LLC what is it? Why do I want one?
How many times do you hear, "I have a great idea for a business!" That is fantastic! Now what?
If you have ever wanted to start a solo venture, create your own brand, be in control of your own idea and take it to legitimate business status, that usually starts with establishing an LLC, a limited liability company.
What is an LLC, Limited Liability Corporation?
Technically, a limited liability company (LLC) is a business structure in the United States whereby the owners are not personally liable for the company’s debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.
Similar to a corporation, an LLC is individual legal entity that has the capability to sue or to be sued. To specify, if an LLC is sued and owes a financial judgment, the plaintiff generally cannot pursue the members’ personal assets or bank accounts. That means you personally can operate as a business, and protect yourself from lawsuits. Consider this your first big step in Risk Management for your business start-up.
Filing for an LLC in 2021 can be done online in most, if not all, states. Your state’s official Secretary of State site should provide links, information and a way to file and pay online. In Oregon, for instance, you can file and pay a small fee of $100 and your LLC is filed and takes 24 hours or less to receive your email confirmation.
Take the time to read the information your state provides, regarding registered agents, member managed, manager member. If you are not sure about any of the information your state requests, ask. Do not just guess or fill out what you think is correct, now is the time to ask and ensure you start out on the correct foundation. You can ask your secretary of state office, or contact your local SBA (Small Business Administration) for free answers and support, depending on your budget, seeking an affordable start-up consultant can provide help, support and education to get your started properly.
Do not avoid this step. You should consider creating an LLC as soon as you know you’re going to be taking your business idea and putting it into action, make sales, and you want to avoid putting your personal assets at risk or you will have multiple owners and/or partners in the business.
So, you made your first sales now and you want to get paid. As the owner of a single-member LLC, you don’t get paid a salary or wages. Instead, you pay yourself by taking money out of the LLC’s profits as needed. That’s called an owner’s draw. You can simply write yourself a check or transfer the money from your LLC’s bank account to your personal bank account.
When you have a partner or multiple partners you should have a written operating agreement between all parties to ensure everyone fully understands expectations of draws, and actionable items for all involved in the LLC. The SBA can again be helpful with these questions as well as a lawyer, or working with a start-up consultant.
It is important to establish the LLC that indemnifies you, establishes your business, and then — with LLC in hand and an EIN — opens the way to get a bank or credit union account for easy basic accounting for your LLC.
If this is your first business, ask a lot of questions, reach out to your local SBA, or find a start-up consultant that will walk you through these steps. It may seem overwhelming or confusing but it is something that can be learned, and help you find a new self sufficient way of living, or live out a dream.
Click this link to access a complete list of Secretary of State offices in every state!