How to Set Up an LLC (6-Step Guide)

After you’ve decided between an LLC (limited liability company) or Corporation as the entity holding or managing your business, understanding the process to organize is essential. An LLC provides the business owner with liability protection and other perks, such as tax advantages, flexible profit distributions, as well as less paperwork and formalities than Corporations. While setting up an LLC may feel complicated, AYC can assist with getting up and running.

#1 Choose a Name for the LLC

The first step is to choose a name for the LLC. It’s important to highlight that most states don’t allow a business entity to have two different names. So, you need to be decisive. You should also make sure that the name you are considering is not already being used by another LLC. Depending on the state in which you are setting up the LLC, you might not be allowed to use certain words that imply you are operating a specific business. For example, you can’t use “insurance” or “banking” in the LLC’s name.

#2 Select a Registered Agent

The registered agent is an organization or person (with a physical address in the state) who will agree to receive all lawsuits, subpoenas, and other legal documents on behalf of the LLC. Members or managers of an LLC can be selected as the registered agent, but a law firm is most often selected. Other companies offer registered agent services in exchange for a fee, but our law firm generally serves in this capacity when working with a client to organize their entity.

#3 Prepare the Operating Agreement

Each state has different requirements and procedures for LLC operating agreements. Operating Agreements include legally advisable provisions related to equity, capital contributions, distributions, voting rights/decision making, management, transfers, dissolution and other material terms. It is the governing document between the legal entity and the owners and/or managers of a business. This is why it’s always advisable to hire counsel for help and guidance. Some states, like New York, have a publishing requirement (announcing in the newspaper that you want to start a company) so the turnaround time to organize takes longer. In general, all LLC operating agreements will require basic information such as your business name, address, the purpose of the business, contact information, and more.

#4 File the Paperwork

After double-checking that you have all the required language in the LLC Articles of Organization and the information necessary for the Operating Agreement, the next step is to file with the Secretary of State and pay the required filing fees.

#5 Receive the Certificate from the State

Once all the paperwork is submitted and approved by the state, they will officially form your entity of record and sometimes issue a certificate of good standing. The certificate issued by the state confirms that your LLC formally exists, and it can be used for different purposes, such as obtaining a tax ID number, setting up a business bank account, or receiving a business license.

#6 Keep the LLC Active and in Good Standing with the State

After finishing the paperwork and starting the LLC, you will need to make sure that it remains in good standing with the state. This can be done by keeping the LLC active and following all your state’s specific rules. For example, some states require LLCs to file an annual report that contains information about their business plan and also pay an annual fee.