Question answered – why are Limited Liability Companies so popular?
To begin with, it’s no surprise that particularly LLCs are the most widely used legal business forms in the U.S.
You may ask why? The answer is quite simple. The name itself suggests why. Basically, an LLC limits your liability as a person associated with that business.
Meaning, your personal and family assets become separate from your business assets. This is quite extraordinarily helpful considering all the risks involved with creating and maintaining a business. You surely don’t want a failed business directly impacting you or your family finances personally.
On top of that, forming an LLC isn’t that hard (especially if you have some experience with it). And if you don’t — that’s not a problem as well, because there are quite a lot of LLC formation services out there that can help you.
So how can I form an LLC myself? Is it hard?
Frankly, it isn’t that hard or complicated. Especially if you’ve done it before. But… some of the steps on creating an LLC will differ depending on the particular state you want to form your LLC in. In this case, I will just outline a few general steps that mostly apply to every U.S. state. So without further ado, here are the main steps you should consider when forming an LLC on your own:
- STEP 1. Choose a unique business name. It should be free to use and not taken. Plus, you can’t choose a misguiding name that would be similar to a government agency or etc.
- STEP 2. Choose your registered agent. This one is necessary. To put it shortly, a registered agent is someone that will receive all the legal mail associated with your LLc. And the good thing about it — in most cases, you can be your own registered agent. Or if you buy an LLC formation service — they will usually provide that.
- STEP 3. Filing your articles of organization. These are some documents that outline the main information about your LLC.
- STEP 4. Decide the management structure of your LLC. It can either be member-managed or manager-managed LLC. There are quite some differences between them, but I won’t go into a lot of detail.
The vast majority of new LLCs are member-managed. So you would probably want to go with that.
- STEP 5. Create an Operating Agreement. An operating agreement of an LLC outlines its structure like management structure, member roles, and ownership.
For most states, this isn’t required, but all legal advisors actually recommend having that.
- STEP 6. Get an EIN. The abbreviation stands for Employer Identification Number. This is basically an SSN for your business. You will need it in order to hire employees, open bank accounts and so on.
What is the average cost when forming an LLC yourself?
Since you’ve seen pretty much all the main steps required to file for an LLC, you might ask how much does it cost? And the answer isn’t that simple or straightforward in every case. Mostly the cost of LLC formation will depend on each state you’re planning to form an LLC. It can range anywhere from $40 to $500 depending on the state. In addition, some states have annual or biennial fees. Surely, you have to account your own time into the price if you plan to do everything yourself.
Should I form an LLC myself or use some 3rd party help (what are the best options)?
This one will also depend on your activities and hourly pay, etc. It goes without saying — “time is money”. So if you don’t have any experience creating LLCs or the legal field in general — the process might be a little intimidating and time-consuming.
However, there are more than enough reputable companies that specialize in LLC formations. They tend to do the job pretty quickly and affordably. I bet you’ve heard of Incfile, Legalzoom, or IncAuthority.
Or even some other popular name in that niche. They all do a pretty good job, although not always the most popular one is the best. In this case, I had a friend who needed several different LLCs, and he decided to use different companies to help him do all the “heavy paper lifting”. Surprisingly, the one that performed the best — was the least known of those 3 I mentioned (IncAuthority) and had the lowest cost $0 + state fees (yes, $0).
So generally, I would say, whenever you can — just use a 3rd party service to help you with all the paperwork. It doesn’t cost much and saves you a lot of time.
I hope you can now see all the benefits that LLC gives you and why is it so popular. And it’s no secret that forming an LLC is not that expensive as you might’ve thought in the first place. On top of that, it can be done quickly as well if you use a 3rd party service. Have fun with your new business endeavours!
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