Should You Form an LLC for Your Small Business

Form an LLC

Many Americans dream of owning a business. However, a lot of people do not pursue it because they think the process is complicated and expensive. That is no longer the case. Now, you can become your own boss by forming an LLC. 

Reasons to Form an LLC

You may have heard of this business entity structure. Generally, an LLC is a hybrid structure that protects the assets of the owners from liability against the debts and obligations of the company. You can enjoy the limited liability protection that corporations have without spending as much and without the complexity in terms of management.

It also lets the owners, which are also known as members, enjoy pass-through taxation. This means that your company will not have to face double taxation.

Another advantage of forming an LLC is that it helps you build the credibility of your company. Having the words “limited liability company” or an abbreviation of it in your business name makes it look more official. People would know that your operations in the state where you organized your company are legal and registered with the state.

Here are other common reasons why a company owner should form an LLC for their small business:

  • The LLC structure is flexible, so you can tailor your rules to suit the company. You can write the operating agreement depending on your business needs.
  • It protects your personal real estate assets.
  • You can protect your intellectual property.
  • You can raise the necessary capital for your company.
  • Your company activities are only for the short term. You can schedule the date of your LLC’s termination.
  • You can change the distribution of profits depending on the percentage of actual ownership.
  • There are no citizenship or residency restrictions when it comes to ownership.
  • In most cases, there are minimal compliance requirements necessary to maintain an LLC. 

Starting an LLC

Generally, organizing an LLC is inexpensive. However, you have to go through a process. Depending on the state where you wish to do business, the steps and requirements may vary.

  • Name your company. The first thing you need to do is to think of a business name that reflects the vision of your company. You have to make sure it is distinguishable and that no other business entity is already using it. You can do this by doing a name availability check on the database of the appropriate state agency. You also need to comply with the naming guidelines of the state where you want to organize your LLC.
  • File formal paperwork. States also require the submission of a document to register your company. It is usually called the Articles of Organization. Check if the state agency has a readily available form. You should also prepare money for the filing fee.
  • Appoint a registered agent. Most if not all states require LLCs to appoint a registered agent. This can be an individual or a company that will serve as the point of contact between the state and the LLC. Your registered agent will receive legal documents on behalf of your company. Check state requirements to prevent any issues.
  • Secure business licenses and permits. Depending on your business activities, you may have to obtain certain licenses. You can check this with state agencies and local governments.
  • Create an operating agreement. In some states, LLCs do not have to submit a copy of their operating agreements. However, it is recommended to have one. It can help you avoid conflicts and misunderstandings in the future by putting in detail the rights and responsibilities of the members. You can also include the voting power and percentage interests of the owners.

Getting Help from Professionals

Forming an LLC comes with many benefits that make it perfect for small companies and startups. If you want to start a small business, consider this business structure. It will help you gain legal protection for your assets. At the same time, it formalizes your business entity. You can also establish your company’s credibility to gain the trust of target customers.

The registration process can be a bit intimidating. Fortunately, you do not have to face the whole ordeal on your own. You can turn to an experienced and reliable third-party organization like DoMyLLC instead.

Our team of experts can help you prepare the paperwork and file them with the right state agency. We can also serve as your registered agent. Additionally, we offer ongoing business compliance services.