Introduction

The United States has one of the most business-friendly corporate cultures in the world. There are countless reasons to establish a business entity—from avoiding personal liability to protecting assets and seeking tax advantages.

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And while there are various options for business formations, the Limited Liability Company (LLC) is often the first choice for entrepreneurs and small business owners. Why? Because LLCs provide many of the benefits of larger corporations but with fewer filing requirements and fees.

In this article, you'll learn not only what an LLC is but also how to form one in seven easy steps. We'll talk about choosing a state to file in, filing initial paperwork, appointing a registered agent, creating an operating agreement, obtaining an Employer Identification Number (EIN) from the IRS, and more.

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Ready? Let's get started!

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Understanding the Benefits of Forming an LLC

When you’re starting a business, there are many options to consider when determining the right structure. An LLC, or Limited Liability Company, is one of the most popular options for small business owners—and for good reason.

An LLC provides liability protection and flexibility when it comes to taxes, meaning that your personal assets are separate from your business assets. Additionally, an LLC can help boost your credibility as a business owner by making you appear more official and established.

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Forming an LLC also has other benefits, such as:

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• Easier bank transactions: An LLC can open up an easier line of credit for your businesses than filing as a sole proprietor.

• Professional presentation: Having an LLC shows investors and customers that you take your business seriously and have made a professional commitment to success.

• Fewer restrictions: Unlike corporations, owners of LLCs have very few restrictions when it comes to managing their companies.

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These are just some of the reasons why starting an LLC is a smart option when launching a new business venture.

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Choosing Your LLC Name

Choosing the right name for your LLC is an important step in creating your business. It’s worth taking some time to find a name that will reflect the purpose and vision of your company.

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Here are key pointers to keep in mind when considering your LLC name:

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• Make sure it is not already taken

• Think about potential trademark implications

• Make sure California allows the use of the name

• Think about how this will look on a business card or website

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When looking for an LLC name, be creative but also be mindful of certain guidelines. For example, California does not allow certain words in its corporate names, including “university,” “bank” or “attorney.” Also, if you want to use two words together (e.g., "Blue Sky"), make sure you include an descriptor like "LLC" after it or risk having it called into question later on.

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Preparing and Filing Your Articles of Organization

Ready to get the ball rolling? The third step in starting an LLC is preparing and filing your Articles of Organization. These documents are officially filed with the Secretary of State, which is the entity that’s responsible for registering business names. It must include certain information, such as:

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• LLC name
• Registered agent name and address
• An effective date
• Name of the organizer who’s filing the document
• Signature of the organizer

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The Articles of Organization can be filed online or by mail, although some states require you to file in person. Whichever way you choose to do it, it’s smart to save a copy for your records.

Another important part of filing your Articles of Organization is paying the filing fee, which can range from $50-$500 USD depending on your state. For example, in Georgia, it’s only $100 USD while in California you’ll pay almost double that amount. If you’re short on cash and need help finding funding—no worries! Check out our guide here.

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Once all that is done, congratulations! Your LLC name is now legally protected—and business owners everywhere are celebrating with you!

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Appointing a Registered Agent

You’re almost there! Now that you’ve determined your business structure and registered your LLC in your state, the next step is to appoint a registered agent. A registered agent is someone who’s authorized to receive official documents (like legal papers) on behalf of your LLC. This may include tax and regulatory notices, service of process documents, and other important notifications from the state. The registered agent must be available to accept such correspondence during normal business hours (at least 9AM-5PM) and must have an address in the same state where you want to form your LLC. You can choose to appoint yourself as the registered agent, or appoint someone else with a valid address in the same state.

‍To recap: A registered agent is someone who'll be responsible for receiving important documents on behalf of your LLC and must have an address in the same state where you're forming your LLC. You can either choose to appoint yourself or someone else as the registered agent.

