You’ve set up your LLC and you’re ready to start your business in earnest, so now what? Read more on our blog about what you need to do next.
You’ve had a great idea for a new business, and you’re serious about seeing it come to fruition. You’ve already formed a limited liability company (LLC), so what’s next?
In this article, you’ll learn five important steps to take after setting up your LLC in order to help your new venture find success.
1. Get your paperwork in order
It may seem simple enough, but it’s critically important to be organized if you’re going to be successful in business. (1)
While this doesn’t just mean having a well- organized filing cabinet, you should have somewhere – a corporate minute book and a binder or file – where you keep documents important to your corporation. This could include:
- Certificate of incorporation
- Any shareholder resolutions or other information
- State mandated reports, if required. (1)
2. Set up an LLC operating agreement
Once you’ve got your LLC taken care of, you might think everything is already sorted out – who has what responsibilities, how risks and rewards will be divvied up, etc. That’s not quite true, however.
The next step you should consider is drafting and singing an LLC operating agreement. For more information on the process and whether it’s right for your business, give a site like PrepareMyBusiness.org a look.
Writing on the blog of the Small Business Association (SBA), Ijeoma Nwatu makes the point that it’s “unwise to operate without an operating agreement even though most states do not require a written document.”
An operating agreement solidifies a lot of very important aspects of your business. The main goal is to lay out the governance of the internal operations of your business in a way that fits the needs of its owners – i.e. you and any partners you may have. Once you’ve drafted the agreement and all the LLC’s members have signed, it becomes an official contract that binds the members of your business to its terms. (2)
The benefits of having such an agreement can include:
- Helping to limit personal risk-This prevents the business from operating as an effective sole proprietorship, which could expose you to personal liability, negating one of your LLC’s key benefits.
- Clarifying of any verbal agreements -This can help iron out any potential miscommunications or misunderstandings by getting everything between you and your partners in writing.
- Protecting your LLC from the government’s perspective – Each state outlines its own default rules for an LLC that lacks an operating agreement, so having one of your own prevents any overly general or otherwise unhelpful rules from being enforced. (2)
3. Get an employer identification number (EIN) and any licenses you need
Just about all businesses will need an employer identification number (EIN), which is issued by the Internal Revenue Service (IRS). This number is free to obtain, you just need to file an application through the IRS website (or by mail or fax if you prefer). (1) (3)
EINs are a little like Social Security numbers for individuals: they help identify your business. As the name “employer identification number” might suggest, you should get this done before you begin to hire and pay any employees. (1)
You should also apply for any local business licenses you need in order to operate. This will vary depending on what you do and where you are, so get in touch with the appropriate local government offices to figure out what’s needed. As an example, you might need a seller’s permit depending on where you’re operating. (1)
4. Visit an accountant and open any accounts you might need
You’ll have choices to make about how you want to be taxed as an LLC, so visiting an accountant early on is advisable. You should also speak with someone to make sure you understand all the accounts you may want to consider opening for your business. These may include: (1)
- Business bank account-This helps separate your business and personal finances, which will in turn help you keep your personal liability limited. You will need your EIN and the certificate of business formation that the state gave you to open this account.
- Merchant account-If you need to process credit card payments as a part of your business’s operation, you’ll want to consider a merchant account. This is a bank account that holds funds from purchases made with credit and debit cards. After the approval of the transaction, the funds in question transfer to your business bank account. If the application process is too daunting, consider using a payment processor (1)
As always, an expert financial advisor can tell you what makes the most sense given the specifics of what your business is setting out to do and which localities you’ll be operating out of.
5. Get insurance and legal advice
If one of the key benefits you enjoy about an LLC is the way it limits your liability…why would you take on additional unnecessary risks after forming one? If you choose not to get properly insured, or you don’t have a trusted source for legal advice when you need it, that’s what you’re doing – taking unnecessary risks.
Your business may be small, but any wrong decisions could result in very expensive problems. Rest assured that many of the mistakes made by small businesses can be avoided with the right guidance. You can also get helpful insight on how to protect your intellectual property, something that can be very important especially as you’re starting out. After all, you don’t want to go to the trouble of designing the perfect product or logo only to have someone else steal it and then learn you’re not protected. (1)
In the same light, getting the right business insurance is wise because it can stand as a bulwark against any unwelcome surprises that might come your way. (1)
If you’re starting a business and you’ve formed an LLC, you clearly understand the need to protect yourself from potential difficulties down the road. The LLC is a good first step, and you’ll be well on your way to total peace of mind once you’ve considered the additional steps listed in this article.
As always, it’s a good idea to speak with your legal and financial advisors before you make any decisions that could impact your personal finances or those of your business.
- “After Incorporating or Forming an LLC – Critical Next Steps,” Source: https://www.legalzoom.com/articles/after-incorporating-or-forming-an-llc-critical-next-steps
- “Basic Information About Operating Agreements,” Source: https://www.sba.gov/blog/basic-information-about-operating-agreements
- “Apply for an Employer Identification Number (EIN) Online,” Source: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
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