Step-by-Step Guide: How to Start an LLC and Get an EIN

As a business owner, it is important to choose the right business structure. One of the most popular options for small businesses is the Limited Liability Company (LLC). LLCs are easy to form and provide a number of benefits to business owners, including protection of personal assets, flexibility in management, and pass-through taxation. Once you have formed your LLC, you will also need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). In this step-by-step guide, I will walk you through the process of starting an LLC and obtaining an EIN.

Introduction to LLCs and EINs

A Limited Liability Company (LLC) is a type of business structure that combines the liability protection of a corporation with the tax benefits of a partnership. LLCs are popular with small business owners because they are easy to form and maintain, and offer flexibility in management. LLCs are also taxed differently than corporations, which can result in significant tax savings for the business owner.

An Employer Identification Number (EIN) is a unique nine-digit number that the IRS assigns to businesses for tax purposes. The EIN is used to identify a business entity and is required for a variety of purposes, including opening a bank account, hiring employees, and filing tax returns.

Benefits of starting an LLC and getting an EIN

There are a number of benefits to starting an LLC and obtaining an EIN. Here are just a few:

Liability protection

One of the main benefits of forming an LLC is that it provides liability protection for the business owner. In an LLC, the business is considered a separate legal entity, which means that the owner's personal assets are protected from business liabilities. This can be especially important for small business owners who may not have the resources to cover large lawsuits or other legal issues.

Tax benefits

LLCs are taxed differently than corporations, which can result in significant tax savings for the business owner. In an LLC, the profits and losses are passed through to the individual owners and are reported on their personal tax returns. This means that the business itself does not pay taxes on its profits, which can result in significant tax savings.

Flexibility in management

LLCs offer flexibility in management, which can be important for small businesses. In an LLC, the owners can choose to manage the business themselves or hire a professional manager. This can allow the business owner to focus on other aspects of the business, such as marketing or product development.

Differences between LLCs and other business structures

LLCs are just one of several business structures that are available to small business owners. Here are some of the key differences between LLCs and other business structures:

Corporations

Corporations are a separate legal entity from their owners and offer the highest level of liability protection. However, corporations are also subject to double taxation, which means that the business pays taxes on its profits, and the individual owners pay taxes on any dividends they receive.

Sole proprietorships

Sole proprietorships are the simplest type of business structure and are not considered a separate legal entity. As a result, the owner is personally liable for any business debts or legal issues. Sole proprietorships also do not offer any tax benefits, as the business income is reported on the owner's personal tax return.

Partnerships

Partnerships are similar to LLCs in that they offer pass-through taxation and liability protection. However, partnerships require two or more owners, while LLCs can be owned by a single person.

Obtaining an EIN from the IRS Online

Once you have formed your LLC, you will need to obtain an EIN from the IRS. Fortunately, this process is relatively easy and can be completed online. Here are the steps to obtain an EIN:

Step 1: Gather your information

Before you begin the application process, you will need to gather some basic information about your business. This includes the name and address of your LLC, the type of business you are conducting, and the name and address of the LLC's registered agent.

Step 2: Go to the IRS website

Once you have your information, you can go to the IRS website to begin the application process. The application is free and can be completed online.

Step 3: Complete the application

The application will ask for basic information about your business, including its name, address, and type of business. You will also need to provide information about the LLC's owners, including their names and Social Security numbers.

Step 4: Submit the application

Once you have completed the application, you can submit it online. You should receive your EIN immediately, which you can use to open a bank account, hire employees, and file tax returns.

Steps to starting an LLC

Now that you know how to obtain an EIN, let's walk through the steps to starting an LLC:

Step 1: Choose a name for your LLC

The first step to starting an LLC is to choose a name for your business. The name should be unique and not already in use by another business in your state. You should also consider whether the name accurately reflects the type of business you are conducting.

Step 2: Choose and Register your LLC with the state

Once you have chosen a name, you will need to choose the state where you want to form your LLC. Each state has its own rules and regulations for forming an LLC, so it is important to research the requirements in your state.

Step 3: File Articles of Organization

The next step is to file Articles of Organization with the state. This document outlines the basic structure of your LLC, including the name, address, and owners of the business.

Step 4: Obtain any necessary licenses and permits

Depending on the type of business you are conducting, you may need to obtain additional licenses and permits from your state or local government.

Step 5: Create an operating agreement

An operating agreement is a legal document that outlines the ownership and management structure of your LLC. While it is not required in all states, it is a good idea to create one to avoid potential disputes among owners.

Understanding the tax implications of an LLC and EIN

Once you have formed your LLC and obtained an EIN, it is important to understand the tax implications of your business structure. LLCs are taxed differently than other business structures, so it is important to consult with a tax professional to ensure that you are filing your taxes correctly.

Maintaining your LLC and EIN

Once you have formed your LLC and obtained an EIN, it is important to maintain both to ensure that your business remains in good standing. This includes filing annual reports with the state, paying any necessary taxes, and keeping accurate records of your business transactions.

Outsource Your LLC Filing

If you are not comfortable with the process of forming an LLC and obtaining an EIN, you can outsource the filing to a professional service or use Elevate’s Smart Start Package. These services can handle all of the paperwork and filings on your behalf, which can save you time and ensure that everything is done correctly.

Conclusion and next steps

Forming an LLC and obtaining an EIN is an important step for any small business owner. By following the steps outlined in this guide, you can ensure that your business is formed correctly and that you are in compliance with all state and federal regulations. If you need additional guidance, be sure to consult with a professional or use a filing service to ensure that everything is done correctly.