If you’re looking to start a business on your own, you might want to consider forming a DIY LLC. This stands for “Do-It-Yourself Limited Liability Company”, and it’s a pretty popular business structure these days. It means that you and any other owners (also called members) are protected from liability if something goes wrong with the business.
The good news is that forming an LLC is usually pretty straightforward and not too expensive. It’s worth noting that the rules for doing this can vary from state to state. Even so, the basic requirements for starting an LLC are the same no matter where you live.
What Is a DIY LLC?
A DIY LLC is a type of Limited Liability Company that you can form on your own without the assistance of a lawyer or other professional. This is in contrast to hiring a lawyer or using a formation service to help you set up your LLC.
While forming a DIY LLC may require more legwork on your part, it can save you money on legal fees and other expenses. With a DIY LLC, you’ll be responsible for filing the necessary paperwork with your state’s business registration agency, as well as drafting an operating agreement and other documents.
On the other hand, working with a lawyer or formation service can take care of these tasks for you. However, this convenience comes at a higher cost.
Ultimately, the choice between a DIY LLC and using a professional depends on your comfort level with handling the legal aspects of starting a business, as well as your budget.
Advantages of a Do It Yourself LLC
There are several advantages to forming a DIY LLC on your own:
Cost Savings: The most significant advantage is that it can be much cheaper to form a DIY LLC than to hire a lawyer or use a formation service. This can be especially important if you’re just starting and don’t have a lot of capital to invest in your business.
Control: When you form a DIY LLC, you have full control over the process. You can research and choose the state in which you want to form your LLC, draft your operating agreement, and file the necessary paperwork on your timeline.
Flexibility: With a DIY LLC, you can tailor the formation process to meet your specific needs. You can choose the name and structure of your LLC, as well as decide how profits and losses will be allocated among members.
Learning Experience: Forming a DIY LLC can be a great learning experience. It can help you understand the legal requirements of starting a business, as well as give you a better understanding of how your LLC operates.
Disadvantages of a Do It Yourself LLC
While there are advantages to forming a DIY LLC, there are also some potential disadvantages to consider:
Lack of Legal Expertise: If you’re not familiar with the legal requirements of forming an LLC, you may overlook important details or make mistakes that could result in legal issues down the road.
Time-Consuming: Forming a DIY LLC requires a significant investment of time and effort. You’ll need to research the legal requirements, draft your own documents, and file paperwork with your state’s business registration agency.
Complexity: Depending on the state in which you form your LLC, the legal requirements can be complex and difficult to navigate. You may need to deal with confusing regulations, forms, and deadlines.
Limited Support: When you form a DIY LLC, you won’t have access to the same level of support and guidance that you would get from a professional. This can be challenging if you have questions or need help navigating the process.
Risk of Errors: If you make mistakes when forming your DIY LLC, you may need to spend additional time and money fixing those errors. This can delay the launch of your business and add unnecessary stress.
8 Steps to Forming a DIY LLC
Obtain a Copy of the Articles of Organization from the SOS Website
When you’re ready to form an LLC, the first step is to obtain the official “certification of formation” or “certificate of organization” from the Secretary of State’s office in your state. This document can usually be found on their website and outlines the details, such as the name, purpose, and duration of your LLC. Once you have this document, it’s important to read through it carefully and ensure that all information is accurate.
Choose and Reserve a Name for Your LLC
When you’re choosing a name for your LLC, there are some steps to follow.
1. The name you choose has to be available for use across all states. You can do this by checking the relevant business records of your state or using an online search tool.
2. It’s important to include the appropriate designator such as L.L.C. or LLC in the name you choose – this is especially important if you want to register your LLC in other states at a later stage.
3. Prohibited terms such as Bank or Insurance cannot be included in your chosen name.
4. After choosing a name, you will need to pay a fee to reserve it for a certain time – typically ranging from 6 months up to 10 years depending on the state laws applicable in which the LLC is registered and situated.
Generally speaking, there’s no need to register the name separately because it will be automatically registered when filing for articles of organization. It’s also worth noting that you may have additional naming restrictions imposed by local jurisdictions, so always make sure that you read up on any specific rules before beginning with the registration process.
Fill out the Articles of Organization
When filling out the Articles of Organization, there are several pieces to include.
First, provide a legal name for your business that complies with state rules. You must also indicate if you’re forming a corporation, limited liability company (LLC), partnership, or another type of entity recognized by the state. In this case, you’ll list LLC.
