Guide on How to Start an LLC for Your Online Business

As you probably already know, there are many positive sides to having an online business. You can do it from anywhere, set your own work hours, and it tends to have a low start-up cost. The best thing is, you are completely in charge!

Whether you already have an online business, or you are thinking about starting one, you should consider forming an LLC (Limited Liability Company).

This can be a stressful time, so you should use any additional help you can get.

Here are some important information on starting an LLC and some potential benefits it might have for your business.

Do You Really Need an LLC

It is understandable for you to still be on a fence and can’t quite make up your mind. Is LLC something that your business can really benefit from? 

Especially if you are just starting your online business, or still just freelancing.

The short answer is yes!

And you should seriously consider creating an LLC if you meet any of these main criteria:

• If you had your first paying customer and your business is starting to get some momentum
• If you want to protect your personal assets and not expose them to any risks
• If your business has multiple partners or owners.

It would also be recommended (if your financial situation allows you) to consult an accountant or a business lawyer before officially form an LLC.

They can properly advise you on what type of LLC is right for your business (a single-member LLC or another entity type) and also help you with any possible legal obstacles.

How to Start an LLC

For starters, let’s just say that the LLC is the most simple business structure, especially targeted for small online businesses and solo entrepreneurs.

There are a few, easy to follow steps in creating an LLC for your business.

1. Pick a state

You might already be aware of this, but the forming process can vary from state to state. So, if you and your company are based, for example, in Nevada, be sure to have all the necessary information in order to form a Nevada LLC.

There are also some additional benefits here since Nevada is known as a state with business-friendly laws.

2. Name your LLC

This step is exactly what it sounds like – picking a name for your business.

But keep in mind, when naming an LLC there are a few requirements you need to follow:

• the name should always include the phrase limited liability company (or LLC/L.L.C.)
• the name can not by any means, include words that might be mistaken for any government agency (such as FBI, State Department, etc)
• some restricted words (such as University, Attorney, etc) may require additional paperwork and a licensed professional

3. Choose a registered agent

In case you are wondering what is it that a registered agent does, here is the answer.

It is quite simple, a registered agent sends and receives legal documents on your behalf.

These papers may include things like legal summons, document filings, etc.

Most states require you to have a registered agent associated with your online company when filing for an LLC.

4. File the LLC with the state where your business is based

It is time to make it official!

In order to do so, you need to file your formation document to the state.

The document required for this part of the process is usually called Articles of Organization, or in some states, Certificate of Formation, or Certificate of Organization.

5. Create an LLC operating agreement

This is a document that makes the outlines of ownership structure and member roles within your company.

An operating agreement is split into six main sections:

• organization
• management and voting
• capital contributions
• distributions
• membership changes
• dissolution

Additional information: Even though it is a good idea to have it, a lot of states do not require an operating agreement in order to file for an LLC.

6. Get an EIN

EIN stands for Employer Identification Number. It is sort of a social security number, but for your LLC.

What is it for?

Well, it is important to set up an EIN so you can open a business bank account (separate from your personal one) and to hire any employees in the future.

How to get an EIN?

Just acquire it from the IRS, the easiest way to do it is to apply via email.

Benefits

Finally, here are a few main benefits of creating an LLC.

Risks and Protection

It is mostly about legal risks at this point. The more your company grows, the bigger the chances of potential legal entanglements.

You want to make sure that you are protected before it gets to that.

Having an LLC means that in the eyes of the law, your business is a separate entity. 

In other words, an LLC keeps your company, your business partners and employees separated from you in case of any legal liability.

Expenses and Financial Investments

The main concern for many new entrepreneurs is the start-up cost. And the thing is, the initial capital is not the same for everyone.When it comes to creating the LLC, as we mentioned before, the cost can vary from state to state.

You might be lucky to have your business located in a state that is more business-friendly, but in any case, investing in an LLC is a clever move that can make your company easier to handle and more profitable in the future.

It is a Simple Process

As you can see, forming an LLC for your online business ventures is not a difficult task.

You can hire a professional to help you, but there are also numerous online services you can use.

There might be some additional costs and licenses to acquire and file, depending on a state you are located in. 

But the whole process is still pretty straightforward.

After Starting an LLC

Here are some steps you need to think about after you get an LLC:

• separate your personal assets from your business assets
• register the LLC for state taxes
• set up an accounting system
• obtain additional necessary permits and licenses
• get business insurance
• follow hiring laws with your new employees

Final Thoughts

Creating an LLC is the best and easiest way for your business to evolve and grow.

It can provide your online company with a more formal business structure, and it can be extremely beneficial in case you have business partners or multiple owners.

Yes, it is a financial investment but it is worth it since it elevates your business on the next level, while also lowering the risks and protecting your assets.

When it comes to your start-up costs and steps, you should really consider creating an LLC in order to start positioning your business the correct, easier-to-manage way.