Starting a business is fun and exciting. But, you realize there are so many things to do.
An important decision you will have to make is figuring out your business structure.
One of the most common business structures is a Limited Liability Company referred to as an LLC.
Before I begin the task of walking you through how to create your very own LLC, let’s get a good understanding of what LLCs are and what they can do for you.
What is an LLC
LLC stands for Limited Liability Company (LLC).
You form LLCs at the state level by registering articles of incorporation.
When you create your LLC you will either have to appoint members or managers to manage the LLC. In member-managed LLCs, members (owners) are responsible for the day-to-day operations. In manager-managed LLCs, members appoint managers to handle the day-to-day operations.
Why should you start an LLC for your side hustle?
Easy to start
It’s easy to form your own LLC. You have to answer a few short questions, pay a one-time incorporation fee, and then you’re all done.
I walk you through the steps below.
Low cost to start and maintain
Depending on your state, starting an LLC can be as little as $50 or could run you a few hundred dollars.
Since every state is different there could be extra costs. For example, states like Georgia and New York have publication requirements that could add additional costs.
To maintain your LLC you must file an annual report. Every state is different so make sure to check when the annual report is due and how much it will cost.
We have links to each state’s Secretary of State below.
Protection of your personal assets
Forming an LLC helps to create a barrier between the business and your personal finances and overall liability.
Easy tax reporting
LLCs are taxed on a “pass-through” basis. This means that the profits and losses are filed through the member’s tax returns. This makes it super easy and uncomplicated come tax time.
Now that you know what an LLC is and why it’s an excellent option for your business, the next question is – “How do I go about starting one?”
Get help or DIY your LLC?
Use an attorney
Business attorneys are excellent resources when it comes to business formation. After all, they went to school for this. But, using an attorney can be costly.
Filing an LLC through a Service
IncFile is a popular online service that allows you to use their platform to register LLCs.
The LLC service is completely free (you still have to pay the state filing fee) and easy to use.
DIY your LLC
Registering an LLC yourself isn’t hard to do. Follow our steps below and you’ll be on the way to your LLC in no time.
6 steps to registering your LLC
Let’s do a little groundwork before we register your articles of incorporation for your LLC.
Step 1: Decide what you want your LLC to do
The very first thing to think about when starting an LLC is what you want the LLC to do for you.
There are two ways to think about your LLC. Do you want your LLC to act as your main business or as an umbrella / parent company?
LLC as Your Main Business
I’ll illustrate this point by using an example. Let’s say your name is Beverly and you want to start a bakery.
If the only thing you are going to do with this LLC is your bakery, then naming it something like Beverly’s Beautiful Bakery, LLC is a good idea.
Now let’s say the unthinkable happens – Beverly’s Beautiful Bakery, LLC isn’t successful and you want to start a new business providing bouncy houses for kids’ birthday parties.
As you can see, the name Beverly’s Beautiful Bakery, LLC doesn’t work for that new business and can be a tad bit confusing.
In this case, you’ll need to either submit paperwork to change the original LLC name from Beverly’s Beautiful Bakery, LLC to Beverly’s Bouncy Houses, LLC, or create a new LLC.
But that’s not all…
You’ll also have to change everything associated with that business such as bank accounts.
Pros: Having one LLC for each business is less complicated
Cons: Changing or starting a new LLC can be timely and will incur extra costs.
LLC as an Umbrella / Parent Company (with LLCs)
In this example let’s say you know you want to have a Bakery business but you also know that you want to have a bounce house business for kids’ birthday parties, as well as sell jewelry.
You can create one LLC to act as an Umbrella Company. You can also call these types of companies – Holding Companies or Parent Companies. Then you would create separate LLCs under the main LLC for your bakery business, bounce house business, and jewelry business.
Instead of naming your business Beverly’s Beautiful Bakery, LLC you could do something like Beverly’s Productions, LLC, and then the LLCs under it could be something like Bev’s Bakery, LLC, Bounce House, LLC, and Beverly’s Jewelry, LLC.