The address where all official documents can be sent should be provided as well.
Provide details about any additional provisions that will govern how your organization operates. Depending on where you live, listing an organizer (who creates the document) may be necessary along with their signature to complete the document.
Once completed and signed off by all parties involved in organizing your organization, submit your articles to the appropriate office for approval and filing — usually, this can be done online or through the mail. Make sure that all required fees associated with filing have been paid before submission for them to be processed without delay or interruption.
Publish a Notice in the Newspaper
In certain states, you may also need to place a notice in a local newspaper regarding the creation of your LLC. This requirement varies by state, so make sure to review your state’s regulations carefully so that you can determine whether this step is necessary for registering your LLC. If you do need to place a newspaper ad, ensure that it meets all requirements outlined by your Secretary of State’s office before submitting it as part of the registration process.
Choose a Registered Agent
When you’re forming an LLC on your own, one of the things you’ll need to do is choose a registered agent. A reliable and responsible registered agent is essential, as they will be in charge of receiving official documents and ensuring that they get to you quickly. When selecting a registered agent, you have several options available:
One option is to assign a trusted employee within your company to be your registered agent. This works well if this particular person is almost always present at the place of business during regular business hours. If you’re confident that this person understands the importance of their role and will be readily available for any legal correspondence sent to them, then this can be a great choice.
Another option is hiring an external registered agent service provider. This may cost more money initially, but it also ensures that someone familiar with all the latest rules and regulations related to LLCs will be responsible for handling important documents. Professional services are knowledgeable about state-specific filing requirements and will help ensure that all necessary forms are completed correctly and on time. External services offer around-the-clock availability, so you won’t ever have to worry about missing an important document or notification due to being closed during regular business hours.
Prepare an Operating Agreement
Although it’s not mandatory in many states, it’s still highly recommended that you create an operating agreement for your DIY LLC. This document outlines important decisions for your business, such as member roles and responsibilities, voting rights, profit/loss allocation, and protocols for handling the sale of a member’s interest or handling situations where a member becomes disabled, incapacitated, or passes away.
Some states, like Arkansas, require that the operating agreement is in writing. Therefore, it’s important to research and understands the requirements in your state when creating your operating agreement. Ultimately, having a well-drafted operating agreement can help avoid confusion and disputes within your LLC and provide a clear understanding of how the business will operate.
Secure Business Permits and Licenses
Securing business permits and licenses for your DIY LLC helps ensure your business is compliant with the laws and regulations of your city, state, or county. Based on the type of business you are running, you may need to apply for a variety of licenses and permits, including permits related to zoning, health and safety inspections, sales tax, or even professional licensing.
The process of obtaining the required licenses and permits depends on your jurisdiction’s requirements. You should check with local officials (e.g., City Clerk or County Clerk) to determine what types of licenses and permits are necessary and how to obtain them. Depending on where you live, there might be resources available online that can help guide you through the process.
Get an EIN
If you’re looking to start your own LLC, an EIN is a must-have. An Employer Identification Number (EIN) is essentially a social security number for businesses, used by the Internal Revenue Service (IRS) to identify and track business transactions. It’s also necessary if you want to open a business bank account, get loans, hire employees, or apply for certain licenses. Applying for an EIN online through the IRS is quick and easy – all it takes is filling out a short form with some basic information about your business. Plus, it doesn’t cost you anything.
doola for a Successful DIY LLC
Starting a DIY LLC is a great option for new business owners who want to save money and take charge of the process themselves. While there are some challenges to setting up an LLC on your own, the benefits of limited liability protection and greater control over your business make it a smart choice.
doola understands that starting a new business can be overwhelming, which is why they offer support and guidance throughout the entire process.
Should you open LLC yourself?
If you’re considering opening a Limited Liability Company (LLC), the best advice is to research and have a good understanding of your specific situation before making any decisions.
How do I file taxes for an LLC?
When filing taxes for an LLC, it’s important to remember that an LLC is its own entity and must be treated accordingly for tax purposes. Depending on your state, there may be additional sales taxes or income taxes that need to be paid on behalf of your business.
What is a good LLC name?
When picking a name for your LLC, it’s important to remember that most states require that the name include something like “LLC” at the end so people know it’s an LLC structure rather than another type of entity like a partnership or corporation. It also needs to be distinct from other businesses registered in the same state (or nationally if you plan to register across multiple states).