Understanding LLC Requirements
To start an LLC, you must first understand your state’s requirements. Research pros and cons of filing in your own state versus another, as this may affect taxes and business operations. Second, choose an appropriate name for your LLC.
Steps to Form an LLC
Here are the steps to form your LLC:
- Choose a name
- Pick a state to file in
- Prepare formations documents
- File the articles of organization
- Create an operating agreement
- Get an EIN
- Comply with licensing and taxes
It generally costs $40-$500 to start an LLC, depending on state fees.
Tax Considerations and Costs
Consider how your LLC will be taxed. The business structure you select could be taxed as a sole proprietorship, partnership, or S-corp. The average cost to set up an LLC online ranges from $30-$350, with most states offering instant or two-week processing times.
Operating an Online Business with an LLC
Forming an LLC for your online business offers personal asset protection in case your business is sued, as creditors cannot take your personal belongings, such as your home, car, or investments. However, this protection is void if personal guarantees are made for business loans.
Setting up an LLC also allows for flexible profit sharing among members, a contrast to the equal profit sharing typical of partnerships.
When forming an LLC, assess your startup and operating expenses to determine the required funds to launch and operate your business. The flexibility of an LLC’s tax designation can help reduce your tax burden.
By following these steps, you can adequately prepare to form and manage your LLC for an online business.