5 Things You'll Need in Place to Start an LLC

Operating as a sole proprietorship is simple, but that simplicity comes with a price. Since your business isn’t a separate entity, your personal assets and credit are always at risk. As soon as you start acquiring employees and property, forming an LLC is necessary to protect yourself.

What you Need to Start a Limited Liability Company

Unlike a sole proprietorship, an LLC can keep business assets separate from its owners. But to receive that protection, you need to gather and sign the following documents for most states.

1. IRS SS-4 and Name Reservation Forms

A sole-proprietorship doesn’t need to obtain an Employer Identification Number (EIN), but business owners must get one to start an LLC. American citizens can apply for an EIN online to receive one immediately. You’ll need your EIN for tax forms and other business documents.

Along with an EIN, you’ll also need to submit a name reservation application before writing your operating agreement and articles of organization. To search for name availability, go to the secretary of state or corporation bureaus’ websites, then file a name reservation form.

2. An Official Operating Agreement

An operating agreement is an important document used by LLCs. But, what is an operating agreement? These agreements outline a business’ financial and functional decisions, like regulations, provisions, and rules, for the purpose of governing internal company operations.

Your operating agreement should include:

  • Business name and address
  • Registered agent name and address
  • Member names, roles, and contact information
  • Member ownership percentage
  • Manager names, addresses, and contact information
  • Formation date and planned duration
  • Compensation plans and profit and loss statement
  • Policies and processes for adding or removing members 
  • Voting rights and meeting schedules

An operating agreement is mandatory in New York, Missouri, Maine, Delaware, and California. LLC owners that don’t draft this document elsewhere must govern by the state’s default rules. Either way, an operating agreement declares the LLC structure as a separate business entity.

3. An Articles of Organization

An article of organization is similar to an operating agreement, except it’s a mandatory document filed with a state government. This document ensures that your LLC meets the specific requirements in your state to operate. An articles of organization will include:

  • Business Name: Write it as it appears on your name reservation form.
  • Business Purpose: Outline what services your business will engage in.
  • Duration: If your business has a dissolution date, state it here.
  • Business Address: State the primary headquarters of your operations.
  • Ownership: List every member and their contact information in your business.
  • Registered Agent: Declare the person/business who will manage your legal duties.
  • Management: Note who will manage the members of your LLC.

All states have a fill-in articles of organization template you can use. Simply follow the instructions and submit your document before registering with the Department of Revenue.

4. Register Your Business

Most states require LLCs to register with the Department of Revenue under at least one tax type. Your tax status depends on your business, but employer taxes, sales and use taxes, and business entity taxes are commonly used. You can register using the form on your state’s site.

5. Get your Business Licenses

Some states or business types require one or more business licenses. Specific industries are more regulated than others. For example, the foodservice and healthcare industries have strict regulatory requirements that you need to update yearly, or you risk losing your business.

For instance, if you are starting an LLC in Florida, the most common type of business license is a business operating license, often called a “business tax receipt”. These licenses can help you to operate all types of businesses and will be nearly identical in all cities and counties across Florida. You can even conduct additional research by checking DBPR, DACS, or FDOH for licensing requirements, to understand the kind of licenses your business will need.

If you fall into one or more of the following criteria, you’ll definitely need a license or insurance:

  • Professionals who run a business out of their home
  • Business owners who own a building
  • Industries that require higher regulatory measures
  • Job titles that require licensing (i.e., engineering)

You can apply for the majority of your business licenses online via your state’s website.