How to set up a LLC for your online Business
The number of online businesses currently operating on the World Wide Web is estimated to be well into the billions. That's a lot of business owners exposed to the inherent risks of conducting business in the market. Creating an online presence for an online business is crucial but establishing yourself as a legitimate and legal business entity is also very important.
Many online entrepreneurs are choosing the Limited Liability Company (LLC) as a tool for risk protection. The LLC grants the business owner a legal shield or insulation from potential liability claims against the business. Additionally, owners of LLCs enjoy a simplified tax process in that they pay their self-employment tax once a year on April 15, just like their personal income tax. A single-member LLC files a 1040 tax return but also attaches a Schedule C form which includes the finances of the LLC.
How to set up the LLC?
First, let me point out that this information is not meant to be official advice. Consult a professional. The easiest way to set up the LLC is to hire a company that specializes in this process. Alternatively, setting up the LLC yourself is easy and relatively inexpensive.
Although, the online business owner can choose to create the LLC in any State it is recommend that business owners establish the LLC within the state where you have the most physical presence (i.e., the owner's state of residency, see qualifying below) or you will create more problems for yourself when tax season arrives setting yourself up for double taxation.
Setting up the LLC is accomplished in only a few steps taken through the local secretary of state's office:
Choose an available business name. File the paper work or articles of organization, and pay the filing fee. Establish an LLC operating agreement, which sets out the rights and responsibilities of the LLC members. Publish a notice of your intent to form an LLC (required in only a few states). Obtain any licenses or permits required for your business.
Requirements to form a Colorado LLC:
State of Colorado LLC Filing Fee: $50
Our Service Fee: Only $35 - Includes Federal Tax ID # (FEIN)
Total cost for forming a Colorado LLC: $85
How long will LLC formation in Colorado take?
Standard Filing Time - About 5 business days
Expedited Filing Time - 24 to 48 Hours
How to name a LLC in Colorado:
When forming an LLC in Colorado the name must not be deceptively similar to any other corporate or LLC name on file with the state.
Membership: One or more - no residency restriction - must be at least 18 years old. Colorado does not require listing of members in the articles of organization.
Management: Colorado does not require the listing of managers in the articles of organization.
Registered Agent in Colorado:
Limited Liability Companies are required to have a registered agent who must maintain a physical address in the State of Colorado and be available during standard business hours.
You'll need to either be a RA (Registered Agent) or know one that you can use. A Registered Agent is someone who is located within the state, has a street address, and will accept mail on behalf of your company.
If the business is registered in one state, what does it mean to have to qualify in another?
Qualifying means you have a formal legal presence in another state. If you sell over the web, or you have a physical presence in another state - you generally don't have to qualify and you shouldn't worry too much about it.
Remember setting up a LLC isn't a one-time cost. Paperwork must be filed annually, with the appropriate fee included.
Online business owners who choose to form a LLC for their business will afford themselves many benefits including piece of mind. The LLC structure is easily created through the local secretary of states office, the filing fees are inexpensive, and the legal and tax benefits are well worth the task. Once the LLC is created the business owner will enjoy a simplified tax filing process and insulation from potential liability claims against their business.
Good luck!