In this comprehensive how-to guide, you’ll learn everything you need to know when it comes to starting and maintaining your LLC. Packed with invaluable insights, like how to get a professional business address, where to find a registered agent, and what you’ll need to do each year in order to maintain compliance, it equips you with the knowledge and expertise needed to kickstart and sustain your business.
This step-by-step resource serves as your trusted companion throughout each stage of your business, offering you the tools and know-how to successfully navigate the world of LLC ownership with confidence and ease. Let’s dive in!
Starting an LLC
As an entreprenuer, you’ve decided that an LLC is the perfect option for your growing business. However, the process of forming an LLC can be intimidating if you're not sure where to start.
From selecting the perfect name for your business to filing the necessary paperwork, this section will guide you through the entire process of starting an LLC, answering all of your questions along the way.
1. Create a business plan
2. Choose LLC name
3. Pick your business address
4. Assign registered agent
5. File Articles of Organization
6. Create Operating Agreement
7. Get your EIN
8. Obtain business licenses and permits
9. Create your website
Step 1. Create a business plan
Most thriving businesses have one thing in common: they started with a business plan.
If done right, a business plan can serve as a roadmap for your company and a blueprint for success. Ideally, yours should outline all of your LLC’s goals and strategies, as well as any actionable steps you plan to take to achieve these goals.
A well-crafted business plan can help your business:
- Better understand the needs of your customers
- See how you stack up against your competitors
- Assess your strengths and weaknesses
- Identify potential business opportunities
- Demonstrate credibility, making it easier for you to secure financing
Above all else, it will serve as a benchmark to help you stay focused on your objectives, monitor progress, and overcome any challenges that may arise along the way.
Here are a few key elements you’ll want to be sure to include in your business plan:
- Executive summary
- Mission statement
- General company information
- Products and services
- Financial information
- Future plans
- Company overview
- Basic company information
- Industry and marketplace details
- Legal structure
- Management team
- Market analysis
- Industry description
- Target market details
- Market share potential
- Market pricing and barriers
- Competitor research
- Product life cycle
- Business organization
- Organizational structure
- Ownership structure
- Background of owners and board members
- Products and services
- Descriptions of products and services
- Product status
- Product research
- Intellectual property
- Sourcing and fulfillment
- Marketing and sales
- Marketing and sales plan
- Financial objectives
- Advertising goals
- Financial plans
- Cash flow statement
- Balance sheet
- Break-even analysis
- Debt obligations
As your company continues to grow, you will find that your business plan may need to evolve as well. So, plan on this being an evergreen document, or one that is continually updated and edited as goals change and progress.
Step 2. Name your LLC
Next, you’ll need to choose a name for your business. This is one of the more enjoyable parts of starting an LLC, so don’t be afraid to let your creativity shine!
When selecting a name for your business, you’ll want to take into consideration factors like uniqueness, memorability, and whether it reflects your business. The more catchy the name is, the better received it will be (most of the time, anyway).
For example, a brand that sells dog collars is going to see more success with a name like, “Collar Couture LLC” or “Canine Chic LLC” than with “Dog Collars LLC”. While the first two are distinctive and fun, the latter is generic and forgettable.
It's also important to make sure that the name you choose complies with state laws and regulations. You’ll need to make sure to include some variation of the word “LLC” in your name. That can take on any of the following forms:
- Limited Liability Company
- Limited Liability Co.
Additionally, you are prohibited from using misleading jargon in your LLC name. You cannot use the words “medical” or “law” without filing additional paperwork, and you may not use words like “bank”, “trustee”, “insurer”, or any other term that implies you have an affiliation with a financial institution.
Here’s a tip to help expedite the name-creation process: Write down 10 of your favorite names and send out a survey to your friends asking for honest feedback. Once you have a list of potential names narrowed down, you can perform a search through your state’s database to make sure it’s available for use. Typically this is done via your state’s Secretary of State website.
Your name will be registered with the state when you file your Articles of Organization, so no further action is necessary (unless you plan to trademark the name or file a DBA).
Step 3. Choose your business address
Before you get too deep into LLC paperwork, you’ll need to choose a business address. As a requirement to incorporate your business, your LLC must provide a principal place of business. This verbiage can be confusing, so let’s break it down into simpler terms.
Your principal place of business is the location that serves as your primary place of business. In other words, it’s where you want communications to be sent and customers to reach you. Your address will serve as a “home base” for business operations and can be your commercial office or another physical address.
If you’re a new business owner on a limited budget, you may be planning to use your home address to save money. However, it's strongly encourage you to research all of your options first.
What are my business address options?
When it comes to choosing a business address for your LLC, there are three different types of addresses you can use. Let’s take a closer look at them.
