When you start a business, one of the early decisions you need to make is what legal structure the business will take. There are many of these that you might be keen to consider, but an especially popular one is the LLC, or Limited Liability Company. An LLC has many advantages, plus a few drawbacks, compared to other business types, and if you are going to be adopting it you need to know what you can expect.
In this article, we are going to take you through some of the essential things you need to know about running an LLC. You will find all of this information to be particularly useful, especially when you are just starting out.
Table of Contents
Finding A Unique Name
One of the most important things at the start is that you need to be careful in choosing a name. Most importantly, it has to be completely unique, with no other business in the world using it. If your business is about managing finances, you might use the word “money” in combination with another word that helps to describe or amplify what you do. For example, MoneyBrighter uses this concept as a digital platform that helps manage finances online with the use of tools and financial-based information.
This process can be trickier than you might think to get right, as there are so many businesses out there and they each have their own unique name. It’s also worth bearing in mind that the trading name is different to the company name – and it might well be that your desired company name is free, but not as a trading name. Fortunately, there are online databases you can use to check if a name is free or not.
Reporting Requirements
Like with many other kinds of business, an LLC has a variety of reporting requirements that you need to fall in line with. Failing to do so is often going to result in a business that is not operating within the law, which is a very serious situation indeed, and one that can land you personally in trouble as well, even though it is a limited liability company. So: research the kind of reporting you need to engage in, understand how frequently you need to do it, and make sure that you are not forgetting or overlooking any of it. This is likely to be the kind of thing that can take a while to get right, but it’s essential.
Choosing Your Location
An LLC also has to have a specific location which is its base, and this is another legal necessity that you can’t simply overlook. When you are choosing your location, however, there are a few things that you might want to bear in mind. One of them is that it needs to be somewhere useful for you – otherwise, there is little point in being there at all. But you are also going to need to think about your postage and mail, and this is something that is a little trickier to get to the bottom of in general.
A good solution for finding an address that you are happy with is to use a virtual address. For example, suppose you’re starting an LLC somewhere in Louisiana and you’re not living there. Using a virtual address is a good solution for finding an address that you’re happy with.
You can sign up for a real business address for LLC corporations, and in the process you will be falling in line with the law while also getting an address that is reputable and desirable. This is helpful in so many ways, and it’s going to mean you have an easier time convincing people that your business is worthwhile and that it can be trusted as well.
Tax Status
One of the biggest advantages of an LLC is that you can have the freedom to choose the company’s tax status. In other words, an LLC can choose whether or not it is taxed as a corporation. Depending on what you choose, you may be able to either declare tax as a whole corporation or simply prepare K-1 statements for each investor. So you are going to want to think about this from the outset, to ensure that you are making the best decision for you and for your business. Although it’s one of the benefits, you have to ensure you are doing it right.
Prepare Your Operating Agreement
One thing you should remember if you are setting up an LLC: you will need to draw up an operating agreement at the start of the lifespan of the business. This is a roadmap of sorts that details exactly how your business is going to be run, who has which responsibilities, and what kind of future you are hoping for from the business. As well as helping you to run the business, this is going to be an important legal document, and it needs to be signed by each director before you can move on.
