The business structure you choose for your consulting practice is an important decision. It influences critical factors relating to your operations, such as personal liability, ownership, and taxes.
A limited liability company (LLC) is a popular choice for anyone starting a business or is looking to add more credibility to and protection for their sole proprietorship or partnership. Read on to learn more about setting up an LLC.
For information about different business entities, see our Choosing a Business Entity article.
*Important Note: This resource is for general information purposes only and may not cover important considerations that apply to you and your business. As such, the information provided below does not constitute legal or other professional advice. We recommend consulting with licensed legal and financial professionals in your jurisdiction to address your particular situation.
Filing for an LLC is done at the state level, and the process varies by state. Typically, you can find each state’s process on that state’s website. The steps generally follow the overview below, but be sure to research and comply with the requirements of the state in which you are filing.
1. Choose a business name
Choosing a business name for your firm is an exciting milestone.
You will need to choose a business name that is not already in use in the state. There may be other requirements to consider, such as including “LLC” in your business name or avoiding restricted words. The state should be able to help you determine whether the name you choose is acceptable.
2. File your LLC’s articles of organization
Setting up an LLC requires you to file a document called the articles of organization with the state. The name of the document may slightly vary depending on the state. It is a legal document that establishes the LLC.
The state likely has a template that you can complete and use for your filing. Generally, you will need to provide basic information, such as the name and address of your LLC as well as the names of its members.
The articles of organization are typically filed with the Secretary of State, but some states might require you to file through another office. Keep in mind that filing may require a fee.
3. Fulfill any other state-specific requirements
Below are examples of other steps the state may require.
Designate a registered agent. The state may require you to designate a registered agent, which is the LLC’s contact for any legal notices and government correspondence. LLCs will typically appoint one of its members to act as its registered agent.
Draft an LLC operating agreement. Not all states require an operating agreement, but consider drafting one to avoid conflicts among the LLC’s members in the future. Operating agreements often cover matters such as the percentage of ownership among members, voting rights and responsibilities, members' powers and duties, and provisions governing the transfer of members' interests.
Publication. In some states, you may be required to publish a notice in your local paper announcing the formation of your LLC.
Once you've registered your LLC, consider the following next steps:
- Business permits and licenses. Obtain any state and local business permits and licenses that may be required for running your business.
- Apply for an employer identification number (EIN). An EIN (also referred to as a Federal Tax Identification Number or TIN) is used to identify a business entity. Think of it like a social security number for your business. You can obtain an EIN from the IRS by visiting https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online. You will need an EIN to open a bank account in your LLC’s name.
- Open a bank account for your LLC. One of the main advantages for filing an LLC is protecting your personal assets and liabilities. It’s important that you set up a bank account in your LLC’s name to separate your business' funds from the personal funds of its members.