Creating (and maintaining) an LLC for your business venture

An LLC is a legal entity formed to protect business partners from liability arising from the business. It is essential to get an LLC if you want to protect and isolate yourself from lawsuits (sometimes predatory) involving your business - so you cannot be held personally liable for damages.

I am not a lawyer and this is not legal advice

Introduction

The purpose of this guide is to inform you in LLC creation so scummy registered agent services do not scam you into overpriced services.

Step 1: Research your business needs

If you have a business with a physical presence in a certain state (ex: dog walking, warehouse/distributer, restaurant), you will likely need to incorporate in that state. However, if your business is completely online/digital with no “nexus” (see “nexus” laws), you may be able to incorporate in any state.

Step 2: Pick a state

Skip if your business has a physical presence as described in step 1

Not all states are created equal. Each state has different rules, policies, and precedent for LLC’s. Rules and policies can be found by searching “State Name + LLC act”.

There are a few states that stand out from the rest:

  • Wyoming:
    • Has strong legal protections for sole proprietors
    • Anonymous incorporation (keeps your personal details hidden from filings)
    • Competitive fees and low taxes
    • Ability to manage online (without ever stepping in the state - or even country)
  • Delaware:
    • Anonymous incorporation
    • Very strong laws for handling disputes
    • Ability to set up unique tax structures

There are also a few states that are notably bad for LLC’s:

  • North Carolina
  • Minnesota

Step 3: Get a registered agent

Most states require that your LLC has a registered agent. A registered agent is basically someone who accepts legal documents for you.

Registered agents usually cost $50/y and can be found online. Depending on the state, you may be able to be your own registered agent.

Step 4: File articles of organization

This is the part where your LLC gets created. Find your state’s filing process (usually on the Secretary of States’ website). There will be a filing fee, and you will need to provide various information, including the name of your registered agent. Alternatively, you can use a service to complete this step, which may add anonymity - at a cost.

Warning: This is the step where you name the LLC. Make sure to not pick anything trademarked or offensive. Names can be changed later - for a fee.

Step 5: Write your operating agreement

Your operating agreement is basically the rules to your organization.

  • How many shares do you need to vote?
  • What are the titles of the leaders in your organization?
  • Who has power to sign agreement?

Questions like these should be answered in this document. There are templates online, and if you used a service for the previous step, they might have drafted one for you.

Step 6: Get an EIN

An EIN is basically a SSN for your company. It is used for tax purposes and can be obtained by applying for free on the IRS website.

Step 7: Get a business bank account

You must separate your personal assets and business assets if you want your LLC to work. Otherwise, you will be “piercing the corporate veil”, and will loose legal protections.

To get a business bank account you should select a bank that meets your needs, and follow their application process. You will need your articles of organization, operating agreement, an EIN, and someone authorized to sign for the business.

Warning: Before entering an agreement read all terms. Also, see signing instructions in step 8.

Step 8: Maintain

There are various steps to maintain an LLC.

  • You must pay LLC fees to the state
  • You must pay taxes
  • You should have annual meetings on record (even if this means talking to yourself)
  • You must comply with rules and regulations
  • Sign LLC documents correctly. Ex: “Nathan Barta, managing member of X LLC” not “Nathan Barta”, which could expose you to liability.

Step 9: Expand (optional)

If you want to expand your LLC to another state, you will have to get a registered agent in the state you wish to expand to. You will then have to register as a foreign entity.

Warning: Foreign entity fees can get expensive. Check the state’s LLC act to determine if you really need to register. Definitions of “conducting business” differ by state - so you may be able to do certain things without a license.