It will look a little something like this…
Pros: This structure gives you a lot of protection
Cons: Can be complicated to set up and manage
LLC as an Umbrella / Parent Company (using Assumed Names / Doing Business As (DBA))
If you don’t want to create separate LLCs for every business, you can have one main LLC – Beverly’s Productions, LLC and then create assumed names/DBAs under it for the bakery business, bounce house business, and jewelry business.
An assumed name/dba gives your LLC permission to use another name other than the one that was registered.
It would look a little something like this…
Notice how the assumed names/dbas don’t have LLC as part of their business name. This is because they are not recognized as companies.
Pros: Easy to set up
Cons: All of the businesses share the same amount of liability. Also, someone could come to your state and register one of the DBAs as an LLC. Registering assumed names/dbas gives you no protection against someone coming in and taking that name.
For the rest of this article, let’s assume that you want to open a bakery and that will be your main business.
Step 2: Brainstorm Potential Names
Now that you know what you want your LLC to do for you, let’s start brainstorming some potential names.
Since we’ve established that we want the Bakery to be our only business for this LLC, we can brainstorm some potential names.
I recommend trying to come up with at least 5 names that you like because you don’t want to fall in love with one name and it not be available.
Once you have your list we’re going to do a business name and trademark search.
The Shit No One Told You Quick Tip #1: Be aware that there may be restrictions on what you can name your business. For example, some states make you receive special permission to use words like pharmacy, architect, and relator in your business name.
Search for Trademarks
You want to make sure that the business name you want is not trademarked or in use by any other business.
There’s nothing more frustrating than growing your business to a point where everyone recognizes your brand only to have to change everything about it because you infringed on someone else’s trademark.
Or, worse – being sued by another business because you used their trademark.
Also, be aware that names are not the only thing that can be trademarked. Logos and images can be trademarked too.
To search for trademarks go here – https://www.uspto.gov/trademarks/search
If the trademark search does come back that there is a business already using your name or parts of your name, you may want to consider using another business name altogether or consulting with an attorney who deals with trademarks for more help.
If the trademark search comes back with no results, move on to searching for your business name.
Your search should come out looking like this:
Search your business name with the Secretary of State
Next, let’s make sure that your business name is not already taken in the state where you want to register your business.
Each state has a Secretary of State division where you can search business names.
I provided a list to every state’s Secretary of State below.
Search for your business name. If nothing comes up, you should be good to go.
If there is a business using the name that you want, then you’ll want to go back to the list you created earlier and choose another name. You’ll have to do another trademark search as well.
Take It One Step Further – Think About Branding
Now that you know there are no trademark issues and the business name you want is free and clear – let’s think about your branding.
If you don’t care too much about the domain name and social media handles for your business, you can skip this step.
However, I can tell you that it only took me one time to forget this step for me to NEVER forget to do this step again.
Can you find a domain that works for your business? You don’t have to register it right now but it’s good to know what’s out there. My favorite place to find domain names is Namecheap.
You can use a site like BrandSnag to search for available social media handles for popular social media sites like Facebook, YouTube, Instagram, Pinterest, and TikTok.
Step 2: Setup a Gmail For Your Business
There are two frames of thought around using Gmail for your business. Some people think it’s unprofessional and others think that it’s fine.
Using a free Gmail account for your business, especially in the beginning is a good start. As you grow you can invest in getting your branded email address. But, for now, a free Gmail account will do.
There are so many advantages to setting up a Gmail for your business. Here are a few:
It’s Free & Forever
Yea, this is the most obvious advantage but it’s one of the best!
Google has two options for creating a Gmail. You can either create a free account or you can create a business account which is around $12/month.
Get a free version first. You can always upgrade later.
Easy to Use
Over 1.5 billion people have Gmail and for a good reason – it’s easy to use and set up.
All Your Business Activities In One Place
Having Gmail gives you access to other Google services such as Google Drive, Google voice, and so much more.
If you need a professional business phone number you can get your very own Google Voice Number. This way you don’t have to put your actual cell phone number on things like your website.
Save all your important documents in your drive folder. This way you never have to worry about losing important documentation. You can also put the Google app on your phone for easy access to your documents.
Organize your life and your business with Google Calendar.
