How to Open an LLC in US- 6 Steps to Follow in Forming an LLC
How to Open an LLC in U.S.: Overall Steps of Forming an LLC
1- Selecting State:
Prior to planning how to open an LLC in U.S., you should learn about some challenges. First of them is to decide the most appropriate state to be located and registered. One of the primary criteria to consider may be the scope of taxes imposed on businesses in different states. For instance, the rate of income tax is zero in Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. However, states such as Alabama, Colorado, Georgia, Hawaii, Louisiana, and New York offers less tax rates. On the other hand, California, Indiana, Mississippi, and Tennessee appear as the states with the highest state tax rates.
Furthermore, forming LLC in Alaska, Hawaii, Maine, Wisconsin, and Wyoming seems more advantageous. The sales tax and state tax are relatively at lower levels among the imposed tax liabilities of other states.
In process of how to open an LLC in U.S., you should consider that operating as foreign LLC leads to some extra expenses. Thos expenses are related to registration, paperwork, and operation costs. When an existing LLC opens an office or starts to operate in another state, it is called Foreign LLC. A Domestic LLC conducts its operations in the same state of establishment.
2- Naming the Company:
Which name to choose is the second question after the one of how to open an LLC in U.S. The company name must differ your company from the other registered LLCs. Additionally; it shall not include words which might cause confusion with any state agency (e.g. Treasury, State Department). Third, it shall not carry some certain restricted words, such as Bank or Attorney. An extra license or approval is required for those titles.
3- Assigning a Registered Agent:
Another step for how to open an LLC in U.S. is assigning a registered agent. This is a person or business nominated to receive & send legal documents on behalf of LLC. In most states, the LLCs are obliged to nominate a registered agent. That could be resident -over age of 18- of the operating state. Registered agent can also be a corporation that is authorized to conduct business in that state. A registered agent is responsible for receiving lawsuits, subpoenas and other official documents or correspondences. These documents may be legal summons & document filings. Registered agent conveys them to the appropriate person at the LLC.
One common misconduct here is that being assigned as a registered agent automatically provides same rights of the owner. However, the status of registered agent is solely not sufficient to claim that. For instance, in Delaware and New York, the board of executives is not listed during the formation process. On the other hand, it is obligatory to have the name of the registered agent in the formal documents.
4- Preparing and Adopting LLC Operating Agreement:
The fourth step regarding how to open an LLC in U.S. is adopting operating agreement. Operating agreement covers the type and details of the business you would run. Additionally it specifies below topics to handle operations:
- Allocation of loses & profits among members.
- Methods for dealing with payrolls.
- Voting and other administrative rights & responsibilities of members.
- Ownership interests.
- Procedures concerning the dissolution of the company or the departure/decease of any member.
An LLC is not required to draft an operating agreement and file it to the state according to the legislation. However, it is beneficial to outline the overall framework and rules of the business based on your vision. Operating helps this through defining operating procedures, ownership structure, and responsibilities. Besides, the operating agreement enables you to be on the same page with other owners/members. That will reduce risks stemming from potential future debates and disputes.
5- Filing Organizational Articles with the State:
This step of how to open an LLC in U.S. is crucial since it demonstrates the organizational structure of company. You need to file the document with the Secretary of State office. The procedures may vary from state to state. However, you are usually required to fill and provide below data:
- The name and address of your company.
- The length of the existence of LLC, if not perpetual.
- The name and address of the registered agent.
- The purpose of LLC, through the paperwork called organizational articles.
The person in charge for the forming of the company must sign the document. Moreover, the state may kindly charge you a fee to implement the procedure.
6- Obtaining an EIN and Certificate:
This is the final step concerning how to open an LLC in U.S. First, you should receive the certificate and permits from the state. These will indicate that your LLC is legally formed. Then, you can take care of other business issues such as obtaining tax ID number & business licenses. You can also set up a business bank account. Your LLC will use Employer Identification Number (EIN) as tax ID. Nevertheless, prior to that, authorities shall approve your documents.