Starting a business of your own surely is a huge step to take, and requires understanding some basic bureaucratic and management steps. When your knowledge and experience are limited in this area it can seem too complicated, but motivation coming from the fact you’re going to be your boss is exciting and enough to make you go for it.
After you’ve set the intention (decided) to establish your own company, comes a detailed business plan, followed by a decision on which type of legal entity would be the smartest to register. Your decision on this will have long-term consequences on your business, therefore choose carefully. Here, you have a couple of options, such as registering a partnership, a corporation maybe, or an LLC.
What is important to mention at this point is that one of the simplest and quickest solutions would be to register LLC. For this very reason, we are going to give you some basics of what you should know when planning to register a Limited Liability Company (LLC).
- 1. It’s one of the best business structures
- 2. Liability both personal and business-wise
- 3. LLC will have to be included in the name
- 4. Each state has a different requirement for registering this type of business entity
- 5. Registration can be done online
- 6. Outsiders can manage the LLC
- 7. There are a variety of tax types available
- 8. Registration is way simpler than in other cases
- 9. Flexibility in investing
1. It’s one of the best business structures
As was said previously, it is one of the quickest solutions to register a business. It combines all the good features of a corporation, and partnership as well. The limited liability characteristic has been taken from the corporations, while flexibility in operation is something typical to the partnership. Read more about the advantages of forming such a business on LLCGuys.
2. Liability both personal and business-wise
Registering this type of business, first of all, gives you personal protection. How? Let’s say someone wants to file a lawsuit against your business, because of personal matters. Their primary motive is something they hold against you as a person, so they shoot where it will hurt the most. If your business is LLC, they cannot harm you personally, so you can sleep soundly knowing your assets are safe.
It is also a great way to prevent your business from liquidation if such a personal lawsuit ever happens. In fact, it is the only way. Other forms of business entities cannot do that.
3. LLC will have to be included in the name
As you have probably noticed, all the famous business structures registered like this, have LLC included in their name. Therefore, you should start thinking about what kind of name will your business carry and how will it sound with this abbreviation in the end. But keep in mind one thing – the name has to comply with the rules of the state where you registering your business in. Rules are different from one state to another, but usually require as already mentioned, that it ends with LLC, and that it has to be unique (there should not be another entity registered under the same name, in the same state).
If you had a really good name, but you’re afraid someone will leak the information about it and it might be stolen, there’s a possibility of reservation for a period of time, for a small fee.
4. Each state has a different requirement for registering this type of business entity
So, just as you would have to do with the name, you should also do some research on the requirements for registering LLC in the state you’re in. Based on this you will find out what kind of documents you may need for registration, and where to search for them. While doing this, you will also notice that not every state uses the same terms. Some states call it the certificate of organization, some certificate of formation. In any case, it is the same thing, so don’t get confused.
5. Registration can be done online
If you’re wondering where this kind of entity is being registered, the answer is the Secretary of the State’s page. When you gather things like the name, address, owner info, and other required information, on the webpage you’ll find a form to fill in and submit by paying a modest registration fee (in most states around 100 USD).
6. Outsiders can manage the LLC
The structure of the management can be organized in a couple of ways. What is the usual practice is that it has a group of people already members of LLC elected to manage, but there is also a possibility to delegate this task to someone outside. This person, or a group of “outsiders” will manage the entity.
It could be like a board that will vote on strategic plans and other decisions, important for the business progress.
7. There are a variety of tax types available
Since this type of entity has characteristics of both partnerships and corporations, it has the opportunity to choose the type of tax status. Depending on which kind of tax status they choose, documents like information statements and federal returns will vary according to your choosing.
8. Registration is way simpler than in other cases
As opposed to registering any other type of business, forming the LLC goes with fewer complications. In previous points, it was mentioned how the management can be different, how online registration is performed, so all this clearly shows that the process is rather simple. Some states require operating agreements to be signed, but not all. It is recommended, however, if your business has multiple members.
9. Flexibility in investing
If there are multiple owners, owning different percentages, one would think the investments must follow the ownership percentage. But, not in this case. LLC will not require the investments to be equal to ownership percentage. That’s why operating agreements are useful to have.
After reading all these basics one should know after deciding to form an LLC, one can’t think how many benefits it has, and how much a good choice it is to choose this form of business. One final thing you should know, that we failed to underline before is that the formation of such a business does not require a group of people, but can be performed by a single person.