- Home address – It’s free to use your home address for your LLC, making it a desirable choice for many. But, since formation documents are public, this creates a major breach of privacy. With a little time and motivation, anyone can access these documents and find out where you live.
- Virtual office – A virtual office might be a good fit if you would benefit from extra amenities like internet, phone, and receptionist services. However, if the bells and whistles of a virtual office are unnecessary at this stage, you could save money by looking into alternatives, like a virtual mailbox.
- Virtual mailbox – Convenient and affordable, a virtual mailbox tends to offer you the best bang for your buck. With one, you’ll gain access to a commercial mailing address that allows you to protect your privacy while taking advantage of convenient mail services to help you run your LLC remotely.
Not sure where to get a virtual mailbox? VPM’s virtual mailbox plans provide you with a permanent business address plus access to digital mail services like scanning, check depositing, and package forwarding.
Side note: You cannot use a PO box as your principal place of business, since it is not an acceptable address in the eyes of the Secretary of State.
Step 4. Appoint a registered agent
Every LLC is required to have a dedicated registered agent on file, regardless of which state you incorporate in.
Unfamiliar with the term? A registered agent is a person or entity who receives official legal and government correspondence on behalf of your business.
Your registered agent is required to have an address in the state you are doing business in, as well as be available during normal business hours to accept service of process.
Who can be my registered agent?
Most small business owners choose one of two options: They either act as their own registered agent in a bid to save money, or hire a third-party to take care of it for them.
Here’s what you can expect with each option:
- Acting as your own registered agent – Because acting as your own registered agent is easy and free, many first-time business owners are swayed into thinking this is the best option. However, you should be aware that there is a moderate degree of risk involved.
- Hiring a third-party like VPM – Choosing to hire a third-party can eliminate the stress of compliance maintenance, allowing you to prioritize more important tasks. If you were to receive a time-sensitive document, like a subpoena, your registered agent would alert you, allowing you to respond promptly.
Though it’s a decision only you can make, hiring a registered agent service comes with a number of benefits: privacy, convenience, and staying on top of legalities, to name a few.
Tip: You can save $100/year or more with VPM’s FREE registered agent services, available with all virtual mailbox plans.
Step 5. File your Articles of Organization
In order to operate and establish your LLC, you’ll need to file your Articles of Organization (some states refer to it as Articles of Incorporation or Certificate of Formation) and pay the associated filing fees.
Think of your Articles of Organization like your birth certificate for your LLC. This document will outline key details about your LLC, including (but not limited to):
- Name of the company
- Principal place of business and mailing address
- Name and address of your registered agent
- Type of business structure
- Purpose of your business
- LLC effective date
As you might expect, requirements will vary from one state to the next. However, you should be prepared to supply the above information as it pertains to your business.
Once the state approves your Articles of Organization, your LLC is officially formed and can begin operating. Hurray!
What is an LLC effective date?
An LLC effective date is the date your LLC comes into existence. You are not required to choose an LLC effective date. However, if you don’t specify a specific date, your LLC becomes effective on the day you file your Articles of Organization.
If you’d like to choose a different date, you may be able to do so, depending on the state. Some states allow you to use a “forward effective date”, which legally recognizes that your LLC was formed at a later date. However, you cannot choose a date that has already passed, and it cannot be more than 90 days in the future.
To bypass paying federal, state, and local income taxes on your LLC, it’s best to defer your date to January, or wait until the start of the new year to file.
How much does it cost to file the Articles of Organization?
The cost to file your Articles of Organization will vary depending on which state you are in. In general, you can expect to pay anywhere between $40 and $500.
Some states also require additional fees, such as a franchise tax. It's best to check with your state's business registration office for the most accurate and up-to-date information on the fees and requirements.
How do I file the Articles of Organization?
Instructions (including due dates and filing methods) will differ from state-to-state. Most states allow you to file your Articles of Organization online or by mail, but you can visit your state’s Secretary of State website to learn more about location-specific rules.
If you are incorporating in California, Florida, Nevada, or Delaware, check out these step-by-step guides on how to form your LLC yourself:
Step 6. Create your Operating Agreement
Did you know that one of the most asked questions is whether or not your LLC is required to have an operating agreement? The answer is no, but it’s highly recommended and here’s why.
An operating agreement is a key document that outlines how your LLC will be run. Think of it like a blueprint for your business. It helps protect the interests of your LLC and its members while providing clarity and structure to business operations. It can also provide much-needed asset protection, limit the power of individuals, and prevent potential disputes amongst LLC members.
What should I include in my Operating Agreement?
