The day a company turns “official” is an exciting milestone for any small business owner. However, getting there can prove confusing for first-time entrepreneurs. For those considering taking their businesses to limited liability company (LLC) status, here are some helpful tips for success.
What Is an LLC?
An LLC is a type of legal structure for a business. Like other business structures, the LLC status dictates how a company will be taxed, as well as who will be responsible for its liabilities. According to Incorporate, benefits of making your business an LLC include:
- Avoiding double taxation. With LLCs, owners can’t be taxed twice on the same source of income.
- No residency requirements. Owners do not have to be U.S. citizens.
- Legal protection. When your business is an LLC, your personal assets are protected against business debts.
- Better credibility. LLC status improves the public profile of your business.
The process of forming an LLC is straightforward, but must be approached with deliberation and thought for the best possible results.
Naming Your LLC
Choosing a name for your LLC is more than just a fun exercise. The name of your company will be a legal identifier. Therefore, great care should be taken when choosing one. FindLaw suggests the following tips when choosing a business name:
- Make sure the name is descriptive enough for potential customers to immediately understand the nature of your business.
- Keep the name general enough so you can easily expand your company’s services should you desire.
- Try to make sure the company name is unique in your field.
- Ensure the name does not violate trademark laws.
Once you’ve decided on a name, FindLaw recommends performing a thorough hunt to ensure that no other companies share it. A detailed internet search of databases should do the trick. Useful databases include those of fictitious names, LLCs and limited partnerships, as well as those for registered trademark names. A general Google search is also helpful to identify any overlooked information.
After it’s certain a business name is not duplicated, you must then file Articles of Organization with the state. In most cases, this is your state of residence. The requirements for this filing change depending on your location. In Ohio, for example, business owners must include the LLC name and address, the signature of the LLC’s registered agent (the person liable of the company) and the dissolution date. Once this information is sent to the secretary of state, business owners can take the next step in the LLC process.
Create and File an Operating Agreement
After the Articles of Organization are successfully filed, you must then create an operating agreement, which outlines all legalities of how the business will operate. It covers topics such as:
- Percentages of company ownership
- Sharing profits and losses
- Company roles and management
- Member withdrawal
- Dissolution of the company
While operating agreements are not required in every state, they usually prove to be an excellent failsafe against owner conflicts. Operating agreements are changeable even after adoption and are best written with the help of a lawyer.
Obtain Business License and Permits
Business owners must also obtain licensure and permits to operate. All LLCs must register with their state government. At the federal level, LLCs must acquire permits if they deal with one or more of the following:
- Alcoholic beverages
- Firearms, ammunition and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics
Starting an LLC can initially seem daunting. However, completing the process is a reward in itself. Doing so allows entrepreneurs to arrive one step closer to their goal of running their own successful companies. Additional Sources: NOLO, Bplans, Ohio Small Business Development Centers.
Starting Your Business the Right Way
Those who want to fulfill their dreams of entrepreneurship can benefit from the right training. The online MBA from the University of Findlay provides a practical curriculum in a convenient format designed to fit busy lifestyles. With four concentrations to choose from, students can tailor their education to fit their unique interests and goals.