If starting a business is on your bucket list, you’ve probably heard the term LLC thrown around. Depending on your business idea, registering as an LLC, or Limited Liability Companies, could be a good idea. Essentially, LLCs:
- limit personal responsibility for debts and lawsuits your company incurs
- help make partnerships easier to manage
- and provide some tax flexibility
If you aren’t sure, read on to learn
What in Tarnation is an LLC?
Okay, so without going all legal beagle here, an LLC is a type of business. It is not a sole proprietorship, partnership, nor a corporation. LLCs are different for the following reasons:
- The Owners (also called members) will never have to use personal money or assets in the case of lawsuits or debt problems
- You have the option to file taxes for your profits or losses on your personal income tax statements, or you can file taxes like a corporation
- One person or multiple partners can file an LLC
- Banking, trust, or insurance companies can’t create LLCs
And there’s one big disclaimer to all of this: LLC rules vary by state.
Depending on which state you’re in, the rules, fees, and requirements for filing can vary. Here’s a 50 state guide to forming an LLC by NOLO.
Click your state to get the full picture of what you’ll need to prepare to register as an LLC. If it’s the right move, that is. Let’s look at some reasons why you might choose an LLC for your business.
First, check out this video from My Corporation, which explains the differences between an LLC and a corporation.
Why Would You Even Choose that LLC Life?
Well, that LLC life may or may not be the best option for you.
LLCs are the Gateway Drug to Corporations
First, if you are planning to become a corporation, or an S-CORP (a corporation held 100% by a single person or entity), forming an LLC is a good starting point, because it has some similarities and requires some organization to get going.
For example, when filing, you typically need Articles of Organization and an Operating Agreement between partners. These will help you establish some of the guidelines you need to run and scale a bigger company in the future.
Liability
By definition, LLCs limit the liability of members. Huh?
Basically, if you run into some money issues, or someone comes after you because they stubbed their toe in your restaurant [insert your scenario here], being an LLC means that they can’t seize your personal assets.
In more basic lingo, they can’t take your money or your stuff to pay for your business’s problemos.
So, if you run a business where these risks are real, or you just want to stay on the safe side, LLCs have the liability advantage over partnerships or sole proprietorships… and other kinds of ships, I’m sure.
Tax Flexibility
If you’re paying self-employment taxes, and you want something to change, try an LLC. Basically, you can choose whether to report profits and losses on your personal income taxes (each member of the LLC can do this), or you can file taxes like a corporation.
Having this flexibility can be nice, especially for new businesses where things are constantly on the move, and managing your finances can get hairy, especially when things are mixed up in your personal affairs.
You also have the option of filing as an S-CORP, meaning that a single person or entity holds 100% of the company.
For more information, check out what the IRS has to say about filing your taxes with an LLC. (Don’t worry, they look scary, but they’re chill and probably drink La Croix, too).
What You Need to Establish Your LLC
If you want to get your LLC done in a day, for reals, there are some things you’ll want to nail down either by yourself or with your business partners. These are the main pieces of information you’ll need in most states, but be sure to check your state’s requirements, as well.
Articles of Organization
Every LLC will need Articles of Organization, which establish the details of your business, including:
- Company Name
- Statement of Purpose
- Duration (if your business is created for a temporary purpose)
- Management (if your business is managed by it’s members or another entity)
- Business Address
- Member(s)/Owner(s) Addresses
- Registered Agent (the one who receives tax and legal documents for your business)
Download a free Articles of Organization Template from Quickbooks, here.
Operating Agreement
While an operating agreement isn’t always required, it’s a solid idea and a step toward better partnerships.
This agreement specifies the way your business will be managed and how things will be divvied up between members or owners. If you’ve already started your LLC without one, you should consider creating an Operating Agreement.
Done in a Day—Creating Your LLC Online
If you want your LLC done right, and done fast, online is your best bet. Online services walk you through the process and register your business with the state for a small fee (on top of the state fee, which varies state-to-state).
Here are some great options to choose from:
NOLO
You can create an LLC for any state with NOLO for either $99 or $299 plus the state fees.
NOLO lets you choose your state, then gives you the option of an express service with priority shipping, personalized record book kit, and a pre-filled IRS application for an EIN, or employer identification number, which you may need to open bank accounts, apply for loans, or hire employees. $299 + state fees.
Or, if you just need standard filing and shipping, and a customized operating agreement, you can get those for $99 + state fees.
Legal Zoom
With legal zoom, their landing page allows you to search for available LLC names, which can be a handy tool even if you don’t use their services.
If you search for your business name, Legal Zoom will take you through a series of prompts to assess what you need for your business. Packages range from $149–$899 plus state fees, depending on how fancy you want to get.
Also, with the typical time to complete being 5 minutes, this is a pretty fast option.
Rocket Lawyer
Rocket lawyer has a pretty great tool right up front. Their pricing calculator gives you the run down on how much it will cost to register in your state. You may want to use this to calculate the cost, before you choose a service.
If you’re a Rocket Lawyer member, this service is free. If not, the base cost is $99.95 without any of the add ons shown below.
My Corporation
Another good option is My Corporation, which has a wider range of prices, with a low end of $69 plus fees. They allow you to filter by state, and choose a standard or rush filing option.
Plus, their packages offer a wide range of add ons to complete everything you need for your business in one place.
BizFilings
BizFilings will help you register your company as an LLC, as well as a variety of other options, such as S-CORP. Their basic plan starts at $99 plus state fees, and includes a free 6 month registered agent service (meaning that they will process all your legal and tax documents).
Incfile.com
The cheapest option on the list is Incfile.com. Their basic LLC filing costs $59 plus state fees.
Their website spells it all out really well. You choose a state, then the packages automatically update with the fees and the price per package. Below that, they provide you with more details about filing for the LLC, which are very useful for reference.
Take the First, Small Step…
…into something bigger. Filing for an LLC helps you organize your thinking around your business, be prepared for managing finances and taxes, and for the future of your company. Take the first big step toward making your business idea a living, breathing thing with a government tax ID, just like the rest of us. 😜
