It’s an exciting day for any entrepreneur when the time comes to officially turn yourself into a business. There are many benefits to forming a single-member LLC, including favorable tax implications, limitations on personal liability, and minimal regulatory requirements.
Setting up a single-member LLC is a fairly straightforward affair. Pull together your essential paperwork and follow the simple steps outlined below, and you’ll be a bona fide business owner before you know it.
- Choose a name. Before you file your LLC paperwork, you must choose a name for your new company, and make sure that the name isn’t already taken. Most states allow you to conduct a business name search online to verify that your preferred name is available. In some states, there may be limitations on including certain words, such as bank, in your name. Otherwise, your business name can be pretty much anything you want, as long as it includes the designation LLC, L.L.C., or Limited Liability Company.
- Draft your Articles of Incorporation. All LLCs are required to file Articles of Incorporation with the state, which lay out the basic operating structure of the company. They also cover certain important business technicalities, like specifying who will be the registered agent for your company. Sample Articles of Incorporation are available online, and some states’ online filing systems will generate the document for you after you fill in the required information.
- File the Articles of Incorporation and pay the fee. Your LLC becomes official once you file your Articles of Incorporation with the state. At the time of filing, you need to pay the mandatory filing fee, which varies from state to state. Most states have an online system that allows you to file your papers and submit your payment from the comfort of your computer, saving you a trip to the filing office.
- Draft your Operating Agreement. Most states require that the LLC retain a signed copy of an Operating Agreement, which sets forth the basics of how the LLC will operate, including the addition of new members and how the LLC will terminate. The agreement isn’t filed with the state, but kept at your place of business.
- Comply with the publication requirement. Some states still have a publication requirement, meaning that you need to run ads about the formation of your LLC in certain local papers. Be sure to check whether the state where you’re incorporating still has any such requirements, and place your ads accordingly.
- Apply for an Employer Identification Number (EIN). While some single-member LLCs opt to file their taxes under the owner’s Social Security number, most file under an EIN assigned by the IRS. Obtaining an EIN is free, and is a simple matter of applying for one on the IRS website. Once you submit your information, the EIN is assigned instantly. Even if you don’t think you need an EIN for tax purposes, you’ll still need one for things like opening a bank account or applying for a credit card for your business.
- Open a bank account and apply for a credit card. Because your business is a separate entity, you’ll want to open a separate bank account for it in order to protect your limited liability status and help with recordkeeping. Most banks offer special accounts designed for small businesses that don’t involve fees or high balance requirements. Many people also find it useful to have a separate credit card for the business. This can be particularly useful for keeping track of business expenses.
Legal Guidance in Building Your Business
At The Gouchev Law Firm in New York, we work with businesses of all sizes, including start-ups and franchise businesses. Call us at (212) 537-9209 or schedule a free strategy session today to see what The Gouchev Law Firm can do for your business.