Setting up your small business as an LLC

There are many things you need to take into consideration when starting a small business. One of these things is the type of company you are going to start.

The most common companies are LLCs, corporations, partnerships, and sole proprietorships. Many small businesses find that for their purpsoes, it's best to start their company as an LLC.

An LLC, or limited liability corporation, allows business owners to separate their personal identity and financial assets from that of their business. When a company is not incorporated, creditors or partnerships can seize the business owners' personal assets, such as homes, savings, or cars. However, when a business is incorporated as an LLC, only the money put into the business can be seized or lost in the event the business tanks or cannot support itself financially.
In addition, LLCs are not subject to double-taxation, as corporations are. Double taxation occurs when the corporate entity as well as the shareholders' dividends are all taxed.

But there are also drawbacks to LLCs. For one, the tax liability for an LLC is different with each state. If your company will be operating in different states, you will have to know how that state handles LLCs before deciding on an LLC. In addition, an LLC is unable to ever go public. If you are an LLC and eventually want to go public, you will have to switch to a corporation.

Setting up your business as an LLC
Each state has different fees and requirements for setting up a small business as an LLC. While each state differs, the following are the steps required to set up an LLC:

1. Go to your local Secretary of State office and get a copy of your state's LLC Articles of Organization.
2. Choose a name for your business. Ask the SOS office if there are any rules regarding business names, and make sure that your name is in accordance with those rules. (Most states will prohibit you from using Corporation, City, Incorporated, and others in your actual business name.) Your name will end with "LLC," but it cannot have the same name as another business in the state.
3. Fill out the LLC Articles of Organization form. This document is typically just the name of your business, the address, names of members, and services provided.
4. If required, publish a notice in your local newspaper about your intention to have an LLC. In Arizona and New York, this is required, but it's a good idea to double check to make sure. If your state requires that you do this, it must be done before you submit and file your Articles of Organization.
5. Submit the Articles of Organization to the Secretary of State office. At the same time, you will also pay your filing fee and in some states, a corporate tax that is due at the same time. Check to see how much it is. Fees range from $40 to $900 to file, in addition to the annual tax that is due in some states.

Some small businesses will hire an attorney to help them set up their LLC, but as a general rule, most companies can do it themselves unless their organization is complex, or unless they would feel more comfortable having a professional handle it.

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• Understanding best practice
• Tips for small business owners
• The basics of writing a great business plan
• The basic requirements of running your own business
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