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The Umbrex Guide to Setting Up Your Own Consulting Practice90 Videos
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Registering an LLC provides several benefits. Number one, it’s simply required if you want to open a business checking account or get business insurance or get an employer identification number so you can pay a subcontractor. Number two, an LLC provides you with limited liability protection. If a client sues you for work that you’ve done through your LLC, then your personal assets should be protected. Number three, it creates a better impression on clients when they’re signing a contract with an LLC as opposed to signing with you as an individual.
Now for more on the details of different entity types, I do suggest you listen to episode 56 of Unleashed, where I interview Jonah Gruda and we go through that in detail. We talk about LLCs, S-Corps, C-Corps, and others. If you are thinking about and talk to your accountant about filing your taxes as an S-Corp, you’d still register an LLC. An S-Corp is a tax designation. You can create an LLC but still file as an S-Corp.
Now, when you are creating your LLC, you do have one question to answer which is, “In what state do you want to register?” The natural answer for a lot of people is, of course, their home state. But some people decide to register in Delaware. There are some advantages to that and you can talk to your tax accountant and your attorney about which is the right for your situation.
The steps to set up an LLC are the following: Number one, come up with a name and you’ve already done that in a previous video.
Number two you want to designate a registered agent. A registered agent is an entity or a person who’s going to receive your official mail and that can be yourself. And it might as well be yourself.
Number three is to create an LLC operating agreement and you get your attorney can help you on that. If it’s going to be a sole member LLC, just you, probably a good chance that no one will actually ever ask to look at your operating agreement. But you may want to set up one, nevertheless. If you’re setting up an LLC with partners, then you definitely want to get an operating agreement in place, so you’ve agreed in all the terms and conditions and how you’re going to work together, what happens if someone wants to leave or sell and all those aspects to consider.
So, come up with a name, get a registered agent, get an operating agreement, then you file your paperwork with the state.
You can do that yourself or you can find one of these services online to do it for you. If you do that, you’ll have to pay that service, plus you’ll pay the fee to the state, which ranges from a hundred or $200 for most states, to $800 in California.
And finally, you will get your certificate of incorporation or your certificate of entity formation in the mail. You want to save that piece of paper.
Scan it, make a copy of it. You will need to show that throughout the term of your firm, whenever you’re trying to do some transaction like get a business checking or business insurance or employer identification number or doing other types of official acts. You may well need to have that certificate of formation.
So, go through these steps and congratulations, you’ve got an official business entity.
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