Best Way to Set Up an LLC
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I’ll show you what I consider the best, most affordable way to set up an LLC in about 5 to 10 minutes. This is how I’ve set up multiple businesses myself, and it’s the way I’d recommend for setting up your own. In the first part, I’ll talk about what LLCs are, why you should have one, the pros and cons, and why I personally chose to set up multiple LLCs for my businesses. In the second part, I’ll show you step by step how to set up an LLC using Northwest Registered Agent.
This is my preferred platform for setting up an LLC. I have an exclusive deal with them that can save you a good amount of money. I’ll take you through how to answer all the questions, and in about 5 to 10 minutes you can have your LLC set up.
What Are LLCs?
An LLC is reportedly the most popular type of business structure in the US. LLC stands for limited liability company, and we’ll talk more about what limited liability means. It’s a great fit for small to medium-sized businesses and new entrepreneurs, and I’d guess that for most of you, it’s probably the right choice too.
Why Choose an LLC?
Why should you actually choose an LLC? Like I said, it works well for small to medium-sized businesses for a number of reasons. The first is that it makes your business more official. If you want to take entrepreneurship seriously, you’re probably going to want an LLC.
Separates Personal Assets From Business Assets
It separates your personal assets from your business assets. As a business owner, you never want to mix the two, because you want to limit your personal liability. Let’s say a client sues your business. If you have an LLC, they generally can’t come after your personal assets, like your house, your cars, and other things you own personally. They can only go after your business assets, which is a big plus.
Raising Capital From Investors
If you want to raise capital from investors, having an LLC can help with that too. Since it’s an official business, it builds more trust and gives them a clear vehicle to invest into.
Tax Advantages and Easy Setup
There are also a number of tax advantages, which we’ll talk about. It’s the easiest business entity type to set up and maintain besides a sole proprietorship, but a sole proprietorship doesn’t have any of these pros. That’s why I almost never recommend staying a sole proprietor.
Pros of an LLC
Tax Advantages
An LLC is considered a pass-through entity, meaning tax is only applied once to the income of the owners. With something like a corporation, tax is applied twice: once to the income of the corporation and again to the income of the owners and shareholders. With an LLC you avoid that double taxation, which is a big advantage.
S Corp Election
If you want to make an S corp election, this is also pretty easy with an LLC. All you have to do is file IRS form 2553. Once your business reaches a certain point, this can potentially save you a good amount on taxes, and it’s entirely doable with your LLC.
Cons of an LLC
Higher Setup and Maintenance Fees
There are higher initial setup and maintenance fees than with a sole proprietorship. If you just do business without setting anything up officially, you’re considered a sole proprietorship, and you’re missing out on a lot of the benefits of an LLC. Of course, there will be filing fees, an annual report, and franchise taxes in some states, so you should be aware of these costs. In my opinion, it’s still worth it.
More Complex to Maintain
It’s also a bit more complex to maintain than a sole proprietorship. If you want that limited liability protection, you need to keep your personal and business finances separate. Don’t co-mingle funds, and don’t use personal funds for business expenses or the other way around.
Pros Outweigh the Cons
In my experience, the pros outweigh the cons. That’s why many entrepreneurs, including myself, have started multiple LLCs. They’re an easy and efficient way to start a new business. You probably already have a business or you’re starting one right now, and that’s a really exciting time. I wish you all the best of luck, and creating an LLC is one of the first major steps I recommend.
How to Set Up Your LLC
Let me take you through setting up your own LLC. This is the fun part, and it can get a little complicated with all the different options, so I’ll walk you through the whole process from A to Z. I’ll have a link down below to Northwest, and the only way to get this special $39 formation package is through that link. I put in a lot of work to set this up so you can save some money. Click the link down below and it will take you to this exact landing page. If you haven’t heard of Northwest, they’re one of the more popular LLC formation platforms.
