Starting and Running a Small Business – Form an LLC
“Do I need an LLC?” is one of the top questions I get from people when they are starting a small business.
Forming an LLC is a way to provide legal protection from creditors and lawsuits that you don’t have if you are a sole proprietorship (one owner) or general partnership (more than one owner), which are the default classifications prescribed by the IRS when you start a business.
Creating an LLC does not change how your business is Federally taxed, but it is a good idea for any business who wants the legal barrier.
In this post, I show you how I would create an LLC for Embarkment Salon, the example Company used throughout The Embarkment’s Guide to Starting and Running a Small Business.
I utilize the services of Incorporate.com in this example.
Important Disclaimer: I am a licensed CPA and do have experience in the matters discussed below. However, I am not an attorney. The information in this post should not be construed as legal advice and I always recommend it is ideal to consult with your own attorney or CPA when it comes to your legal and financial matters.
What is Incorporate.com?
Incorporate.com provides assistance in filing the necessary paperwork for small businesses like yours.
It’s their specialty.
They are not a legal service, but can help remove the uncertainty when it comes to getting the necessary paperwork filed when you are just starting out.
In the example below, I demonstrate the process of setting up a single-member LLC (one owner) using their service.
Links Used in This Post
Click on the Incorporate.com link above and you will be taken to their home page.
From the home page, select what state you want to incorporate or form your LLC in.
Embarkment Salon is forming an LLC in the state of Maryland.
Once you choose the state you want to form in, you’ll be presented with the various packages available to you.
If you want help applying for an EIN, need an operating agreement drafted and/or want hard copies of the documents that will be filed, you may want to upgrade your package.
Keep in mind, Incorporate.com will be charging you for your state’s filing fees and their fees for assisting you with the filings, so the total fee will vary by state and type of filing.
I choose The Starter package for Embarkment Salon and move forward with the interview process.
On the next page you have an opportunity to purchase individual add-ons.
For example, if you want help applying for an EIN but don’t need any of the other items in The Essentials package, you can purchase just the EIN help on the next page.
Next, you’ll provide some basic contact information about you and your Company.
Finally, you’ll answer a series of questions to complete the process of registering an LLC in your state.
These questions may vary slightly based on what state you are filing in.
The questions include:
- Preferred Name – In my case, I am seeking to register Embarkment Salon, LLC.
- Alternate Name – If your name is unavailable, you can choose a backup name. Alternatively, you can have a representative contact you to discuss your options.
- Industry and Brief Business Description – Select the industry you will operate in and provide a brief description of what your business will do. Embarkment Salon is a hair and nail salon.
- Primary Business Address – I am using a fake address in this example, but you will input the main physical location of your business.
- Will Your LLC Exist for a Set Amount of Time or Indefinitely – Embarkment Salon will exist indefinitely.
- Who Will Run the Business – If you are viewing this post, you are most likely planning to manage your own business. However, many businesses are owned passively and run by non-owners. Embarkment Salon will be owner-managed.
- Owner Information – Input the number of owners and information for each owner. Embarkment Salon is owned by one person.
- Additional Beneficial Owners – Some businesses will be owned partly or entirely by another business or entity. If this is the case for you, provide information about the owners of those entities. However, if this describes you, I would highly recommend retaining an attorney.
- Address for Documents and Tax Notices
- Registered Agent Information – Separate legal entities are required to have a registered agent for serving important legal and other documents. You can typically act as your own registered agent if you operate your business in the state you are organizing in. If you will be operating in a state you are not organizing in, you will need to register and appoint a registered agent in that state. You may also choose to have a separate registered agent even if you are operating in the state you organize in and Incorporate.com offers this service. Embarkment Salon’s owner will act as its registered agent.
- Shipping Address – Provide a mailing address for any documents that will be mailed as part of your Incorporate.com purchase.
And that’s it!
Once you complete this simple questionnaire, you will provide payment information and complete your purchase.
Incorporate.com will begin the process of registering your LLC with whatever state you are registering in.
Embarkment Salon is a hypothetical business, so I did not actually file Articles of Organization.
However, what you will end up with is something like this, which is what Articles of Organization look like in Maryland.
Feel free to leave one in the comments section down below or connect with me on social media.
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