One of the first things that entrepreneurs do when starting a new business is to form a legal entity for the business venture. Their most common choice is the LLC start-up or Limited Liability Company.
Once it is set up, a limited liability company creates a separate business vehicle for starting and operating a business. This is a common choice for entrepreneurs since its most important benefit is to give business owners a limited liability protection.
However, there are other advantages as well, such as more credibility, more flexibility, an easier process for raising capital and expansion, unlimited business life, and more tax choices to the company.
Since most people get confused with the details on how to form a new LLC, this article will provide some basic steps to get you started with the process.
1. Decide on State of Formation
You can form an LLC start-up in any of the 50 states in the United States. Your home state or where the business will be operated is your best choice. Since your home state will require registration of the business, there is no real benefit to form in another state unless your setup is more complex.
For instance, the business owners are from different states, or the business is going to be run out of multiple states. Then your best option is the state of Delaware. Delaware is known for having business-friendly laws and processes, and it protects privacy more than most states.
2. Article of Organization
In most states, the Article of Organization is the document used to form officially a limited liability company. However, each state varies when it comes to what must be disclosed in the filing papers. There is one common requirement among all states when filing, that is a business name should not be the same or too similar to another business name registered with the state.
Another typical requirement of most states includes the appointment and disclosure of a qualified registered agent and the principal address of the business. A few states will require more information such as the identity of the members or managers of the business while some states want you to include a business purpose.
3. State Processing Times and Fees
Another confusing part in establishing an LLC start-up is the different fee rules imposed by each state. You may have several options depending on how fast you need the registration to be completed. Before you start conducting any business activity, it is important that you have completed the process as this is the key to your limited liability protection.
One of the common reasons for a lot of formation filing rejections is making payment to the wrong state agency. So always verify the rules and instructions to avoid long delays and hassles.
The processing time estimates of each state are always posted. Since some states like Delaware of California receive a lot of formations filings, regular processing can run as long as six weeks. Luckily, they also offer expedited processing. You can get your LLC formed in as fast as one business day when you pay the additional fees for the process.
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