How To Create An LLC

Step One: Stay Informed as you Start your LLC

Before you jump headfirst into the process, make sure that you understand what it truly means to start an LLC. First off, what is an LLC, exactly? Before we discuss how to start an LLC, let’s look at easy definitions.

Companies called LLCs are simply businesses that are considered to have ‘limited liability.’ What does this mean? It means that the business is recognized as existing completely separately from the business itself.

In other words, the company is known to be a separate lawful entity. Why is this so important? If the company is a separate entity, then the members of the company aren’t personally responsible when debts to the business arise.

An attractive element of LLCs, then, is this idea of protection. If members or owners of the business are not culpable for the debts of the company, then they are known as “not liable.”

Additionally, LLCs are known to be more adaptable as compared to corporations and are easier to construct and get up and running. This is because LLCs, overall, necessitate fewer requirements.

If creating an LLC sounds good so far, then let’s keep going. As you form the LLC, you will soon be required to file the correct paperwork and forms within the state of California. Be aware that each state possesses its own unique regulations and rules, but we will be going over the general guidelines you must follow and tasks you must accomplish to form your LLC in your chosen state.

Step Two: Select an Original Name as you Create an LLC

In many states, it is not allowed for two companies to exist that use an identical name.

For example, even if “Brian’s Skimboards, LLC” was located in the city of Encinitas, California and “Brian’s Skimboards, Inc.” was located in the city of Los Angeles, CA., there would be an issue. In fact, one of these businesses would need to alter its name. You will also notice that the focus here is on the name itself and not the abbreviation that signifies the company’s structure. Also, there are additional restrictions in the states, such as the use of certain words. For example, the word “bank” is restricted in some states in the U.S.

So, when you form your LLC, how can you be sure that the name you have chosen is unique and has not already been replicated? It is usually as easy as a few clicks on the internet since most states have their own databases that are devoted to existing names of businesses.

Suppose your name is readily available; congratulations! If not, then it is good to have a few backup names you also think will work. We want to emphasize that this part of the process is important so that you will not run into legal problems later. You especially do not want to be unsure of the originality of your name before you form your LLC.

It is also a smart move to do some research in your industry. For example, if you are running a new seltzer company, check on other beverage companies in your state. A replication of a name in your specific industry is troublesome and could invite legal action.

Another way to avoid this is to spend some time coming up with an exciting new name. Have fun with this, speak with friends, family, and of course, co-owners, directors, and employees. Maintain the vision of your new venture with a great, original name.

It may also be helpful to search out if there is a corresponding domain name and website name available for your new name. These may not need to match perfectly, but you want to make sure that someone else does not have an already-established web presence that will adversely impact your business as you get off the ground.

Step Three: Reserve the Name you have Chosen When Your Start an LLC

Here is a common scenario at this point in the process: you’ve come up with a name that makes everyone happy and is unique. You absolutely do not want to lose this name, and you are growing worried someone else will take it.

However, you are not quite ready to file your LLC forms and documents yet.

Here is your solution: reserve your name. Most states let you place a reservation on your name; you will simply need to file a specific form and pay a fee. We cannot give you the exact specifics regarding how long your name will be reserved or how much this will cost since it varies on a state level, but it is a smart move given your situation.

Step Four: Finding an Agent as you Form your LLC

Let us get the definitions out of the way first: an agent who is registered is simply an individual who will act legally for your company. What will they do?

This type of agent serves to receive legal actions and subpoenas and be the recipient of other official lawful documents on behalf of your LLC. When these legal issues arise, the agent will formally “accept” these legal documents and then pass the forms on to the correct individuals at your LLC, depending upon the structure.

Who can become an agent in this manner? Just as most states require all LLCs to register and name an agent, most states set these rules. The registered agent:

• Must be over the age of 18
• Must be a state resident
• Can be a member of your LLC or an officer

If you are not sure where, to begin with, this step or you cannot find an individual who offers to act as your agent, there are some companies that will help match you up with an agent. You will need to pay a fee, however. If you are still wondering how to start an LLC, let’s move on to the next step.