Your operating agreement should include the following elements:
- Company formation details
- Voting rights and responsibilities of members
- Percentage of members’ ownership
- Powers and duties of members and managers
- Capital contributions
- Distribution of profits and losses
- Transfer procedures
Though it may seem like another tedious responsibility to add to your to-do list, the importance of having an operating agreement cannot be overstated.
Let's say you and your business partner have decided to start a remote tech company. You plan to invest equal amounts of money into the business and share the responsibilities of running it. However, you both have different ideas about how the company should be managed. You also have contrasting opinions when it comes to finances, hiring processes, and marketing strategies.
With an operating agreement in place, you can outline how decisions will be made, how profits will be distributed, and how changes to the business will be handled. This can help you and your partner reach a mutual understanding of how the company will be managed and avoid any conflicts that could jeopardize the business.
Step 7. Get an Employee Identification Number (EIN)
After completing the steps above, you’ll need to obtain your Employee Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is a unique nine-digit number that is essential for tax purposes and serves as a social security number for your business.
How can I get an EIN?
You can apply for your EIN one of four ways:
- By mail
- By phone
- By fax
If your business is located in the U.S. (or a U.S. based territory) and you have a SSN, the fastest way to apply for your EIN is online. If you are located overseas, you are not permitted to apply online, therefore it will take longer to obtain (and even more of a reason to start the process ASAP).
As a reminder, you should never have to pay to get an EIN. It’s completely free for all business owners!
Step 8. Obtain necessary business licenses
Acquiring required licenses can be a complex process, but it's critical for avoiding legal and financial issues down the road. In this section, it'll discuss the importance of obtaining necessary business licenses for your LLC, as well as the different types of licenses you may need.
What types of business licenses are there?
There are many different types of business licenses, and the licenses required for your business will depend on factors such as your location, industry, and the nature of your business.
Here are 5 types of business licenses you may be responsible for acquiring when starting your LLC:
1. Federal Business Licenses
If you are operating in any of the following federally regulated industries, there’s a good chance you’ll need to apply for a federal business license:
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics
2. State Business Licenses
Many states require you to obtain a business license or permit, but again, this will depend on your location and industry. You should be able to check your Secretary of State office’s website for an exact list of requirements.
3. Local Business Licenses
In some cases, you may need to apply for a city or county license if you wish to conduct business operations within a town or city’s limits. To find out if you need one, check with your local Department of Commerce or city/county offices.
4. Professional Licenses
In order to operate in certain fields, you may need to obtain a professional license that certifies you have the knowledge and expertise.
Some of these industries include:
- Hair stylists
- Insurance agents
- Real estate agents
5. Sales Tax Permits
If you’re planning to sell products online, you will need to charge sales tax, which also means you’ll need a sales tax permit. Regulations vary from state-to-state, so you’ll want to check with your local jurisdiction for specifics.
Almost all businesses will need to apply for at least one business license, even those based out of your home. If you are unsure which type of license pertains to you and your business, you can contact your local government office for more information.
Step 9. Create your website
In today’s digital age, having an online presence is essential for any business, and a website serves as a virtual storefront for your LLC. There are ample ways to bring your ecommerce visions to life, from using a do-it-yourself website builder like Shopify to hiring a professional web developer.
Here are some tips to help you create a website that not only looks impressive, but also attracts and retains customers:
- Keep the design simple
- Make it mobile-friendly
- Optimize for search engines
- Use high-quality images and videos
- Offer multiple payment gateways
- Include clear calls to action
Once your website is up and running, you can take your branding a step further by adding a custom domain (i.e. a unique web address for your business). Investing in a custom domain will help you improve your LLC’s credibility, increase customer trust, and ultimately attract more potential customers to your business.
Maintaining an LLC
Congratulations, you've completed the LLC formation process! Now that your new business is up and running, it's time to shift your focus to maintaining your LLC.
Don't worry, it's not as daunting as it may sound. Maintaining your LLC simply means taking the necessary steps to keep your business in compliance and running smooth.
From opening a business bank account to filing annual reports, this section covers everything you need to know when it comes to maintaining your LLC. So, grab a cup of coffee, sit back, and let's embark on a journey through the world of LLC maintenance!
1. Open a business bank account
2. Purchase insurance for your LLC
Step 1. Open a Business Bank Account
Opening a business bank account is one the best things you can do for your growing business. It offers an extra layer of protection by allowing you to keep your business and personal funds separate.
Having a dedicated business bank account is a legal requirement in the eyes of the IRS, and in most cases, a prerequisite for obtaining any type of business loans.
Other advantages of opening a business bank account include:
- Clean financial records
- Preservation of limited liability
- Easier to manage budgets
Additionally, a business bank account can make your LLC appear more professional to potential customers or clients. It shows that you're serious about your business (vs. just a hobby that you’re trying to monetize) and are taking the necessary steps to protect it.
