Start an LLC in 2022 (The Ultimate Guide)
If you want to be your own boss, and you have an idea that will make money, you’re in the right place! Welcome to your complete guide to forming a limited liability company LLC. Here, you will learn if an LLC is right for you, and exactly how and where to start.
What Should I Know Before Starting An LLC?
An LLC is a combination of a sole proprietorship, or a partnership, and a corporation. LLCs protect the owner’s personal assets from business decisions and a company’s debts.
LLCs also offer a way to simplify record keeping and save you taxes. The main difference between an LLC and a corporation is that corporations have shareholders.
Corporations also have more rules and are more scrutinized by government entities than LLCs.
LLCs are usually simple and easy to form, but they are not without downsides. Going in, you’ll want to be aware that you will be taxed on your company’s profits. Those taxes will be a little more difficult than your personal returns.
Annual reports may also be required in your state. Even if they aren’t, it’s a good idea to get in the habit of creating them so you can get a full understanding of your company’s financial strength.
Before starting your LLC, you’ll need to create a plan. You want your LLC to start off strong, with fewer hiccups. If your business will have multiple partners, the basis of your plan will be your Operating Agreement. Operating agreements establish how your LLC will be managed.
Operating agreements may not be required in your state, but if you don’t have one, local and state laws will determine how your LLC is managed.
The first step to creating an operating agreement is to appoint a registered agent. The registered agent will be the person who accepts all legal paperwork on behalf of the LLC.
Next, you’ll want to establish meeting rules and buyout, or buy-sell provisions in the event a member dies or becomes disabled. A basic operating agreement will clearly state each member’s
- Percentage of Ownership
- Allocation of Profits and Losses
- Authority
- Duties
- Voting Powers
Once the organization of your organization is complete, your business is officially born, and the process of legalizing your business begins. Let’s go into more detail on that now.
How Do You Start Your Own LLC?
Congratulations! You’ve made it to the fun stuff. You’ve probably been dreaming about your company’s name for a while. Now is the time to make it official. Forbes has a great article to help you make sure you’ve chosen the perfect name for your new business. Click here to read it. https://www.forbes.com/sites/allbusiness/2016/10/23/12-tips-for-naming-your-startup-business/?sh=4e170c80904e
Next, you’ll file a Certificate of Formation with your Secretary of State. After receiving confirmation from the state that your business is official, you’ll need to apply for an IRS Employer Identification Number (EIN) if you plan to hire employees. You can complete an online EIN application on the IRS website free of charge.
Here are some additional Frequently Asked Questions (FAQs) and answers about starting your LLC…
Can I start an LLC myself?
Many people start their own LLCs without legal assistance, but it is recommended, especially if your company has many members or a complicated ownership hierarchy. You may also want to discuss your plans with an accountant.
Check out your Secretary of State’s website for more information and forms you’ll need to file if you want to navigate the process on your own. Starting with your Secretary of State will save you time and money.
Do I need a business license for an LLC?
Not in most states. You’ll need to check with city, county, and state governments to be sure.
Are LLCs expensive to start?
Most states charge a fee to form your LLC, and a fee every one or two years to keep your LLC actively registered. Again, the Secretary of State’s website is a valuable resource for this information.
If you choose to consult an attorney, the fees vary. Legal Zoom charges $79 plus filing fees. You can also purchase a prepaid legal protection plan from Legal Shield or Met Life for a monthly fee.
What records does my company need to keep?
Nolo has a great article for you to read regarding business record-keeping. Click here to read. https://www.nolo.com/legal-encyclopedia/llc-record-keeping-rules.html
The best advantage of owning your own business is the tax savings associated with the day-to-day operations. Here is a list of common expenses you’ll be able to deduct when preparing your tax returns…
- Rent and Property
- Charitable Donations
- Insurance
- Business Expenses
-travel, phone, internet, security system, utilities, etc - Meals and Entertainment
- Contractors
- Cost of products
Home-based businesses offer a simplified calculation of $5 per square foot of space used to conduct operations, up to 300 square feet, or you can track each exact expense. Just be sure you are maximizing your tax savings by keeping complete and accurate records.
Closing Statements
There you have it. You are now an executive! Head over to your Secretary of State’s website to begin your new endeavor. Best wishes for a successful and profitable first year in business!
