While applying for an LLC is not complicated, there are several steps that you need to follow to make sure you form your business correctly.
How to form an LLC
Depending on the state in which you will be starting an LLC, you may not have to take all the steps outlined below. Your state business office will be able to provide you with more information on what particular steps you will need to follow for properly setting up an LLC.
1. Choose a Business Name
It's important to spend some time thinking about your new LLC's business name. In addition to choosing a good name for business and marketing purposes—for example, one that will help you build and establish brand identity—there are other important legal considerations as well.
First, your LLC's business name will need to indicate that your business is, in fact, an LLC. This means you will need to use a designation such as "LLC" or "limited liability company" as part of your name. You also can't include in your name any words that your state has restricted from being used in an LLC name. For example, words such as "Bank" or "Insurance" are commonly restricted by most states. Check your state's list of restricted words to make sure your chosen business name doesn't contain any words it shouldn't.
Also, make sure your proposed business name doesn’t infringe on any existing trademark. You can check for potential infringement by searching online using the Trademark Electronic Search System (TESS), a database of registered trademarks and prior pending trademark applications maintained by the U.S. Patent and Trademark Office.
While a trademark search isn't required, it's a smart business move, as you'll be able to see if a trademark has been registered or been applied for, which might be too similar to your proposed LLC name.
2. Check the Availability of Your Business Name
Once you've chosen a business name, the next step is to make sure another business is not already using it in your state. Your state's business office should be able to provide you with further information as to how you can determine if another company is already using your proposed business name.
If your proposed business name is available, your state may also permit you to temporarily reserve the name until you're able to get your documentation filed. In most states, your business name will be automatically registered when you file your articles of organization, so you likely won't have to register the name separately.
In addition to ensuring the name you've chosen isn't already used by an existing LLC in your state, you also want to be sure you can purchase your business name, or some acceptable permutation of it, as a domain name. The WHOIS database is a handy tool for performing such searches. If your proposed name is available as a domain name, it's a good idea to purchase it as soon as possible so you don't run the risk of losing it to another domain name buyer.
3. Register a DBA Name
Most LLCs operate under their business names, but if your plan is to run your company under a name that's different from its business name, you will need to register a DBA ("doing business as") name. Also known as an assumed name or a trade name, a DBA name is a name that's different from your LLC's officially registered business name. Not all states require that a DBA name be registered, so check with state authorities to determine the process you'll need to follow if you're planning to use a DBA name.
4. File Your LLC's Articles of Organization
When creating an LLC, you will need to file articles of organization with your state. The term "articles of organization" is the name used by most states, but your state may refer to the document by another name, such as a certificate of formation.
The articles of organization is typically an easy-to-fill-out document which you can obtain from your state's business or filing office. In many states you may also be able to download a blank copy of the form online. While the information that will be required varies from state to state, you will usually need only to provide the name and address of your LLC and the names of its members.
Once you've filled out your articles of organization, you will need to file it, along with the appropriate filing fee, with your state. In most states, filing your articles of organization is usually done with the Secretary of State, but some states might require you to file it with another office. The Small Business Administration maintains a list of links to state business offices on its website. Check this list for the link to your state's business office, where you can obtain more information about the proper place to file your articles of organization as well as the required filing fee, if any.
5. Designate a Registered Agent
Most states require an LLC to designate a registered agent. A registered agent, also known as an agent for the service of process, is the person who will receive service of process notices, government correspondence and compliance-related documents on behalf of your business. Most companies will typically designate one of the LLC members to act as registered agent.
6. Draft an Operating Agreement
While most states don't require an LLC operating agreement, it's still an extremely wise move to have one. An operating agreement is an essential document which provides structure for important internal business decisions. Operating agreements often cover matters such as percentage of ownership among members, voting rights and responsibilities, members' powers and duties, and provisions governing the transfer of members' interests. It should also be noted that, while most states don't require operating agreements from LLCs, some states do. You should check with your state to see whether an operating agreement is a requirement.
7. Fulfill the Publication Requirement
In some states, you may be required to publish a notice in your local paper announcing the formation of your LLC. If your state has such a publication requirement, check with your state's business filing office for more information regarding the content of the notice, how many times it must be published, and any other requirements which may apply.
8. Obtain Business Permits and Licenses
Once you've registered your LLC, you'll need to obtain business permits and licenses that may be required for running your business. The types of permits or licenses which you'll need will depend on both your state and your local government requirements, and also on the industry your business is in. The Small Business Administration website maintains a list of state business license offices here.
9. Open a Bank Account for Your LLC
It's important that your LLC has its own bank account to separate your business' funds from the personal funds of its members. Different banks will have different documentation requirements for opening a bank account for an LLC. Check with your bank to see what documents you should bring when opening up your company's account.