Step Five: Agree to Operate as you Create your LLC

Still wondering how to start an LLC? When you form an LLC, the operating agreement becomes an exceedingly important document, so pay special attention to this part of our rundown.

We like to think of the operating agreement as a set of guidelines that stipulate the way in which the LLC will run and be overseen. When you create an LLC, you are starting more than just a business; you are creating a team of people who need and want to know their roles. This document will help with that. What does the operating agreement consist of? It details:

• Interests of ownership
• Voting rights belonging to owners/directors/members
• Allocation of profits/ losses
• Process through which meetings are run and held
• The ways in which the company will be and is governed
• What happens to members’ rights if someone leaves or passes away
• A plan for dissolving the business, if needed

Please know that an operating agreement is not limited to only these things and can include other points particular to the specific LLC you have created and incorporated.

What do you do with this agreement? You do not need to send it anywhere or file it with California, and the penning of this document might not even be needed in your state. Then, why do it?

We think that this operating agreement is a great way to set expectations for everyone involved in your new LLC and provide everyone with the same playing field and knowledge concerning the business. You may not anticipate disagreements and misunderstandings, but they are bound to happen. Setting these guidelines out beforehand is a great way to all gets on the same page at the right time.

Step Six: File Paperwork with California before Starting Your LLC

Whether you are forming your LLC in California or another state, you’ll need to pay extra attention to the specific procedures required. For example, you will definitely need to file your Articles, also known as your Certificate of Organization.

What does this certificate establish? It is responsible for putting down on paper and into the record:

• The purpose of your LLC
• The name of your registered agent and address
• You LLC’s chosen name and location from where you will run the business
• The expected length of your LLC (some put down “perpetual” here, which is fine).

One of the individuals who is creating the LLC must sign the certificate. Now, some states require your agent to also sign the document.

Each state charges a fee for this, and costs vary. For specific information on your state, check the internet. If you are still curious about some of these details, contact our California business and corporate attorneys. We can help advise you concerning starting your LLC off right!

Step Seven: A State-issued Certificate

You are getting closer and closer to forming your LLC. Now that you have filed all the specific documents, California will send you back something in return. Your state will send your LLC a document or certificate that proves the existence of your business.

What is the significance of this certificate? Fantastic question. It allows you to commence important matters such as:

• Procuring your Tax number (ID number from the IRS)
• Setting up your LLC’s corporate bank account

A business lawyer may be helpful in completing this step. You are almost there, and there is only one more step before you are ready to create an LLC.

Step Eight: Conducting Business Outside of Your State

In order to conduct business in another state, you need to submit the proper paperwork—just as you did in California—in order to register. Some states will indeed require additional or distinct paperwork, and even more importantly, you will need an agent for this additional state. As a matter of fact, you need a unique agent for each state you want to conduct business in.

We recommend this: Form and start your LLC in your primary state, and see how it goes for a little while. You may find the business is off to a great start; you may find you need to make adjustments. This approach will give you a sense of what is needed to branch out into other states, and in your extra time, you can be looking into which states might be most advantageous and prosperous for your specific brand.

Of course, if you are really keen on it—perhaps you are an established entrepreneur with a track record of success, or your market research is showing that the multiple-state option will bring success—then go for it! We will be there with you every step of the way if you need us, of course!

Forming an LLC is an exciting venture for those who are interested. Relatively simple to organize and start, these companies offer a lot of great advantages. Remember to check in with the state of California (or your chosen states) and to make sure you have checked all the appropriate boxes: regulations passed, forms filled out, agents registered, etc.

Once you have done all that, the ball is in your court. Good luck out there as you start your LLC. Creating an LLC is not without its challenges, but it is a great opportunity. We hope we have answered all of your questions regarding exactly how to start an LLC.

Where will you take your business next? We can’t wait to find out. Please let Nakase Wade know if you have any questions about this process or would like a free consultation.