An LLC owner (you) is not personally responsible for debts accrued through your LLC. Basically, if your business is sued — which it probably won’t be — then they can’t collect your personal assets, like your personal bank account, car, etc. Now that’s peace of mind!
Your LLC qualifies for “pass-through taxation,” which means that the profits, losses, and anything in-between “pass-through” the business to your personal tax return. What you pay yourself from your LLC are taxed at your personal tax rate.
Adding that little “LLC” at the end of your business name can lend some major credibility to your business. Customers may see you as a more “legit” business and therefore trust you more — even if nothing else about your work changes. Having an LLC also helps you confidently market yourself as a voice of authority in your field.
Steps to follow after forming an LLC
Welcome to the wonderful world of business ownership. Feels good, right? Luckily, it’s easy to keep your shiny new LLC blemish-free. Avoid the headache — and keep your business legit — with these important steps.
Get an operating agreement
Here’s a free business tip (and honestly, life tip) from us to you: If it’s not in writing, it doesn’t exist. Period.
That’s why one of the first things you want to do after forming your LLC — aside from breaking out the champagne — is to write out your operating agreement. (Another life tip for you: maybe don’t combine the two!)
This agreement is especially useful if you entered into a partnership with someone when setting up the LLC. This document will set out the financial expectations for all of the LLC members and managers involved. It will spell out how your LLC is organized, who decides how changes are made, how to handle new partners, and how to handle dissolution (read: a break-up) in the future.
As you can see, there are a lot of moving parts here, especially when multiple people are involved. If you have a partnership, an operating agreement isn’t just a recommendation: it’s a lifeline.
Get your EIN
We know, we know. No one likes to talk about taxes, but your business will run into some nearly insurmountable problems if you don’t nip this in the bud right now.
Open up business bank accounts
You are probably eager to see that major cash flow boost from forming your LLC, but make sure that you have the proper channels set up for it. If you haven’t split your personal transactions from your business ones, now is the time to do so.
You don’t want your personal account anywhere near your business. This will make managing your business finances easier, keep you better organized for tax time, and avoid giving the impression of any funny business when it comes to your hard-earned revenue and income.
Look into licenses and permits
It’s tempting to think your paperwork for forming your LLC covers everything you need to run your business, but that actually may not be the case. Federal, state, municipal requirements may all differ. For example, annual LLC filing requirements vary by state.
Take a breath; don’t get overwhelmed by this step. A quick visit to your state’s Secretary of State site can help. You can even call their number or send them an email to see if you need any special licenses or permits. In most states, you don’t need anything additional to run an entirely online business, but brick-and-mortar and in-person services (like wedding planning and photography) just might.
If you need help, reach out to an expert, like a local attorney, to cover your bases. Set up any renewals on your calendar, save your documents in a secure (yet handy) place. You got this!
Make sure you’re insured (if you need it)
We can’t forget the sexiest topic of them all: insurance. But no, really, this is a big one. Your insurance covers you when it comes to financial losses and general liability, which protects you against claims like bodily injury and property damage.
Errors and omissions (E&O) insurance is another good investment for your newborn LLC. E&O insurance covers you if a client sues you for a mistake that happens while you’re completing your services, such as a breach of contract or misrepresentation of deliverables or services. While we hope it never happens, it’s always best to be prepared.
Contracts, Terms & Conditions, privacy policies, and more
Because we are The Contract Shop®, you may think we just added this one to hype ourselves up. But no, this happens to be an essential element of a thriving LLC. (We just happen to be really good at it.)
Keep up-to-date on the legal elements of your biz
Even with these handy steps laid out, forming an LLC can still be a nerve-wracking decision. Whether you’re dealing with imposter syndrome or just cold feet, we want to help you finally build the business of your dreams.
Your journey starts here! Be sure to check out our other content on our YouTube Channel for more tips and tricks to make your business grow… legally.