid this problem is by hiring a tax consulting service to make sure you’re tax compliant.

Let NCH Be Your Guide in Establishing Your Own LLC

While forming your own LLC can seem intimidating, the steps to creating one are actually clear and straightforward. After doing research to ensure that it’s the business structure that suits how you want to run your company, all you have to do is file your paperwork. This includes your Articles of Organization and drafting an Operating Agreement. Finally, designate a registered agent to have your affairs in place. 

 Still not sure how to make your first move in your business entity setup? The NCH team can help you explore your options and guide you every step of the way as you build your LLC. Check out our LLC formation services here.

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.