How To Set Up Your LLC

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As an independent stylist, it’s important to think about your business structure when starting your business.  Being an independent stylist does not mean that you should settle on being or remaining a sole proprietor.  

Many business owners set up LLC’s because of the liability protection an LLC provides.  LLC’s are much more flexible than corporations and they have much fewer ongoing reporting requirements. 

The first step to setting up your LLC is to file paperwork with the state your business is located.  Keep in mind that every state has its own rules and procedures for setting up an LLC, however, there are several steps that are necessary no matter what state your business in. 

Step 1: Choosing a Name for Your LLC

Most states do not allow different business entities to have the same name.  For example, there can’t be an Anderson Accounting, LLC, and an Anderson Accounting, Inc within the same state.  In many states, you can search online to find out if the name you are thinking about using for your LLC is available.  Always research for name availability before settling on a name for your LLC.  Choosing a unique name for your business can help minimize confusion and possible trademark infringement claims. You also want to consider whether a domain name is available that matches your business name.

Step 2: Reserving a Name (optional)

Once you decide on a name for your LLC, go to your state’s website and research to see if the name is available.  If the name is available, but you are not ready to file your LLC right away, most states will allow you to reserve the name so no one else can use it. In order to reserve the name, you will need to fill out a form and pay a name reservation fee.  How long you can reserve the name, the filing fee cost, and the reservation renewal policies vary from state to state.  

Step 3: Choosing a Registered Agent

Almost all states require an LLC to appoint a registered or statutory agent.  A registered agent is a person that agrees to be the one that receives any official documents on behalf of the LLC.  The agent is then required to pass the documents along to the appropriate person at the LLC.  These documents can consist of lawsuits, subpoenas, and other important and sensitive documents.  Most states allow any state resident over age 18 to be appointed as a registered agent.  A member or and officer of the LLC can also be a registered agent.  I am the registered agent of my LLC.  Check with your state to see if you can appoint yourself as your LLC’s registered agent.  Just make sure that if you appoint yourself, you are in the habit of opening your mail because you don’t want to let important notices go ignored.      

Step 4: Prepare an LLC Operating Agreement

An LLC operating agreement is the roadmap that describes how your LLC will be run.  The operating agreement is even more important if your LLC is run by more than one person.  It clarifies such thing as member’s financial interest in the business, each member’s voting rights, allocation of profits and losses to each member, how the business will be governed, what happens to each member if a member of the LLC dies or exits the business.  Members of this site are all independent stylists and therefore, you run your business alone, so most of what I mentioned above will not apply to you.  Not all states require you to file an operating agreement with the state so as part of your research, you want to find out if an operating agreement is required as part of your LLC registration paperwork.   

Step 5: File Organizational Paperwork With the State

Each state has its own form and procedures for filing articles of organization.  The type of information required may differ slightly from state to state.  However, some of the information that is commonly required are

  • The legal name and address of your business
  • The name and address of the registered agent
  • The Member(s) of the LLC
  • The purpose of which the LLC was formed

Remember this is just a general list; each state is different.  The LLC work should usually be signed by the person forming the LLC.  In some states, the registered agent is required to also sign the paperwork.  Check with your state. 

In most states, you will file your LLC paperwork with your secretary of state.  However, there are some states that have a separate state entity that handles LLC paperwork.  The filing fee to set up an LLC varies from state to state. 

Step 6: Receive a Certificate Or Other Document From The State

Once your LLC’s paperwork is approved and filed by the state, the state will issue you a certificate or some other form of documentation depending on your state.  Now it’s time to apply for your Federal Tax ID number also known as your Employment Identification Number.