According to the IRS in 2021 there were roughly 21.6 million LLCs in the United States. A Limited Liability Company (LLC) is a...
According to the IRS in 2021 there were roughly 21.6 million LLCs in the United States. A Limited Liability Company (LLC) is a powerful business structure that offers owners personal liability protection, tax advantages, and flexibility. If you're considering starting an LLC but aren't sure where to begin, this blog is a great place to start.
Steps To Establish An LLC
Although fees and procedures differ from state to state, here are the essential registration steps required:
Name Your Business
Choose a name that follows the state guidelines. LLC name requirements by state can be found here.
You will have to search the applicable state website to be sure your name choice is not already taken.
Designate a Registered Agent
By law, an LLC is legally required to have a registered agent, someone who acts as a representative for receiving legal documents and passing them along to the LLC owner. Requirements for a registered agent include being over the age of 18 and having an address where the LLC is registered.
Prepare and file Articles of Organization
After naming your business and designating a registered agent, you can file the Articles of Organization with the state agency responsible for business filings. The Articles of Organization should include the business name, principal business address, business purpose, registered agent’s contact information, and the LLC’s duration. Most states have online forms you can complete. Be aware that filing fees, which vary by state, may apply.
Receive an Acknowledgement from the State
After you have filed the articles of organization, you will receive an acknowledgment that your certificate of formation was accepted and recorded with the state.
Create an Operating Agreement
The Operating Agreement is the agreement among the members of the LLC outlining the financial, legal, and management rights of all members as well as any limitations in how the company can be managed. This can provide information detailing how profits are divided, who is responsible for capital contribution, and more. The complexity of the Operating Agreement can vary significantly when there are several LLC members and managers. It’s a good idea to consult an attorney at this step in the process.
Comply with the Corporate Transparency Act (CTA)
This is a new law in 2024 that requires most closely-held businesses to register with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) and report Beneficial Ownership Information (BOI) within 90 days of formation. The 90-day reporting requirement drops to 30 days for entities formed in 2025. BOI compliance and reporting information can be found at www.fincen.gov/boi.
Additional Steps that May Not be Required in Your State
Open a Business Bank Account
Not all states require this, but certain ones will ask for a bank account to be set up. Once you have the certificate from the state, you should have the information needed to complete this.
Get an Employer Identification Number
An EIN (employee identification number) is another business-related task that will be required.
This will be necessary to open bank accounts, hire employees, and pay taxes.
What to Do After Forming Your Business Entity
Seek Tax Advice Specific to Your Business Structure
Consult a tax professional to ensure compliance with state and federal tax regulations and help you take advantage of tax deductions. Under Section 179 of the IRS tax code, LLCs can deduct the full purchase price of qualifying equipment financed during the tax year.
Maintain Compliance and Good Standing
Regularly review and comply with state requirements, including annual reports and BOI filings, and fee payments, to keep your business entity in good standing.
Keystone Can Help
As you grow your business and expand your equipment fleet, Keystone can assist with equipment financing, whether your entity is a sole proprietorship, LLC, or other corporation type.
