Starting a business can be an overwhelming and daunting task, especially if you do not have sufficient knowledge and lack proper guidance.
Thankfully, in this day and age, tons of sources can be easily accessible and serve as a guide to any process we desire to undertake.
So, let’s take a plunge into the essentials that you need to learn when it comes to forming an LLC.
What is an LLC?
An LLC means Limited Liability Company and is a legal entity used to own and operate a business. It is currently a popular way of starting a business because it is easier to set up and more affordable to form and manage. However, the LLC cost differs from one state to another. You can check online or inquire with the Secretary of the State to know how much a LLC cost in the state where you will form your LLC.
Advantages of Forming an LLC
There are several reasons why LLC has become a go-to business structure for many start-ups and small businesses.
1. Limited Liability – LLCs are known to combine positive attributes of other business structures with the absence of most of their drawbacks. One of which and the most beneficial for individuals starting a business is having limited liability.
2. Pass-through taxation – Another known advantage of LLC is the flow-through or pass-through taxation, wherein LLC income is “passed-through” to members, which is reported on their personal tax returns.
3. Flexible membership – Flexibility on its memberships means that Members are allowed to be individuals, partnerships, corporations, and trusts. Additionally, there are no limits when it comes to the number of members for an LLC.
4. Management options – Most LLCs are member-managed, which means all the members share responsibility for the day-to-day running of the business.
5. Fewer compliance requirements – Compared to other corporate entities, establishing and maintaining an LLC is less complex and requires less paperwork.
How to Setup an LLC
Now, you might be wondering how to set up an LLC, and how much a LLC cost. Setting up an LLC is as easy as completing these 5 steps:
1. Choosing the location or state of formation – LLC laws can vary widely from state to state, which is why it is critical to know the registration costs, taxation rules, and registration process.
2. Name your LLC – Make it a point to check the Secretary of State’s website to determine whether the name you pick hasn’t been taken by another qualified business entity.
3. Appoint a Registered Agent – You are required by law to appoint a registered agent with a physical street address in the state when forming an LLC.
4. State Filing of LLC – The LLC Articles of Organization need to be filed with the secretary of state’s office to create an LLC officially. The state filing fee varies across the United States, so it’s best to check the LLC cost in your chosen state. For instance, if you’re going to form an LLC in Indiana, the filing fee for Articles of Organization ranges from $95-$100 when you submit it via mail or online. They also require filing of an annual report and you have to pay $50 if you file it by mail and $32 if done online. If you want to make a name reservation, an additional fee of $20 will apply.
5. Get an EIN – Once the LLC is officially registered, you will need an EIN to open a bank account for your business and hire employees. This works like a Social Security number for your company and is provided by the Internal Revenue Service (IRS).
Starting something you are unfamiliar with may be overwhelming and often challenging to accomplish.
However, if you know where to look for sources, as well as guides, the process can be more manageable.
Furthermore, once you have accomplished the basics in forming an LLC, everything else will follow smoothly.