Monday, June 10, 2013

Understanding How to Make Your Small Business an LLC

When a small business converts itself into a limited liability company (LLC), it will gain many legal and tax benefits. One of the most advantageous reasons for a small business to become an LLC is that it protects the owner's assets in the event that a lawsuit was to arise. Also, if a business was to go under and file bankruptcy, as a LLC, the owner's assets are once again protected. So, how do small business owners go about turning their companies into LLC's? Let's take a closer look.

Step 1: Choose a Business Name

More times than not, a small business can continue operating as an LLC with its original name; however, this does not always apply. Sometimes, there will already be a business operating as an LLC with the same name. In this case, a new business name will have to be chosen.

Step 2: Choose a Registered Agent

A registered agent accepts any official mail that is sent to an LLC business, including LLC documents. An LLC must partner with a registered agent, or it will not be in legal compliance with a wide range of laws. Some states will allow an LLC to be its own registered agent.

Step 3: Filing Paperwork

Once a name and registered agent have been established, it is now time to file the appropriate paperwork with the Secretary of State office. When filing this paperwork, there will be a fee involved, ranging from $100 to $800. Also with this fee, small business owners will have to submit a copy of the Articles of Organization. A copy of this document can be located online and printed for free. The purpose behind this document is that it tells the Secretary of State what a particular business' name will be, who will be working for it as well as the nature of the company.

Step #4: Create an Operating Agreement

Some states will require business owners to create an operating agreement, which states how workers will be paid and what their responsibilities will be.

Step #5: Publish the LLC

Some states require that new LLC's publish their openings in local newspapers. In addition, LLC owners may be required to submit an Affidavit of Publication form.

Step #6: Obtain Permits

All LLC's must obtain the appropriate type of business licensure, and some of them will need to obtain permits.

Step #7: Update Banking Accounts

LLC's must obtain an Employer Identification Number that is issued by the IRS. This number must be used to establish a business bank account. If a bank account is already in place, the number must be used to update the account information.

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