Monday, September 8, 2008

How I Formed My LLC

I'm going to call this "How I Formed My LLC" instead of "How to From an LLC" since I really can only share my experience on the the topic. If you need more detailed information, there is plenty on the internet and of course you can and probably should get legal advice. (If you have no interest in forming your own company, today's post will probably not float your boat. Please come back for Wordless Wednesday!)

It is a good idea to get legal advice from a lawyer. Most will give you an initial meeting for free. I am lucky enough to have a friend who is very generous with his limited time and helped me out tremendously! The first thing you need to do is decide what type of legal entity you should form. A sole proprietership, a partnership, an LLC, etc. You'll have to research these and figure out the best choice for your situation. We decided an LLC was the best option for us and researched the costs involved. To have a lawyer do it, which is a great option if you can afford it, would cost about $1,000.

I chose to do it through an online company called LegalZoom.com. For me, this option worked out well. If you do it yourself, you have to be on top of everything! It's very important that you do each step and don't miss any deadlines. Legal Zoom guides you through the process and files your paperwork for you. On your own, you'll have to publish a legal notice in the 2 local newspapers designated by your county clerk, pay for the notices, send in affidavits of publication after the publication period is over (in NY it is 6 weeks,) and pay the state fees to file the affidavits. One more thing, you'll need a registered agent. This is someone who is always available to be served with papers. Legal Zoom will do it for you for a fee. I used freeregisteredagent.com which is free for the first year. If you're going to use someone other than Legal Zoom, have it set up before you start filling in the forms. In New York State, and my county, this whole process cost just under $500.

You will also need to get a Federal EIN number. This is VERY easy and quick to do online, so I wouldn't recommend paying a fee to have Legal Zoom do it for you. And you'll need to apply for a State Sales Tax Certificate if you will be collecting sales tax. This has different names in different states. In New York it's called, Authority to Collect Sales Tax. You might also hear the term "reseller certificate." This is a form that's filled out, basically proving you are a legal entity that doesn't have to pay sales tax on wholesale goods. See your states' website for specific information.

So, if you are willing to do the leg work yourself, you can save some money. Just be sure you are organized and know what you need to complete.

Here's an important thing to note. This process takes time! Plan ahead, since you won't be able to open a bank account or get credit cards for the business until you have your official paper work. (See my post "The Waiting Game" in the July archives.) Good luck!

2 comments:

Jason said...

Just wanted to add that I’ve used The Company Corporation (www.incorporate.com) in the past, and they’ve been a big help. I wasn’t sure of a lot of the steps, and they do a pretty good job of guiding you. I’ve gotten help with my Inc, business license, EIN, Web site, business credit, you name it. Prices are reasonable too. Hope this helps anyone who’s researching their options.

just me... said...

This was a great post! Thanks for the info-