In 2022, I took on a new editing client as a freelance journalist. When I shared my copy editing rate for his legal blog, he didn’t hesitate to agree. Eventually, he retained my services. My goal was to draw in more clients like him: professionals who appreciate creative work and are straightforward to collaborate with.
To enhance my professional skills, I made the decision to elevate my approach. One evening, during a graduate seminar led by the department chair, I found myself distracted. My mind works in a way that compels me to act on any ideas that arise immediately. So, while engaging in a discussion about the previous week’s readings, I established my limited liability company (LLC), Springer Creative Associates.
Creating an LLC for Your Business
An LLC, or limited liability company, is a type of business structure that merges the pass-through taxation features of a sole proprietorship or partnership with the liability protection offered by a corporation. This structure safeguards your personal assets from creditors in case of financial distress or legal challenges, as they are considered independent entities.
The Filing Steps
Before you proceed with setting up your LLC, it’s wise to conduct thorough research to determine if this is the best business structure for you. If you’ve concluded that an LLC is right for you, follow these steps to file:
1. Select Your State
You can choose to file your LLC in any state you prefer. Typically, most individuals file in their home state or the state where they anticipate conducting business.
2. Verify Name Availability
Once you’ve selected a state for filing, brainstorm a business name and check its availability. Opt for a name that is distinctive and aligns with your growth aspirations. As a marketing professional, I advise selecting a name that is conducive to search engine optimization. I’ve encountered businesses with generic names that make them difficult to locate on Google.
3. Designate Your Registered Agent
It’s mandatory to appoint a registered agent. A registered agent is an individual or entity designated to receive legal and tax notifications on behalf of your business. You can serve as your own registered agent or choose someone else—typically an attorney or a firm that offers registered agent services.
4. Draft an Operating Agreement
Your LLC’s operating agreement will provide liability protections for its members and specify agreements among them.
5. Submit Your LLC Documentation to the State
This step involves officially registering your LLC by submitting the necessary formation documents to your state. You can generally complete this yourself via the secretary of state’s office, or alternatively, you could hire an attorney to assist you.
6. Complete Your Beneficial Owners Information Report (BOIR)
Many businesses are now required to submit a Beneficial Owners Information Report to promote transparency regarding business ownership. This form can be filed online through FinCEN.
Completing these steps ensures the legality of your LLC. However, I personally wish I had known certain things prior to filing. I used a DIY legal platform, and I regret that choice. If given the chance to redo it, I would either personally process the application through my state or collaborate with a business attorney. DIY filing services tend to inflate their fees without offering the insights that a qualified attorney would provide, particularly concerning local business laws and compliance documentation.
Regardless of whether you handle the filing yourself or enlist a business attorney, seeking legal guidance is crucial. Jon Morgan, CEO of Venture Smarter—a consulting firm focused on assisting startups—emphasizes that a common misstep among entrepreneurs is a misunderstanding of local regulations.
“Every state in the U.S. has its own unique regulations regarding LLCs,” Morgan explains. “These can vary extensively, so freelancers should familiarize themselves with the specific laws relevant to their state before launching their business. This task can be complex, so I frequently suggest that freelancers consult with a local attorney or business advisor to guarantee compliance with all local and state regulations.”
Post-Filing Actions for Your LLC
I must confess to a serious oversight when I filed my business: I paid for my employer identification number (EIN).
As someone who works in technology journalism, I should have known better. Nevertheless, there are companies that mimic the IRS website, guiding users through the registration process while charging upwards of $300 for a service that is free of charge.
After establishing your LLC, there are a few essential tasks to follow up on:
- Register for your EIN. Again, avoid any fees for this! You can register free of charge on the IRS website.
- Acquire any necessary business licenses and insurance. Research what is required for your locality and obtain them. Be cautious of misleading mail solicitations that might claim you need to purchase additional licenses or labor law posters.
- Open a business bank account to keep your expenses organized. To fully benefit from your LLC, it’s critical to distinguish your business expenditures from your personal finances by opening a dedicated business bank account and using a credit card solely for business transactions. “One frequent error is the failure to keep personal and business finances distinct, leading to confusion, potential legal issues, and even risking the LLC’s limited liability status,” Morgan advises. “To prevent this, I always recommend that freelancers establish a separate business banking account immediately after registering their LLC.”
- Register to operate in other states if necessary. This is typically required if you have business activities or employees in those states.