Step 3: Get a Business Address
This is often an overlooked step when forming an LLC.
If you don’t have a physical business address, you’ll have to use something like your home address. I don’t know about you, but I don’t like having my personal address all over the internet for everyone to see.
Also, when you’re ready to start applying for business loans and credit cards, lenders will see you as more credible which may increase your chances of getting approved.
The business address is the physical location of your business (this should be in the state where you intend on filing your LLC) and your mailing address is where you want your mail to be sent.
These two addresses can be the same or they can be different.
For example, you can have your business address in the state where you filed your LLC and your mailing address for your business at your home office which could be in a totally different state.
You can use a virtual service like ipostal1 to get a virtual business address. IncFile also has a virtual business address service as well.
Step 4: File Your Articles of Organization
Now that we’ve done all the hard work of making sure your business name is free and clear to be used, we have a business address, and we have a dedicated business email address you can get started with filing the articles of organization for your LLC.
Go to the state where you want to file your business. Click here for a full list of every state’s Secretary of State.
Most states will have an online filing system but some will want you to fill out the paperwork and send it in.
Answer Questions About Your LLC
While every state is different, here are some of the most common questions that you may be asked:
Name of Your LLC:
Make sure to include the LLC as part of your business name. For example, Beverly’s Beautiful Bakery, LLC.
It shouldn’t matter how you write LLC (LLC, llc, L.L.C., l.l.c, etc). The important part is that you need it as a part of your business name.
How is it Managed:
Will your LLC be managed by members or will members of the LLC appoint managers? Members are the people who have ownership of the company. Managers are appointed by members to act on behalf of the company.
This is a person or a business that is responsible for getting important documents to the LLC. This person or business needs to have an address in the state where you are registering the LLC and has to be open from 8-5 pm for most states.
Physical Address: This is the address where your company is physically located. If you don’t want to use your home address, use a virtual one instead, like ipostal1 or IncFile.
Mailing Address: This is the address where you want important information to be mailed
The business’ physical address and mailing address can be the same or they can be different. The important thing to remember here is that the physical address needs to be in the state where the company is registered.
The Shit No One Told You Quick Tip #2: If you’re confused about any of these steps, give the secretary of state a call or send them an email if that option is available. They know the forms better than anyone and can answer your questions quickly.
Pay Your Filing Fee
After you pay your filing fee it normally takes anywhere from 5 to 10 days to get the articles of incorporation paperwork back in the mail.
Go ahead and file that paperwork in the Google Drive you created for your business.
Step 5: Create An Operating Agreement
An operating agreement is a written agreement created by the members of the LLC on how the LLC will be managed.
No matter if you are a single-member LLC or multi-membered LLC, an operating agreement is still a good idea to have in place because it helps to avoid piercing the corporate veil.
Your operating agreement will more than likely cover the following:
- Your business name, business address, registered agent, and business purpose
- How it is managed (member-managed or manager-managed)
- Ownership percentages if it is a multi-member LLC
- How the LLC will be taxed
- What members have contributed to the LLC
- How distributions will be handled
- What types of actions need to be consented to by members of the LLC
- Meeting schedule for the LLC
- How liquidation and dissolution will be handled
- How the operating agreement can be amended
Step 6: Get an Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a 9-digit number assigned to you by the IRS for tax purposes. Think of an EIN as your business’s social security number.
It’s a good idea to get an EIN because:
- You will need it in order to open a business bank account.
- It helps you to establish business credit.
- Reduces your liability because your personal assets will be separate from your business assets.
- Protects your identity because you will not have to use your social security number.
To obtain an EIN, you can fill out the online application here. Answer a few questions about your business and you will get your EIN instantly.
The Shit No One Told You Quick Tip #3: Save this document in your drive folder from the Gmail account that we started earlier for your business. If you lose this document there is no easy way to get another copy. You’ll have to call the IRS and speak to an agent about getting a copy (and who wants to call the IRS?)
Every State’s Secretary of State and Videos To Help Guide You Along The Way
Here are some helpful links and videos in case you need a little more help.
District of Columbia
Give yourself a round of applause!
You’ve just created your very own LLC.
Go forth and make Shit happen!