In the complex world of business organization and registration today, business starters are looking for a way to uncomplicate things and yet still have the benefits of the business. With the advent of the LLCs, business owners can now have the best of both worlds. Traditionally, and this is still being exercised in many countries, there are only three kinds of business categories in the eyes of the law: the sole-proprietorship, the partnership and the corporation. Each one of these business categories has their own strengths and weaknesses.

In sole-proprietorship and partnership, both the business and the owners are one and the same entity. This means that when the business gets into trouble, the separate property of the owners of the business can also be used to answer for the liability of the business. In corporations, the business is a separate and distinct person from the actual owners. This means that no matter what happens to the corporation, the shareholders cannot be made liable except to the extent that they invested in the company. In the United States there is a fourth kind of business category: the LLC or Limited Liability Company. This type of company enjoys the simplicity and inexpensiveness of setting up sole-proprietorship and partnership but at the same time it protects its members from liability as in the corporation. Also, unlike corporations where shareholders are doubly taxed for the individual income and corporate income, the members of the LLC are only taxed once. What’s more registration of the business is simpler and less complicated than in the corporation. So how does one set up an LLC?

Choose a Business Name

The first thing that anybody who wishes to set up an LLC has to do is to choose a business name. This business name must be distinct from the other business names that are already registered in the state where you want your LLC to be registered in. Furthermore, you also have to follow the LLC naming rules in your state. You cannot make use of the names “insurance,” “bank,” “city,” or “corporation.” It is also required that your business would end in “LLC” or any other nomenclature of “LLC” approved by your particular state.

Create an Operational Agreement

The next two steps can be interchanged but for reasons of practicality it is always good to create an operational agreement between the members of the LLC about the exact details of your business. This includes operational management, leadership, amount or percentage of profit sharing, decision making, capital needed and other business practicalities. This is important because each member of the LLC must be able know what his exact duties and responsibilities as well as the benefits that he can get from the LLC. It also gives anyone who doesn’t want to participate an opportunity to back out.

File the Articles of Organization

The next thing to do is to file the Articles of Organization of your LLC. This is typically just a form you have to fill up and file with the state. You also have to pay a fee that ranges from $100 to $1000 depending on the state the LLC is registered in. There are some states that require you to publish a notice of your intention to form an LLC. You have to fulfill this requirement to be able to register.

Lastly, your business would need to obtain the necessary permits, tax identification and other permits that your state may require from you.

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