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In 2021, the number of new businesses that opened in the US soared to record highs. According to the U.S. Census Bureau, roughly 5.4 million new business applications were filed during the year. This number beats the record that was set in 2020 of about 4.4 million.
There are so many benefits to running your own business, including being your own boss, having flexibility in your schedule, and the pride in having built something from the ground up. However, with all of this freedom comes great responsibility.
When you own a business, you’re not just a W-2 employee anymore. You’re an owner, an entrepreneur. One of the first questions you’ll have to answer is what type of business entity you’ll operate as.
LLCs are a common business entity in the US. Stick with us to look at some helpful info and tips about filing LLC paperwork.
What Is an LLC?
An LLC is a type of business entity that is formed by one or more members. An LLC has responsibilities, rights, assets, and debts separated from its owners, unlike a sole proprietorship.
This type of legal business entity is a fairly simple business structure. The profits from the business pass through to the personal income of the members based upon how much ownership they have.
LLCs can be created with any number of members. It’s also possible to add and remove members as the business succeeds and grows.
Why Would You Want to Start an LLC?
When you’re starting a new business, one of the first things you’ll want to determine is what type of business entity you will operate as. There are three main benefits to choosing a limited liability company.
Pass-Through Income
When you start an LLC, the profits are pass-through to the personal income of the owners. This is just like what would happen in a partnership or a sole proprietorship. For many businesses, this means that they will pay lower taxes than if they started a corporation.
An LLC is also simpler to manage than a corporation. It’s also possible for LLCs to be taxed as S corporations if they elect to do so. This gives owners a lot of flexibility in terms of how they manage their tax burdens.
Limited Liability
One of the main motivations behind forming an LLC is in order to protect yourself from financial and legal liability. If you operate as a sole proprietor, any business debts or legal judgments could put your personal assets at risk. When you form an LLC, it helps shield your income and personal property.
Active Ownership
Another benefit is the fact that an LLC can be managed just by its members or by others that have been appointed as a manager. This means that you can be as active in managing the business as you’d like. Many business owners appreciate the flexibility this offers.
If you choose to work with a lawyer to set up your LLC, you want to work with someone you can trust. Learn more about Venerable Law here.
What Documents Do You Need to File LLC Paperwork?
If you’re wondering how to fill out LLC paperwork, you’ll first need to determine which documents you need to collect. The following are the basic documents that are required to file LLC paperwork. However, you might be able to skip some of the steps depending on where your business is and what type of business you run.
IRS Form SS-4
You will need to get an Employer Identification Number(EIN) if you don’t already have one. You can obtain this through IRS Form SS-4.
You can receive an EIN immediately by applying online. However, you can also download the form and send it to the IRS through the mail.
Your EIN is a number that will be used to identify your business on official documents such as tax forms.
Name Reservation Application
You will need to choose a name for your LLC before you file any of the formation documents. It’s also essential that you run what is known as an availability search. This is a process that lets you know whether another business is already using your chosen name.
This type of search can usually be conducted on the corporations bureau website or the secretary of state’s website.
There are usually different rules in each state to make sure that businesses have well-differentiated names. There are also rules about what makes a name permissible. You’ll want to check with your specific state to learn words that are restricted or prohibited in business names.
On top of all that, there are also state-specific rules about using corporate designators in your business name.
After you have gone through the process of coming up with a viable name, you can file a form with the state known as a name reservation form. This isn’t required, but it can be a safe guard against someone else taking the name while you file LLC paperwork.
You can commonly find documents such as the name reservation form on the website of the secretary of state.
Articles of Organization
You will need to submit articles of organization to your state to form your LLC. This might also be referred to as a certificate of formation or a certificate of organization. The secretary of state website should have the appropriate form available for download.
You will want to include a specific number of copies when you file this form. It is common to require two copies when you’re filing your form. This is so the state can stamp one and return them to you for your records and keep the other.
Your filing might be rejected if you don’t include the prescribed number of copies. In fact, this is a common reason that business’s filings get rejected.
There are different requirements in each state regarding what is included in this filing. However, you can expect that states will ask for your business name, business purpose, duration, address, and more. Agreements typically also have to include information about ownership, management, and registered agents.
