The excitement you experience when you form a new LLC can be exhilarating, but it also can be overwhelming. To help you maintain control, here are seven things you should consider doing after forming your LLC.
1. Draft and Sign Your Operating Agreement
An operating agreement sets out the rules and procedures that will govern the company and its owners. If your LLC has just one owner, your operating agreement can be short. If it has multiple owners, it likely will be longer and include issues like economic rights, voting rights, management rights, transfer restrictions and more.
2. Apply for an EIN
Employer identification numbers are issued by the IRS and can be obtained online in just a few minutes. Even if you are not hiring employees, you likely still need an EIN—it’s a unique identifier for your business. Various parties will request your EIN, from your bank to government entities, and you likely will need it to complete your IRS Form W9.
3. Obtain State and Local Licenses and Permits
You should register with your state’s Department of Revenue and obtain all relevant business licenses and permits. At a minimum, your city likely will require you to have a business license. From there, you may need to obtain specialty licenses. For example, restaurants, liquor establishments, entertainment venues, construction companies and more all have unique licensing requirements.
4. Open a Bank Account and Set Up Your Accounting Software
It is important that your LLC maintain its own bank account separate from your personal accounts to avoid issues with commingled assets. In addition to your ID, you’ll need a copy of your Articles of Organization and a copy of your EIN letter in order to open an account. Some banks also will require all or portions of your operating agreement. This is also a good time to add additional signatories to your bank account if applicable.
You should also purchase a subscription to a cloud-based accounting platform such as Xero or FreshBooks. They will make tracking income and expenses easier and will save you all kinds of headaches come tax season.
5. Consider Purchasing Insurance
Depending on the goods or services you provide, you may want to purchase insurance. Consider liability and property insurance and possibly auto, workers’ compensation, errors and omissions, and other specialty insurance policies, depending on your situation.
6. Operate As An LLC
You must operate as an LLC if you want to isolate your personal liability from the liability of the LLC. To do this, purchase assets in the name of the LLC (and when applicable, transfer existing assets to the LLC). Always sign contracts in the name of the LLC. Further, you should maintain a minute book that includes all of your important corporate documentation.
7. File Annual Reports
Some states require you to file annual or biannual reports to remain an active LLC. At the time of this writing, Missouri does not, but Kansas does. These usually can be filed online and usually are quick and painless. But if you forget to file, the consequences can be very negative.
This article is general in nature and does not constitute legal advice. Readers with legal questions should consult with an attorney prior to making any legal decisions.