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Creating an Operating Agreement

If you decide to form an LLC, creating an operating agreement is the fifth step in the process. This document outlines how your business will be run, including roles and responsibilities of members, the profits and losses divided among members, and the process for conflict resolution. It's important to have a clear understanding of your expectations as LLC owners now, so things don't get messy (or litigious) down the road.

Creating an Operating Agreement is essential in order to provide structure to your business. Without it, you're essentially running your business without a roadmap — and that's just not going to cut it. Doing this will go a long way towards helping you avoid disputes that could put your business at risk.

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Here are some things you should include in your Operating Agreement:

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1. The name of the LLC
2. Purpose of the LLC
3. Member duties and responsibilities
4. Profit distributions among members
5. Process for resolving disputes between members
6. Management structure of the LLC
7. Buyout rules in case a member leaves

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Read more: How To Choose a Name for Your LLC

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Obtaining the Necessary Licenses and Permits

Another step to starting your LLC is obtaining the necessary licenses and permits. Depending on your state, you may be required to get certain licenses or permits from state and local government authorities. It’s important that you understand which permits are required for your business—not having the right ones can sometimes lead to consequences like fines.

The type of license or permit you need will largely depend on the type of business you plan to operate, so it’s best to check with your state or local government for details. For instance, businesses dealing with food service, hazardous materials, firearms, or medical related services may require extra permits or certifications.

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Read more: What Type of Business Plan Do You Need?

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Another note:

Make sure that when you fill out forms for necessary licenses and permits that you list your LLC as the legal entity applying for them. That way, if any liabilities arise from their use, only the LLC will be legally responsible—not you as an individual!

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Depending on where you live and what kind of business you operate, here are some common types of licenses and permits:

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• Business Operating Permit
• Professional License
• Tax Registration
• Food Service License
• Alcohol (Liquor) License
• Zoning Permit

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It might seem like a lot but taking the time to make sure all of these are taken care of is an important part of setting up your business correctly.

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Understanding Your Tax Requirements

The last step in starting an LLC is understanding your tax requirements. This can be a bit complicated, and even the most seasoned entrepreneurs may need assistance. To make it simpler, here's a quick overview of what you need to know:

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Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is an IRS-issued number used to identify businesses and corporations, and you'll need this to open a business banking account and file taxes. The process for obtaining an EIN is straightforward and only takes a few minutes — all you have to do is apply through the IRS website or by faxing or mailing Form SS-4.

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File Necessary Tax Returns

You are required to file taxes as soon as you create your LLC, so make sure you are up-to-date on the relevant filing requirements for your state. You may be responsible for filing an Annual Report or Employer's Returns — depending on where you live — so pay attention to any deadlines and consult a professional tax advisor if you need assistance.

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Take Advantage of Tax Benefits

The good news is that forming an LLC will give you access to some tax benefits not available when operating as a sole proprietorship or general partnership—like pass-through taxation, which allows business losses and profits to ‘pass through’ the business entity directly to its owners/members, which eliminates double taxation.

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Read more: 4 Important LLC Tax Benefits In 2023

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At this point, you should have all the necessary information about starting your LLC. The next step is taking action — so don't delay: with the right knowledge and resources, starting your own LLC can be a smooth journey towards success!

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Conclusion

Starting an LLC doesn’t have to be a complicated process. With a few steps, you can get your business up and running in no time. Speak to an advisor at But remember, with starting any business it’s important to do your research and make sure you understand the rules and regulations for your particular state.

Investing your time and energy into starting an LLC can be a great way to establish yourself as a legitimate business and give yourself the opportunity to attain the success you’ve been dreaming of. 

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‍Speak with an advisor at Vincere Wealth Management to get started on the journey to owning your own LLC today!

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‍About the Author

As Managing Partner of Vincere Wealth, Josh assists clients in navigating financial challenges and making sound financial decisions. Having someone guide you in making sensible financial decisions today can have a substantial impact on your future financial wellbeing. Josh takes great pride in guiding customers through the complexities of taxes, real estate, businesses, employer stock and international financial planning.

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Reach out to Josh today.

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