With a limited liability company, you can lawfully run many types of businesses, be it commercial activities, services, or social works. An LLC is one of the most popular business structures so far and for a good reason. Offering a solid legal framework, it boasts amazing management and taxation flexibility so much appreciated by all entrepreneurs. So, with an LLC, you can realize a whole lot of business ideas and give your private venture a proper legal start. That’s an answer to the question “ What Can I Do With an LLC?”. Yet, a more appropriate question sounds like “What Should I Do With an LLC?”
LLC formation is only the beginning of a bigger journey waiting for you ahead, and you need to be fully armed for that. To respond to that question, let’s take a closer look at what steps you should take to get the best of your newly formed business entity.
Important Things to Do After Forming an LLC
Once your LLC documents are approved by the state, your business is officially formed. But it doesn’t mean you can relax and simply drift downstream. You still have quite a lot of tasks on your plate to make your venture successful and profitable. The key aspects to focus on include law compliance, personal asset protection, financial issues, and development planning. To cover those, there are certain prerequisites you need to match. And we’ve made a list of essentials you need to do right after LLC formation to get your business up steam:
- Make up an Operating Agreement;
- Acquire an EIN;
- Open a business bank account;
- Hire an accountant;
- Sign up for taxes;
- Obtain business licenses and permits;
- Research employment requirements;
- Check for compliance rules;
- Think about online presence;
- Work out a business plan.
Make up an Operating Agreement
Though only a few states require LLCs to have an Operating Agreement in place, and it’s optional in most states, this document is too important to be neglected. It’s an essential bylaw that works for both single-member and multi-member LLCs. And it’s nearly vital for the latter. The document covers such crucial points as ownership split, profit distributions, company management structure, voting issues, membership changes, and LLC dissolution. As such, it greatly enhances overall company credibility in the eyes of courts, state, and financial institutions, as well as in the eyes of customers, potential partners, sponsors, and investors. Clearly outlining financial and business control issues that often evoke internal disputes and disagreements, an Operating Agreement allows LLC members and managers to avoid conflicts and focus on day-to-day business operations and growth.
Acquire an Employer Identification Number
Similar to an Operating Agreement, an Employer Identification Number is not a must for LLC formation. Yet, you’ll quickly guess that you need this number just as a US citizen needs a social security number. It’s a sort of identifier for your business making it visible and distinguishable for financial and tax authorities. To make it clear, you’ll need an EIN if:
- You plan to hire employees;
- You are going to open a business bank account;
- You’ve established an LLC with more than one member;
- You register for certain types of income taxes.
So, it’s advisable that you get an EIN once you’ll get your formation documents approved by the state. It will take you neither much time nor much effort. Just submit an application to the IRS and obtain your EIN number the same day for free.
Set up a Business Bank Account
It’s a strong recommendation that you open a separate account for your business right after establishing an LLC and refrain from using your personal bank account for business transactions. It’s highly important to maintain a secure corporate veil provided by the LLC. Having a separate account for your company, you’ll draw a line between your personal and business cash flows. Besides, this way, accounting for business finances is much easier and efficient.
Hire an Accountant
Think you can handle your business finances on your own? Then think twice. It’s a mistake many small business owners make time and again. Yet, trying to save on professional services, you might put at risk your business compliance in the end. Meanwhile, an accountant will take care of your financial, tax, and reporting issues and handle your company bookkeeping in a more effective manner. With a dedicated accountant, you’ll be able to apply optimized taxation schemes and avoid many fines and penalties.
Sign up for Taxes
Taxes are a part and parcel of any business. The plus of LLC taxes is flexibility. First, you need to select your desired LLC status since LLCs can be taxed either as pass-through entities or as corporations. While pass-through taxation is applied by default, S-Corp or C-Corp status needs to be filed for. Pass-through or disregarded entities are free from state and federal taxes, with business income taxes payable on the personal tax returns of LLC members. Meanwhile, a C-Corp status implies corporate tax payments at a federal level.
The most common types of taxes LLCs are normally exposed to include sales and use taxes, franchise tax, employment, withholding, and unemployment taxes. On top of that, though, there are a handful of state and local taxes all LLCs are to pay irrespective of their tax status. Overall, taxation is a tricky field. Before registering for taxes, you’d better consult with a tax advisor and your accountant to apply the most efficient tax scheme beneficial for your current business situation.
Obtain Business Licenses and Permits
Licensing is yet another highly important aspect to consider after forming an LLC. Some types of businesses and activities require licenses and special permits to be operated in certain territories, areas, and localities. Accordingly, licenses are issued at federal, state, and local levels. While federal licenses are industry-specific regulations, state and local licenses rather refer to specific activities and occupations. Anyway, licensing is a vital field to tackle to have all appropriate regulatory permits in place to run your business and avoid any state penalties. To check for business licenses and permits you need for your type of LLC business, contact your Secretary of State.
Research Employment Requirements
If you are going to engage hired employees in business operations, consider employment requirements valid in the state of your LLC formation. Basically, they do not vary too much by state, yet, there still might be some state-specific nuances to consider. Two core aspects to take into account are checking the eligibility of your future employees and registering for unemployment and withholding taxes.
Check for Compliance Rules
Staying in good standing with the state is an essential part of after-formation compliance maintenance. Along with matching licensing and tax requirements, most states set forth annual reporting regulations all LLCs need to follow. Check for reporting rules in your state of formation and operation not to miss filing deadlines for updating your company records.
Think About Online Presence
Being a part of the digital world is a moving force for any business today. So, think about online presence for your future business. Acquire a domain name to set up the branded website for your company and create separate accounts on social media to look more attractive and trustworthy for customers and partners. All of this will greatly contribute to your company’s credibility and recognizability and help create corporate style and establish a solid business reputation.
Work out a Business Plan
When a legal LLC structure and a proper maintenance framework are in place, it’s high time to sit and think about a strategic plan that will set up a basis for your business development and growth since this is a true aim of establishing a company. In this plan, you should make a quick overview of your company’s long-term goals and short-term objectives, closely consider the products and services you are going to provide and outline the ways of achieving your goals including both marketing strategies and financial resources.
A business plan is not only a tool for shaping up and realizing your endeavors but also an instrument that will come in handy in negotiations with investors, sponsors, and creditors.