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Feeling ready to open your own business, but not sure where to start? Starting your own company can seem like a daunting task. In reality, the right tools and information can make the process a no-brainer. In this post, we break it down step by step, so that once you fully understand what a limited liability company (LLC) is, you’ll be ready to move forward with the next steps for your business.
Whether you are new to the game and just curious about opening your own startup, are looking for a better way to protect your intellectual property, or are a tech-savvy seasoned business owner, it’s important to note what are some of the main distinctions between an LLC and other types of companies.
An LLC, or legal liability corporation, is a status given to business entities that are neither a sole proprietorship nor a corporation. An LLC is by definition owned by one or more persons or “members,” and provides a legal separation between the company and any personal assets of its members. An LLC owned by one person is classified as a single-member LLC, and when there are two or more, multi-member LLC.
Benefits of an LLC
- More flexibility in tax filing
In addition to the possibility of being elected as corporations, single-member LLCs can be filed as sole proprietorships, with earnings only counted once. Taxes can be filed with Form 1040, Schedule C, and through your individual 1040 returns.
- Better liability protection than a sole proprietorship
In the event of a legal dispute or bankruptcy, personal assets are typically maintained separately and face significantly less risk of being under risk of seizure.
- Creative Ownership over LLC name
No other company can legally possess the same name as that of your LLC in the entire state where it is registered.
Steps To Opening an LLC
Ultimately, this whole process consists of you registering your business, and paying certain fees. There are a few different ways you can go about doing this.
It’s typically a good idea to check and see if the name you want to use is not already taken. You can do so by contacting the United States Patent and Trademark Office or just running a quick search.
Make sure to verify what specific requirements, if any, your state has in place for filing. Certain states ask that you provide what is known as a notice of intent for filing your LLC. Once this is done, you will need to create an LLC operating agreement. The operating agreement is required by the majority of states and is often considered most useful as a preventative measure against future issues between any LLC members.
One way is by doing everything on your own, which can save you time and money upfront. You may run into legal fees in the future, in which case you would want to hire someone to walk you through the process. Luckily, service providers like LegalZoom can offer help through every step of the process. Starting up your own business can feel like a lot at first, but enough education and the right help can make it a lot less complicated than going at it alone.
