August 13

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Choosing Your Business Structure

By thebadassceo

August 13, 2020


Choosing your business structure is an important decision when starting a business, but it doesn?t have to be overwhelming. Common business structures include sole proprietorships, partnerships, corporations, and limited liability companies (LLCs). To learn more about different business structures click here. I?ve always formed LLCs for all of my companies. You can hire an attorney to help you decide your business structure and complete the formation documents, but it is possible to do yourself. I?ve listed out the steps to follow when forming an LLC.

How to set-up your LLC

Note: All forms, links, and advice are specific to forming an LLC in California. Registration forms and criteria can differ from state to state. Be sure that you also register with your city and meet their requirements.

1. Pick the name of your business

  • Cannot duplicate an already existing LLC in your state.
  • You can search to see if your business name is taken here.
  • Typically, you must include “LLC” in your business name.

2. File form LLC-1 Articles of Organization

  • The Articles of Organization outlines all of the contact and management information of your LLC.
  • The form is fill in the blank and requires basic business information.

3. Assign a Registered Agent

  • The Registered Agent is the person representing the LLC legally, typically one of the owners of the LLC.

4. Create an LLC Operating Agreement

  • Although it is not required, the Operating Agreement helps outline your business plan, vision, operations, and responsibilities.
  • Here is a template you can refer to when writing yours.

5. Apply for an EIN#

  • An EIN is your federal tax identification number, and it only takes about 5 minutes to apply online.
  • Be sure to save this number because you will use it on almost every form, including your taxes and opening a bank statement.

6. File your Statement of Information

  • The Statement of Information is due within 90 days of the initial registration and then every two years.

7. Register with the California Franchise Tax Board

  • All LLCs in California must file Form 3522 and pay the $800 Annual Franchise Tax every year, regardless of revenue or activity. Said another way, there’s no way to avoid this fee. The first $800 payment is due the ?15th day of the 4th month? after your LLC is approved.

Other things to keep in mind

  • A registered trademark gives you the exclusive right to a specific word, phrase, symbol, or design. If someone copies your trademark, then you have the right to take legal action. I choose to trademark my business to claim ownership and protect my brand.
  • Depending on your business activities you will need federal, state, and/or city permits and licenses. Keep track of when you need to renew these licenses and permits because some expire after a certain amount of time.
  • Filing sales tax returns – When collecting sales tax from your customers, you need to include city, state, and county sales taxes. Whether you file monthly, quarterly, or annually depends upon the total amount of sales tax your business collects. Do your research and don?t miss those deadlines because the fees can be expensive.
  • Think about opening a business bank account. This will help keep your business funds separate from your personal accounts for bookkeeping and liability purposes. You will need your formation documents and EIN to open the account.

thebadassceo

About the author

Entrepreneur and Angel Investor Mimi Maclean brings you business strategies, life experiences, lessons learned, inspiration, and advice for you to be your best Badass Entrepreneur Self.

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