What to do After Forming an LLC
Congratulations on your shiny new LLC! You now have personal liability protection, flexible tax options, and the credibility that comes from registering your business with the state. But if you want to start making money—and protecting that money—you’ve still got work to do. Here are your next steps.
In this article, we'll cover how to:
Handle Any State-Specific Requirements
In most states, filing Articles of Organization (or your state’s equivalent) is all it takes to make your LLC official. But in some states, there are other requirements you need to take care of right away.
In most states, you’ll file something called an annual report every year, starting the year after you form your LLC. A few states have biennial reports, which are filed every other year. But in the following states, you need to file a report right away:
- South Carolina
The initial report is just another piece of paperwork that requires you to provide basic information about your LLC. In some of these states, you have up to 120 days to file your initial report. In other states, you’ll need to include your initial report with your Articles of Organization. We suggest taking care of it ASAP—that way you won’t forget and rack up any penalties.
Some states (New York, Arizona, and Nebraska) have an annoying extra step: meeting a publication requirement. Often, this also requires filing more paperwork with the Secretary of State. Depending on where you live in your state, publication fees can get pretty steep (we’re looking at you, New York City) and calling around to compare fees is a huge time suck. We’ve got some tricks to help you get around overpaying when you publish in New York.
Draft an Operating Agreement
So far, we’ve dealt with public documents—those you file with the Secretary of State. But your LLC is going to need to keep some documents on file internally, too. The most crucial of these is your LLC Operating Agreement. Like its name implies, it’s an agreement for how your LLC will operate. A solid operating agreement will cover how your LLC will do important stuff like take a vote, add or remove members, distribute profits, and even dissolve, should the time come.
Your operating agreement should also have information about membership percentage—that is, how much of the LLC each owner holds. Usually, this is directly correlated to how much each member initially invested and directly determines voting power and how much much each member is paid.
Most folks don’t write their own operating agreements from scratch—that’s usually left to the lawyers. But you can find plenty of templates online. Just make sure they’re coming from a source you trust, as adopting an operating agreement is a big deal.
Need other LLC documents? Check out our library of LLC Legal Form Downloads.
Get an EIN
An EIN (or Federal Employer Identification Number) is a unique, nine-digit number assigned to you by the IRS. Like a social security number for your business, your EIN is what the IRS uses to identify your business. Virtually all LLCs need one. Even if you’re legally exempt, you’re still going to need an EIN to open a business bank account. You can apply for an EIN with the IRS or hire us do it for you.
Open a Business Bank Account
Opening a bank account for your business is crucial. That’s because the main perk of starting an LLC is the legal separation between you and your business (and the way this separation limits your personal liability). If you let your personal finances mix with your business finances, you’re eroding this separation. Should you ever get hit with a lawsuit (heaven forbid), you’ll want to be able to show that your LLC is a totally separate entity from you, the owner. Keeping your business money in its own account is an important part of doing so.
To open a business bank account, head down to the bank of your choosing with the following in hand:
- an ID
- Articles of Organization
- your LLC Operating Agreement
- your EIN
- a Resolution to Open a Bank Account
- an opening deposit (required only by some banks)
Apply for Local Business Licenses
Getting a business license is not the same as registering your business with the state. Some states require a state-wide business license. In some states, you only need to get a business license on the local level, either with your county or municipality.
Certain professions also require licensing—like architecture, nursing, counseling, and veterinary practice, just to name a few. Those kinds of professional licenses are issued by the regulatory board in your state.
The process for getting licensed in your state is going to depend on where you live and what you’re doing, so you’ll need to get in touch with your local government to find out what to do.
Get Your Business Online
If you really want to reach customers or clients, you need to get your LLC online. The extent to which you want to market your business online is up to you, but at a minimum, you’ll need a website, business email, and social media accounts.
To get your business website up and running, you’ll need to decide on a domain name (the address where your website will live). You’ll want it to be short, memorable, and—most importantly—available for use. When you’ve decided on a domain name, you’ll need to register it with a domain registrar. Some domain registrars also offer hosting, and most will provide you with a business email.
Once you’ve got your domain picked and registered, you’ll need to actually create your website. The simplest option is to use a website creation tool—there are plenty of free ones available. Most are pretty easy for newbies to use. If you want something fancier and more customized, you can hire a designer to build your website.
Buy Business Insurance
If you have an LLC, you’ve got personal liability protection. This means that if something disastrous befalls your business—like a lawsuit, for example—your personal assets are protected. Your business, however, is on the hook to pay. Business insurance can help cover the costs of lawsuits and other expensive problems, like burglaries, floods and fires.
In most states, workers’ compensation coverage is required by law if you have employees. Liability insurance typically isn’t, but many business owners feel better knowing their business is covered. You can purchase general liability insurance or add on more specific types, like professional, cyber, home-based, or commercial.
Understand Your Tax Situation
You likely started an LLC for the liability protection and adaptable management structure, but LLCs also have flexible tax options. By default, your LLC is taxed as a pass-through entity, meaning the profits “pass-through” the business to the owner(s), who report profits and losses on their personal tax returns. However, you can also file paperwork to be taxed as an S-Corp or C-Corp instead.
You may also need to pay a local tax in your municipality or county—you can probably find out by looking at your local city or county website or giving them a call.