How to Form an LLC

You’ve determined to start a business, decided that a limited liability corporation (LLC) is the best business structure for you, and you are ready to make it all official.


Once you have decided to start an LLC then it is time to learn the procedure and take the necessary steps to make your business an actual entity of its own.

When officially incorporating and registering your business, it is important to remember that each state has slightly different rules.

Check the website for your local secretary of state to find out exactly what is required for you to properly form your LLC in accordance with local law.

Generally speaking, you should take the following steps to officially incorporate your new LLC.

1. Write/Revise Your Business Plan

write-a-business-planIf you haven’t already created a business plan then now is a great time to do that.

Business plans don’t necessarily need to be formal or follow any specific structure, but you should take the time to write down all the important aspects and elements of your business.

Not only will this help you and your investors in the long run but it will help you complete all the paperwork required to form your LLC.

The official paperwork is not the place to create first drafts of answers to important questions that you will need to answer over and over again.

If you already created a business plan in the initial stages of forming your business then now is a great time to give it a second look.

Since you have decided to form an LLC, you may want to make revisions to your business plan that take advantage of the perks an LLC has to offer.

For example, you may have decided to leave a somewhat risky business activity out of your business plan because you were afraid of the legal liability.

With an LLC, all your personal assets are protected from company liability, so you may want to re-evaluate the profitability of putting that risky activity back in the running.

2. Choose a Business Name

brand-your-businessIt may seem silly that choosing a name is an entire step of its own. This step, however, is one of the most important in creating your LLC and launching your business.

The name of your business will stick for the life of your LLC. It is how you will brand yourself, market yourself, and portray yourself to the world. Because of this, it is one of the hardest parts of starting a business.

When choosing a business name, look for something that creatively conveys what you do and why you do it. Keep your target market in mind and think of names that will appeal specifically to that demographic. Once you choose a name, you should do the following:

  • Conduct an Internet search of the business name as well as the acronyms or short hand names you expect it to go by. Make sure there are no other businesses out there that have the same or a similar name.
  • If you do find a business with a similar name, make sure it is not a business within the same industry. If it is then you should go back to the drawing board and choose another name to avoid overlaps and confusion among your target market.
  • If it is a name similar to another business in a completely different industry then make sure that business has a solid reputation so that people who do make the association will do so positively.
  • If you decide that you want your business name to be unique then you should speak with a trademark lawyer about registering your business name as official property of your business. This will mean that no one else can use your business name or a name substantially similar to your business name in the future. A trademark lawyer will also do a more thorough search of existing businesses to make sure that your business name is truly unique.
  • Run your name by some people and see what they think. Without giving them too much detail, ask what they think the business is based on name alone and if they would be curious enough to explore the business further. You should run your name by people both in and outside of your target client/customer pool to see if there is any discrepancy and how that may impact your business.

If any of these do not result in a positive outcome then you need to go back and come up with a new business name. To help save time and frustration, we recommend coming up with 2-3 possible names right from the outset in order of preference.

3. Choose a Registered Agent

registered-agentA  Registered Agent is a person or business that you chose to accept legal notifications and documents on behalf of your business.

Appointing a Registered Agent is a mandatory legal step you need to take in order to be able to operate.

You have the option to hire a Registered Agent via using a specialised service, upon paying a fee of ca. $100 – $150 per year.

4. Follow Your State Incorporation Guidelines

pick-legal-structureNow that you have a name and a business plan, it’s time to do the paperwork. Visit your local secretary of state and determine what they require to form your business.

  • Most states require official articles of incorporation (you can have these drafted by a lawyer or, in most states, follow the template the secretary of state provides you with to draft your own) and
  • A registration fee (anywhere from $20 to $1000+, depending on the state).
  • Some states require miscellaneous paperwork as well.

You can use an online incorporation service to save time and make sure you get your LLC up and running in no time.

5. Get Yourself Established

register-business-nameOnce you register your business with the state and have your name locked down, it is time to make things happen! Before you can actually start doing business, you should get all the technical components of your business in place. This may include the following:

  • EIN – EIN stands for Employer Identification Number. It’s a Federal Tax Identification number for your biz. You’ll need an EIN for tax purposes, but also for opening your bank account and hiring employees. It’s free and you you can apply for it online via IRS.
  • Bank Accounts – Get business bank accounts in your business name and determine how finances will be managed. This is also a good time to decide how your accounting will be done and what technological resources you need from the bank to link up your accounting and payroll service/software.
  • Insurance – Make sure you follow your state and industry requirements for insurance coverage, including small business liability and professional responsibility. Again, all policies should be in your business name, not your own name.
  • Licenses and Permits – Check with your local city hall about additional inspections, paperwork, licenses, and permits that you need to complete before you can start operating your business. This may incur extra fees as well.

Once you have all your paperwork completed and your basic tools in place, you will be ready to start operating your business.

Good luck with your new LLC!