How soon do I need to open a business bank account?
You should open your business bank account before your company begins selling any products and/or services. This will allow you to accept credit card payments from customers and ensure your personal assets are protected from the start.
What do I need for a business bank account?
Requirements will vary from one bank to the next. But in general, here’s what you’ll need to open a business bank account:
- Employer Identification Number (EIN)
- Business Address
- Mailing Address
- Registered Agent
- Personal identification
- Business license and business permit(s)
- Certificate of assumed name or DBA
- LLC Operating Agreement
- Articles of Organization
It’s important to note that most banks require you to provide proof of address, such as a lease agreement or utility bill, to verify that you occupy your physical space (i.e. your business address).
Tip: Looking for a simple and affordable way to obtain proof of address for your business? VPM’s TruLease plan can help you get a physical business address, enabling you to open your U.S. business bank account and protect your assets.
Step 2. Purchase insurance for your LLC
As a business owner, it’s a good idea to purchase insurance for your LLC to protect it from the unexpected.
Depending on your business type and industry, you may need to purchase different types of insurance policies.
Some of the most common types of business insurance include:
- General Liability Insurance – Protects your business from claims of bodily injury, property damage, and advertising injury.
- Professional Liability Insurance – Also referred to as errors & omissions (E&0) insurance, this covers you against claims of negligence or failure to perform professional services.
- Workers' Compensation Insurance – Required by law in most states, this provides benefits to employees who are injured or become ill as a result of their work.
- Property Insurance – Protects your business property from damage or loss due to events such as fire, theft, or natural disasters.
- Cyber Liability Insurance – Covers your business in case of a data breach, cyber attack, or other cyber-related incidents.
Before purchasing any insurance policy, it's a good idea to consult with an insurance professional or attorney to determine what types of coverage your business needs.
Staying legally compliant
Maintaining legal compliance is paramount for the protection of your personal assets, the continuity of your business operations, and the avoidance of costly penalties and legal issues. Failing to do so is like forgetting to feed your beloved pet or skipping a crucial step in your morning routine – the consequences can be dire!
In order to maintain your “good standing” status with the state, here’s what you’ll need to do on an annual basis.
Summary Chart 1. Update your registered agent 2. File an Annual Report 3. Renew your business license(s) 4. Pay your taxes
Step 1. Update your registered agent
You can change your registered agent at any point in time. The only caveat is that your registered agent must remain current with the state.
If you decide to switch registered agents, you will need to file a Change of Registered Agent form and pay the associated filing fee as soon as possible.
Failing to update your paperwork can cause you to risk losing your “good standing” status with the state. In some states, your LLC could potentially even be dissolved.
Step 2. File an Annual Report
Filing an annual report is a requirement for every LLC owner, regardless of location, business size, or industry. Think of it like an annual check-up for your business, similar to how you visit your doctor every year to ensure everything is in tip-top shape.
Your LLC's annual report allows you to provide the state with updated information on your business's activities, management, and finances. Most states require an annual report to be filed each year, although some states require these reports be filed every 2 years (or if you’re in Pennsylvania, every 10 years).
You can check your local Secretary of State office for more details pertaining to state-specific rules and regulations.
Step 3. Renew your business license(s)
Renewing your LLC's business license(s) every year is a critical aspect of maintaining compliance and ensuring the smooth sailing of your business. In addition to helping your business stay legally compliant, keeping your business licenses up-to-date enhances your credibility and builds trust among customers, partners, and stakeholders.
Failure to renew your licenses can result in fines, legal penalties, and even the suspension of your LLC. Don’t overlook the importance of staying on top of expiration dates!
Step 4. Pay your taxes
You’ve reached the final step of LLC compliance maintenance (though, keep in mind that you’ll have to repeat these every year): paying your taxes.
As an LLC owner, you wear many hats: You’re the CEO, the manager, the bookkeeper, and more. But perhaps one of the most critical roles you play is that of a responsible taxpayer.
Paying your taxes is a vital part of being a law-abiding citizen and a successful business owner. Ignoring your tax obligations can lead to a cascade of problems, including lofty fines, legal issues, and even the dissolution of your LLC.
Tip: Need an extra hand when it comes to bookkeeping? Reclaim your time by delegating your mundane operational tasks to VPM’s TruAssist team.
Your LLC Journey Begins Here
Now that you’ve got a solid foundation when it comes to starting and maintaining an LLC, it’s time to put your newfound knowledge to action.
With a VPM virtual mailbox, you’ll get a professional business address to protect your privacy, enhance your credibility, and gain access to convenient and reliable mail management services.
Ready to get yours?