If you opt to expand your business in the US, it is suggested to form a US company. This is even advisable for businesses owned and operated by foreign companies or those who are not US citizens.
A Limited Liability Company (LLC) is the preferred business structure if you are to form a business in the US. US citizen or not, US company or not, you are qualified to form an LLC in the US. In this article, you will be given a guide on how you could start your own LLC.
What is an LLC?
As Ian from LLCGuys mentions – an LLC or, in full, a limited liability company is a US business structure that protects business owners from having personal responsibilities in relation to liabilities or debts.
These types of companies are referred to as hybrid entities that hold the characteristics of corporations with sole proprietorship or partnerships.
Step by Step Guide to Forming a US LLC
1. Select a US State. When it comes to forming an LLC, it is highly advisable to form one in US states without state taxes. In this way, you will only be handling Federal Taxes.
For your business purposes, however, if you see the need to open an office, or there is, in a particular state, the need for physical presence, you are required to form an LLC in that particular state.
It is preferable to consider first whether there is a need to have a physical presence or office in a state. A physical office or presence maybe a job site or actual employees.
In this case, it is highly preferable to form an LLC in that state.
2. Name the LLC. Each US state has its own set of rules for the type of names allowed for an LLC. You are required to observe the following guidelines in general:
- The phrase “limited liability company” or one among the acronyms such as LLC or LLC must be included in the name. The name must not contain words that might confuse your LLC with or in association with government agencies like the State Department, FBI, Treasury, etc.
- Words similar to University, Bank, or Attorney are words that are restricted. This may require the presence of licensed individuals such as a lawyer or a doctor to be part of the LLC. There may be additional paperwork also if these types of words are included.
- It is highly suggested to see whether the business name you are going for would be available as a web domain. You may want to purchase the URL even if you are not planning to make the business website yet. This is recommended so that you can prevent others from obtaining it.
3. A registered agent is a must to hire. Any business or a person that holds the task of receiving and sending legal papers on your behalf is referred to as a registered agent.
In most US states, it is required that LLC companies nominate their registered agent. The registered agent nominated should be a state resident of where the business is located or an authorized corporation operating its business in the particular state.
For non-residents who own businesses, it is highly recommended to hire one registered agent for specific services.
If you hire a registered agent having a physical address in the state your business is in, services will be open at any required time to accept and process services and even other notices of compliance.
4. File the LLC in the State.
You will be required to file needed documents with the state to officially file and register your LLC.
The document to be filed is commonly named an Articles of Organization. Certificate of Organization and Certificate of Formation are two other names for this document. Such documents outline the LLC’s organizational structure.
5. LLC Operating Agreement must be created. Operating agreements are legal documents that outline the operating procedures and ownership of the LLC. In the majority of US states, it is not really required to have an operating agreement. It is, however, regarded as a good practice to have one.
Having an extensive operating agreement allows business owners to ensure they are all on the same page and, at the same time, reduces the risks of future conflicts.
6. Secure an EIN. An Employer Identification Number is the tax ID for the LLC. Thus, the reason why you must get one. To get an EIN, either an Individual Tax Identification Number (ITIN), a US mailing address, or a US Social Security Number (SSN) is not necessarily needed.
These identification numbers, however, are allowed for the online application process of the IRS to obtain an EIN. For non-resident business owners, applications submitted via mail or fax are other options provided.
7. Obtain a Physical US Mailing Address. In opening a bank account in any US state, it is necessary to have a physical address in that chosen state. In the US, one way of getting your mailing address would be through establishing a physical office where you will be doing or forming a business if this would be required.
However, in certain cases where opening a US physical office is not needed, your LLC will still be required to have a US Mailing Address.
In registering and applying for a US Bank Account, having a real US mailing address is required, and some offered services can help you. Having a real US Mailing Address is also practical for other services.
8. Open your US Bank Account. This is probably the most complex part of the process of forming an LLC. Banks are strict when it comes to knowing their clients, given the laws on US money laundering.
For non-residents, this would mean requiring them to travel to the US and apply for visas for doing so. Once you have received your EIN and you’ve already formed your LLC, opening the company’s Business Bank Account may be already processed.
Costs for Starting an LLC
Depending on the US state, the fees may range from approximately $40-$500. For forming your LLC, its main cost would be the filing fee for the LLC’s articles of the organization, usually done with the Secretary of State.
Also, if you decide to start your LLC with the help of a professional company – you will have to incorporate that into the total cost as well.
On the other hand, there are companies like IncAuthority that offer free incorporation services.
Other costs for forming an LLC could include Optional LLC name reservation fees which are required in Alabama, permit and business licensing fees, optional DBA or fictitious name fees, and publication fees which are mostly asked in New York, Arizona, and Nebraska.