Aiming to push your business from a garage-ran effort to a legitimate enterprise? You’ll have to start by establishing it as a company. If you own a regular business, you’ll probably want to turn it into an LLC, or limited liability company – you’ll reap multiple benefits, and besides, who doesn’t want to be only partially liable should something go wrong?
Jokes aside, no matter how difficult or downright scary setting up an LLC might seem, it’s actually pretty easy. Here’s how to go about it.
The basics for any business
The first thing you might want to get out of the way is figuring out state-specific laws: every state treats LLCs and their creation differently, and you’ll need to familiarize yourself with the ins and outs related to your particular area.
In general, you can expect to pay anywhere from around $50 to upwards of $150 depending on where your company will be located and what kind of business you’re in. Thanks to how far internet has come, you can even opt to start your LLC online, although you’ll probably pay less if you do it in person in the office of your secretary of state.
Next up, paperwork. (you didn’t really think you could get around this, did you?) The purpose of much of the paperwork related to LLC start-ups is actually to protect the future company owner from legal harm. Sure, you might think you and your partners will never quarrel and that everything will always be rosy, but it only takes one arduous legal battle to make you wish you took protective measures.
Consider working with a lawyer going into your first LLC. You don’t need one, but then again, you don’t exactly need a lawyer even when facing 20 to life – having professional legal help now might mean a world of difference some day.
The documents you provide should include an operating agreement where you’ll explain who’s who and who owns what in your company – should things ever get to a court, you won’t have to worry about a minor partner claiming full ownership of the company.
Should I start a LLC, anyways?
You should know that starting an LLC isn’t free even past the initial fee. Once you’re a successful business owner, everyone wants a piece of your pie, and things are no different here – you’ll probably find yourself paying hundreds of dollars every year to keep your LLC up depending on your exact state. Scratch that – when you count in profit-based fees, you’ll fork over anywhere from over $1,000 to a five-figure amount to Uncle Sam every year. While only businesses making over $200,000 a year tend to be charged a five-figure annual fee, don’t underestimate your potential earnings – even a smaller company like one that installs rain gutters can rake in big numbers when things start rolling.
Hence, you’ll have to figure out whether your business has really reached this point. You can use the following for a good measure: if your company acts as your main source of income, go ahead and slap an LLC tag on it – it will be worth it, despite the taxes.