Most entrepreneurs starting a new business need to first form a legal entity for the new venture. The most common choice is the LLC start up which is also known as the limited liability company.
A limited liability company, once set up, creates a separate business vehicle for starting and operating a business. The most important benefit it gives business owners is limited liability protection. However, there are other benefits as well such as more credibility, more flexibility, an easier process for raising capital and expanding, unlimited business life, and more tax choices.
Many people get confused when they get into the details of how to form a new LLC. This article will provide some basic fist steps to get you started.
DECIDE ON STATE OF FORMATION
You can form one in any of the 50 states in the United States. For the great majority, the best choice is your home state or the state where the business will be operated. Your home state will require registration of the business in any event, so there is no real benefit to forming in another state when you have to conduct similar registrations in your own state.
For more complex LLC start ups, you may consider Delaware as an option. These situations include when the owners of the business are all in different states or the business is going to be run out of multiple states. Delaware is well known for having business friendly laws and processes and it protects privacy more than most states.
ARTICLE OF ORGANIZATION
The document used to officially form a limited liability company is known in most states as the Article of Organization. Some states use different terms. Each state varies when it comes to what must be disclosed in the filing papers.
Every state requires that the business have a name that is unique and not the same as or too similar to another business name registered with the state. Other typical requirements of most states include the appointment and disclosure of a qualified registered agent and the principal address of the business. Few states will require more information such as the identity of the members or managers of the business. Some also want you to include a business purpose.
STATE PROCESSING TIMES AND FEES
Another confusing aspect of establishing an LLC is that each state imposes different fee rules and there may be several options depending on how fast you need the registration to be completed. It is important you have a completed and existing business entity before conducting any activity as this is key to your limited liability protection.
One of the biggest reasons for formation filing rejections is making the payment to the wrong state agency name. Check the rules and instructions to avoid potentially long delays and hassles.
Each state will have posted processing time estimates. Some of the states which receive a lot of formations such as Delaware and California can run as long as 6 weeks for a regular processing. Luckily, they offer expedited processing for additional fees and you can get your LLC formed in as fast as one business day if needed.