Once you have decided to start a small business and structure it as a Limited Liability Company (LLC), the next question to answer is, how do I get started? There are basic steps that generally apply in most states. But, since LLCs are governed by state laws, you’ll need to know the rules in the state where you’re registering. Each state has its own quirks and idiosyncrasies, and you’ll need to pay attention to these details from the start.
I’ve put together a few tips I’ve learned through years of helping people set up their businesses. While this guide is a good place to get started, you should consider consulting with a lawyer in your state to make sure you dot your i’s and cross your t’s according to your state’s rules.
1. Establish a Name for the LLC
For marketing purposes, it’s essential to give your business a unique name. For legal purposes, it’s required that the name of your LLC be unique enough that it can be distinguished from all the other businesses registered in your state. Checking a state’s database of business names is the surest method to ensuring the name is available in your state.
Most states require that some form of “Limited Liability Company,” “LLC,” or “L.L.C.” appear in your LLC’s name, so make sure you check what your state requires. Once you have decided upon a business name and confirmed it is available, if you’re not yet ready to register, check to see if your state allows you to reserve a name until you are ready to establish your LLC.
2. Name a Registered Agent
A LLC must have a registered agent in the state of formation. This is someone who is authorized to accept documents, such as legal service, on behalf of the LLC. Generally, the registered agent needs to have a physical address located in the state and can be either an individual or another business. You can even hire a registered agent service to take care of this duty for you.
3. File Articles of Organization
Each state requires a LLC to file valid Articles of Organization which include basic information about the company. The specific contents that need to be included in the Articles vary from state to state, but generally include the LLC’s name, registered agent, and particulars about the structure of the LLC. Once you file, your Articles of Organization will become part of the public record.
The name used in the Articles needs to be unique for your state but does not have to be the name the LLC shows to the world. If you would like to use a different name, you can operate under a fictitious “Doing Business As” name (sometimes called a “DBA”) as long as you file the proper paperwork with your state or local authorities to register the DBA. Think of a DBA as a nickname for your business.
Many states also require LLCs to file an annual report and pay an annual tax or fee to remain in good standing. You should always find out the requirements in your state and the state fee before getting started.
4. Draft an Operating Agreement
To help avoid pitfalls before they occur down the road, you should consider creating an operating agreement for your LLC which serves to detail how your LLC will be governed. It’s best to do this before you start running your new business. While not legally required to form a LLC, an operating agreement will assign duties, powers, and other responsibilities amongst the members of the LLC. It is particularly advisable for LLCs with more complex structures and multiple owners to have operating agreements from the get-go, though it is beneficial for single-member LLCs to also have an operating agreement in place.
5. Ensure the LLC Has the Proper Tax Identification and Licenses
No matter what state you start your LLC in, if your LLC has more than one member, you will need to obtain a federal tax ID number called an Employer Identification Number (EIN) from the IRS, even if the LLC does not have any employees. Thing of the EIN as a Social Security Number for your business! You’ll also need an EIN if you start a single-member LLC and choose to be taxed as a corporation, not as a sole proprietorship. Even if you don’t choose to be taxed as a corporation, most single-member LLCs opt to obtain an EIN when they form their LLC because it will likely be needed at some point down the road. An EIN will be assigned to your LLC by completing the free application on the IRS website.
In addition to filing Articles of Organization, some states and localities will require your LLC to obtain additional business licenses. Whether you need a state or local business license to operate your business can also depend on what type of business the LLC operates. Generally, if you’re selling goods or providing a professional service, there will be more licensure requirements. Be sure to check with your state and local governments to verify the license requirements applicable to your LLC.
6. Start a Business Bank Account
This critical step is often overlooked in the excitement of forming a LLC. Since one of the crucial reasons for forming a LLC is to protect your personal assets from liability exposure, having a separate bank account from the beginning of your business operations is the best way to go.
If you start mixing up your personal and business funds, you risk losing the asset protection a LLC usually offers to its owners. A business bank account will also help avoid messy bookkeeping issues stemming from the commingling of personal and business funds.
Establishing a LLC in North Carolina
The North Carolina Secretary of State’s office will govern the formation procedures for a North Carolina LLC. The Secretary of State’s website contains specific information that may differ from other states. North Carolina, for example, allows a LLC to have names ending in “ltd. liability co.,” “limited liability co.,” or “ltd. liability company.” Some other states do not allow these abbreviations. You may reserve your business name for up to 120 days as well if you’re not ready to register your LLC but want to preserve the name. To do so, complete the Application to Reserve a Business Entity.
To file Articles of Organization in North Carolina, you must pay a $125 filing fee (current as of this writing), and you can file the articles online or by mail. For Articles of Organization to be valid in North Carolina, they must include the following information:
- LLC’s name, including a proper ending with some version of “LLC”
- A name and address for each person who signs the articles
- Information on the LLC’s North Carolina registered agent, including name and valid in-state address
- An address and phone number for the LLC’s principal office (A checkbox is available if there is no primary office)
- The date when the articles will become effective
- A signature from at least one of the LLC’s members
A LLC with employees, or one that will be selling goods that require charging sales tax, needs to take the additional step of registering with the North Carolina Department of Revenue.
Establishing a LLC in Oregon
The specific provisions of starting an Oregon LLC are regulated by the office of the Oregon Secretary of State. LLCs are restricted to names ending in “Limited Liability Company,” “LLC,” or “L.L.C.” Once you have decided upon a name that is available, you can reserve the name for up to 120 days through the online filing of an Application for Name Reservation.
Your LLC’s Articles of Organization can be filed in Oregon either by mail or online. It will cost a $100 filing fee (current as of this writing). The articles are required to list:
- LLC’s name, including a proper ending with some version of “LLC”
- Whether the LLC is perpetual or for a specific period of time
- Information on the LLC’s registered agent, including name and valid Oregon address
- An address for the LLC’s primary office
- An address to mail notices from the Secretary of State’s office
- Information on the structure of the LLC (Including if the LLC will be managed by members or if it will be in the professional services business)
- Each organizer’s name and address
- The name and address of at least one member (or manager’s) who has direct knowledge of the LLC’s business
Once your LLC has validly filed its Articles of Organization, it will need to make sure it is in compliance with any further Oregon Department of Revenue requirements. If the LLC has any employees, for example, it will need to register with the Oregon Department of Revenue.
If you want to establish an OR or NC LLC but don’t know where to start or are overwhelmed with the process, Mod Law Firm can help! Schedule a consultation with Mod Law today!