4 steps to start a limited liability company

September 26, 2023

4 steps to start a limited liability company

There are 4 steps to start a Limited Liability Company (LLC). Although it may seem simple enough, these steps establish the foundation for the LLC and govern the way that the LLC will be managed. An LLC is an entity which offers protection from liability to its owners. It is owned by Members who have ownership interest in the entity and may manage the entity or elect a Manager.

Step One: File the Articles of Organization.

The Articles of Organization for an LLC is what establishes the LLC and registers the entity with the Secretary of State. This is filed with the Secretary of State in which the entity is organized.

Step Two: File for an EIN Number.

Many entrepreneurs starting an LLC end up paying too much for a Federal Tax Identification Number or Employer Identification Number (“EIN”) because they use the wrong website to register the number instead of using the proper IRS website. A Certified Public Accountant (“CPA”) or an attorney can assist in registering an EIN number and maintaining the needed documentation for the entity.

Step Three: File a Statement of Information.

Once the Articles of Organization have been filed, a Statement of Information (“SOI”) must be filed naming the Members of the LLC as well as the individuals who will act as the officers of the LLC. This document must be filed every two years or used to update the LLC’s information on the Secretary of State website.

Step Four: Sign an Operating Agreement

The Operating Agreement governs the internal workings of an LLC and is not filed with the Secretary of State. However, the Operating Agreement can be requested by banks or other government branches in the course of doing business. Although simple ones can be found online, many LLC Members do themselves a disservice by not asking important questions about how the entity is established, managed, and dissolved. Having a clear Operating Agreement which meets the needs of the entity can make or break a company by preventing foreseeable disputes.