Operating Agreement
Operating agreements are also sometimes referred to as company agreements. This is a document that makes clear the ground rules for operating your LLC. It also includes both the responsibilities and the rights of the LLC’s members.
On top of that, this form confirms the plan for distributing profits and losses among members. It is common for LLC members to receive profits in the form of income that is directly related to their ownership share.
States do not typically require operating agreements in order to form an LLC. However, this is an important document for determining how you plan to govern your LLC. In order to validate the agreement, the document must be signed by all members of the LLC.
Tax Registrations
Depending on the state you are starting a business in, you might also need to register for the department of revenue. It’s possible that you will have to register for one or more types of taxes. These could include employer taxes, general business entity taxes, use taxes, and sales taxes.
It is common for the forms and requirements surrounding tax registrations to be located on the business portal of the state’s website.
Initial and Annual Reports
You will likely also have to file periodic reports with the state in order to verify basic information about your business and its operations. This helps states keep up-to-date information about businesses within their borders.
These reports can go by a variety of names. These include statements of information, annual reports, business entity reports, franchise tax reports, and annual certificates.
Some states collect these reports more often than others. They might be required once a year or once every ten years.
There are a handful of states that actually require that LLCs file an initial report when they are first registering the LLC. These include California, Washington, Nevada, and Alaska.
Business Licenses
You also might need one or more business licenses depending on your business. You might find that your state or industry requires that you have:
- Home occupancy permits
- Professional licenses for services such as architecture or engineering
- Licenses for food preparation, daycare, or other regulated activities
- Premises permits for a variety of features including elevators, signs, and alarm systems
The first place to look for licenses applications is on the state corporations division online.
Tips for Filing LLC Paperwork
When you’re filing LLC paperwork, it means you’re taking an important step towards the creation of your business. Consider following these tips for filing LLC paperwork to help make sure this symbolic and essential act goes smoothly.
Get Everything in Order First
Even though LLCs are generally considered one of the simplest types of business entities, it still requires quite a bit of paperwork. It’s a good idea to collect all of your necessary documents ahead of time to make sure you don’t continuously meet obstacles that set back your timeline.
(Are you wondering how much it costs to work with an LLC lawyer? Learn about our pricing here.)
Do Your Research
When you’re first starting a business, you might think that it’s as simple as slapping a sign on the window saying “open for business.” While you can do this in some industries as a sole proprietor, this might not be the most advantage option as far as taxes go.
For many small businesses, LLCs are a good option. They are fairly simple to manage, offer tax advantages, and protect your assets and property (to a certain extent.)
That being said, it’s a good idea to get pretty familiar with the different options. Depending on your state, there might be different types of LLCs you can start that might be more or less advantageous.
Be Meticulous
It’s a good idea to be extremely meticulous when you are filling out forms. We all know that the government doesn’t move particularly quickly when it comes to paperwork, and you don’t want anything to stand in the way of you starting your business. Triple-check your forms to make sure all of your information is accurate, otherwise, you could end up receiving a rejection and having to start all over.
Consider Using a Lawyer
Unless you are starting a tax preparation business, there’s a good chance business entities and taxes aren’t your specialty. The learning curve when it comes to filing for an LLC can be steep. For this reason, you might find that it is a worthwhile investment to work with a lawyer when filing LLC paperwork.
Are you wondering what an LLC lawyer can do for you? Check out our services here.
Is It Time for You to File LLC Paperwork?
Starting an LLC is more complicated than one might imagine or hope. Luckily, though, there are professionals out there that know all of the ins and outs of filing LLC paperwork. You might find that it is well worth investing in hiring a lawyer to guide you through the process.
When you work with a lawyer, you can have someone always there to answer any questions you have about your LLC paperwork. They can also help you to review and prepare contracts for customers, vendors, and service providers. Working with a lawyer can help set you up for long-term success.
Filing LLC paperwork is not a place where you want to cut corners or wing it. The way that you file your LLC now can either help boost you to success or leave you to face unmanageable obstacles. With the help of a lawyer, you can be sure to start off on the right foot.
Are you interested in working with an LLC lawyer? If so, contact us today!
