All too often, people think that starting an LLC is as simple as filing a form with the state and that is all that is required. However, this can’t be further from the truth!
A Limited Liability Company is the establishment of a separate legal entity that operates in a capacity separate from its owners. This entity will operate within the rules set forth by the state of its inception, giving rise to its ability to own assets and maintain liabilities. In addition, the creation of a newly formed legal entity creates presence within that state, in which tax compliance becomes an immediate need for attention.
Many people after filing the Articles of Organization think they have established the “separate” legal status needed for liability protection. However, federal and state governments say “not so fast, we want proof.” Proof means, is the LLC operating outside of your personal purpose? Does it have a specific business purpose that serves the intentions ascribed to it? Proof also means, is it being treated apart from yourself by both federal and state authorities? Are the businesses finances and your personal finances distinctly separate and apart from one another?
If you have filed the Articles of Organization and have been operating out of your personal finances, then you have made a grave mistake and one that could cost you in both liability protection and taxes. So let’s avoid mistakes and get down to business.
So what do you need to file to create a Limited Liability Company?
- File Articles of Organization with the State.
- Draft an Official Operating Agreement specific to State Law, and get it signed by all members (best to have notarized).
- File an SS4 – Federal Employment Identification Number Application. Acquire the federally registered number you will use to file all future tax obligations for both Federal and State governments.
- File the appropriate Federal Elections, depending on the tax status you choose to serve your LLC.
- Acquire a Certificate of Existence, usually needed to open a new Commercial Checking account.
- Draft a Banking Resolution, assigning authorization rights for all Members of an LLC to a specific member to open the Commercial Checking Account.
- Acquire a Commercial Checking Account.
Once all these items have been created, you have successfully created a new legal entity, which will now have Federal and State recognition and terms in which it will operate set forth by the Official Operating Agreement.
To maintain this status you will also need to supply the commercial checking account with member contributions(cash deposits) that will fund its operations going forward. This ensures that all transactions used to operate are within the new commercial checking account you created. Each year, you will need to have accurate financial representation by being able to provide a Profit and Loss statement, and Balance sheet. This will demonstrate to federal and state authorities that your LLC is apart from yourself giving rise to its status and function within the jurisdictions it will continue to operate.
Simple Start has been providing clients across the country with LLC services designed to serve their short and long term goals. Our understanding of state laws, and federal regulations allow us to create an LLC for you that comes with future benefits, helping you avoid the pitfalls and mistakes made by many. Our belief is that every good decision is contagious and will lead to future good decisions thereby giving your business an opportunity to grow and excel in the product or service it provides. Allow us to serve you in your effort to create a new LLC, we believe in your success just as much as you do.