Entity Type and Jurisdiction
The first thing we’ll do is click on entity type. Since we’re forming an LLC, you’ll want to keep this as is. For jurisdiction, select the state where you do your business. I live in California and my business is based here, so I’ll select California, but select accordingly. Note that every order on here reportedly comes with one free year of registered agent service, which is extremely important to have. You also get other bonuses like a free domain, website, email, and phone, which are really helpful for getting your business kicked off.
Standard or Expedited Filing
Next, we select standard or expedited filing. This is a fee you’ll have to pay regardless of what service you use. Even if you create your LLC yourself, you’d still need to pay it. This might look a little different depending on your state, but I’m going to leave it as standard. Now we’ll click continue.
Company Name and Business Purpose
It will have you enter your company name. Next, you choose whether you want a copy of any legal notices sent to your attorney. Most of you won’t have an attorney, so just select no. If you do, feel free to select yes and add their contact info. I’ve always selected no. Then you enter your business purpose, which can be just a few words or sentences. It doesn’t need to be complicated, so don’t worry too much about this.
Physical Address and Mailing Address
Here you select the physical address you want on record with the state, as well as the mailing address. You can use your own mailing address if you want, but I don’t recommend it since this is public information. Anyone can look up your business and see this address. Don’t use your home address. This is a mistake I’ve made in the past. Use the registered agent service instead. As I said, you get a free year of it, which I believe is worth about $125. For most of you, I recommend leaving it on the registered agent address. Now we’ll click continue.
Company Management
Now you select your company management. If you have any questions about any of this, click the little question mark icon and it will give you more information about what you’re selecting. The two options are member managed and manager managed. For almost all of you, it will be member managed, since it’s managed by you, the owner. If you want to hire an actual manager to run your LLC for you, select the other one.
Member Number One
For member number one, it’s probably going to be you. Put in your first and last name, and for the address, just use the registered agent address. If your LLC will have multiple owners or members, click to add a new member. For this business it’s only me, so it’s just member number one. Now we’ll click continue.
Additional Services
It will give you the option to add some additional services. The first is the tax ID, which is your EIN. Think of it as your social security number for your business. You’ll need it to file taxes and to open a business bank account. You can pay Northwest to do this for you for $50. I will say it’s very simple to do yourself and should take about 5 minutes, and if you go down below to our LLC consultation guide, it has all the directions. If you don’t want to handle it yourself, you can have them do it for 50 bucks. It’s totally up to you. I’ll uncheck this for now.
S Corp Election and Other Services
If you want to make your S corp election with the IRS, they can do that for you for $100. For most of you, I suggest waiting and doing this later. All you have to do is file form 2553 yourself, which is very easy, or your CPA can do it for you. If you want any of the other services, like premium mail service, trademark filing, or a DBA, you can select those as well. I’m not going to select them since I don’t need any of them. Now we’ll click continue.
Create an Account and Payment
Now we’ll create an account. All you need to do is enter your email address and then create a password. I always generate mine and save it in a password manager, which is a secure way to do it. Click continue, then enter your contact information and make sure it’s all correct. Next, go to payment information, and once you’re done there, click submit order.
Account Dashboard
Once you pay, you get access to your account dashboard. That’s where you can see all your registered agent information, and you can start setting up your website, email addresses, phone line, and anything else you need to start your business. If you want to cancel any of those services, you can do that within your account. Once you click submit order, they’ll start processing your LLC formation. All you have to do is sit back and wait for it to be officially processed.
Final Advice
I really like platforms like this, because filing an LLC used to be something you had to do yourself, and it was complicated. You don’t want to mess up the filing. When you use a platform like Northwest, they handle the paperwork for you and help make sure it’s done compliantly. The last thing you want is an error in your LLC filing, and that’s why I recommend using a platform like this. It’s simple, and in my experience it takes about 5 to 10 minutes to set up your LLC. In my opinion, it’s one of the cheapest and best ways to do it. I’ve created multiple businesses with Northwest, I like them, and I find it affordable to file.
