If you’re forming a limited liability company (LLC) for your tech company, you’ve made an excellent choice. LLCs offer many benefits, including personal liability protection and pass through taxation. But forming an LLC is a process that involves many steps.
Here we’ll cover exactly how you can form your tech LLC.
Check Name Availability
Presumably you’ve chosen a winning name for your tech company, but before you form your LLC with that name, you need to make sure the name is available. If you file your LLC formation documents with a name that’s in use, it will be rejected, and you’ll have to start over and pay the filing fee again.
First, you need to do a business name search on your state’s relevant website, which is usually that of the Secretary of State. The search generally will show you businesses with similar names, which is important because most state regulations state that your name must be distinguishable from all other business names in the state.
If there are any business names that could potentially be confused with yours, you should choose a different name.
You’ll also want check the USPTO website to make sure the name is not trademarked.
Finally, check a site like GoDaddy to make sure the related domain name is available.
Choose a Registered Agent
All states require that you appoint a registered agent for your LLC. A registered agent will accept all your official correspondence, such as state, legal, or financial correspondence. You can be your own registered agent, but a registered agent is required to be available during normal business hours at their registered agent address, which appears on your LLC formation documents.
Instead, many tech entrepreneurs choose to hire a registered agent service Northwest Registered Agent so that they have the flexibility to leave the office for sales calls, meetings, or other business activities. These services usually cost between $100 and $300 annually, but they can make your business life much easier.
Determine Your Management Structure
LLCs must have one of two management structures – member-managed or manager-managed.
In a member-managed LLC, all members are designated as managers of the LLC, meaning that they can act on behalf of the LLC to sign contracts, handle bank accounts, and more.
A manager-managed LLC, on the other hand, can have one of three scenarios.
In some states, you must disclose your management structure on your LLC formation documents, so you need to make your decision early.
Register Your LLC with Your State
Now you’re ready to officially file LLC formation documents with your state. The document is usually called the articles of organization but may be called a certificate of organization or certificate of formation in some states.
In almost all states, you can do this online on the Secretary of State’s website, or through the state’s business portal. The document will require your business name and address, and your registered agent name and address. Sometimes additional information is required.
Fees, known as LLC cost by state, vary and range from $40 in Kentucky to $500 in Massachusetts.
Create an Operating Agreement
Creating an operating agreement is a critical step, even though one is not required in most states. An operating agreement defines the management and ownership of your LLC, the voting rights of members, how profits are allocated, and much more.
You can have the agreement drawn up by an attorney, or you can use an online service that will provide you with a customizable template.
Get Business Licenses and Permits
Depending on your state and your specific location, you may need various business licenses and permits. You’ll have to do some homework to find out your requirements, but don’t skip this step. Operating without the proper licenses and permits can result in fines or even the dissolution of your LLC.
Insure Your Business
A tech company likely needs multiple types of insurance, depending on the nature of your business. General liability insurance is generally a must, but you also should consider professional liability insurance which protects you if a client is damaged by an error or omission in your work. You may also need to insure any equipment that you use.
Talk to your insurance agent to get recommendations.
Obtain an EIN
If your tech company has more than one owner, or if you have employees, you’re required to obtain an employer identification number (EIN) from the IRS. Your EIN identifies your business for tax purposes.
LLC Formation Services
If all of this seems overwhelming, there’s good news! There are many LLC formation services companies that can handle many of the formation steps for you, including filing your formation documents with the state. They can also act as your registered agent, provide you with an operating agreement, handle your EIN application, and more.
One of the leading companies for these services is IncFile. Using IncFile to form an LLC is affordable, and can save you time and attorney fees, and their registered agent services are among the lowest priced in the industry. They are free for one year, and then just $119 annually.
In Closing
Starting an LLC for your tech company is a process, with critical steps to complete in order to be in compliance with the law and to protect your interests and the interests of your business. An LLC services provider can be very helpful in this process, ensuring that everything is done correctly and saving you time and hassle.