Category Archives: Formation

Two Secrets to Set Up an LLC With (Almost) No Money and No Time

You should probably have an LLC. When you create an LLC (or any other type of corporate entity), you’re essentially creating another person out of thin air.

Why would you want to do such a thing? So he can be sued instead of you! With a few exceptions, an LLC will shield your own personal assets from the assets that you use to run your business. Think of it as almost like the firewall between the engine compartment of your car and the passenger compartment. You want the engine to run and do its thing, but if something horrible happens, you don’t want to put yourself or your family at risk.

A lot of people immediately think they need a lawyer to handle the creation of a corporate entity. As a lawyer, I can tell you that when it comes to single-member LLCs, you almost never need a lawyer. If you come to me and ask me to set up an LLC for you, I will be happy to charge you $200 per hour. But at the end of the day, I’ll be using the same form that is available to you on your local Secretary of State’s website.

You can – and probably should – set up your single-member LLC without a lawyer. When more than one person is involved, however, this all goes right out the window. Contact me!

But wait!

Do you already have an LLC? My first secret is this: you might not need more than one.

People think they need one for each business, and it seems to make sense. Let’s say you have “Pat’s Ponies, LLC” and you decide to move into another opportunity: say, Pools. Well, “Pat’s Pools” is going to need another form and another registration fee, right? Well… maybe not.

If you’ve formed your LLC correctly (i.e. similar to the steps I outline here), then you might be able to simply keep using the same LLC. There are definitely exceptions. Read on.

Step 1. Find Your Secretary of State Website

If you haven’t already, you need to figure out which state you live in. I really hope you’ve done that already. LLCs are formed at the state level. Not the county. Not the United States. Your state.

Now, find the website for the “Secretary of State” in your state.

Most likely, your Secretary of State will have a “Business” section of his or her website. This is where you will find the LLC form for your state. It might be a PDF that you have to download and print. If you’re lucky, it will be an online form that you can submit right now. Once you’ve found that, you’re ready for…

Step 2. Fill out the Form

This should take almost no time at all. Typically, the form asks for three pieces of information. And I’m going to advise you to leave one blank. Start your stopwatch.

What’s in a name?

You need to come up with the name you want to use.

What’s in a name? For the purposes of your LLC, almost nothing. In fact, if you’re not exactly sure which direction your business will take, you might just want a jumble of letters or something very generic.

When you do business as an LLC, you do have to use the name of your LLC to conduct business and put others on notice that they are dealing with an LLC. BUT (and this is a big but), you can still use a “doing business as” or “DBA” name just like a person without an LLC might do.

Your contracts have to use the LLC. Your advertisements can keep it in fine print at the bottom or leave it out altogether. So don’t fret over the name too much. As I like to say: don’t business card this part of the problem.

You DO, however, need to make sure that whatever you choose is not already taken. Most likely, your Secretary of State’s website will also have a search tool that you can use to make sure that your chosen name is not already taken.

Here’s another important thing to know about these names. This is not the same thing as a trademark! Just because there’s no “Apple Computer” registered in South Dakota doesn’t mean that Apple Computer, LLC is up for grabs there. You will get sued, and you will lose.

Your (LLC’s) Life Without Purpose

The LLC form will likely ask for your business purpose. There are historical reasons for asking for this. It has to do with the corporate charters that used to be granted to robber barons.

These days, it’s typically not important that you state a business purpose. In fact, the LLC form will probably indicate that it’s optional. If not, you can essentially leave it blank by inserting “for any legal activity” or some such thing.

A Not-So-Secret Agent

The third and final piece of information that LLC forms typically ask for is your statutory agent. This is legalese for “if someone wants to sue you, to whom should they mail the Complaint?” You can use your own name and address. If you have an attorney, you can ask to use their name and address, and they most likely will not charge you for this service.

You typically cannot use a PO box.

Step 3. Pay the Man

Did I say “no money”? OK, I didn’t literally mean $0. How much your state charges will vary, but I can guarantee it will be pennies compared to fighting a lawsuit to protect your personal assets from a business dispute.

Step 4. Wait

Your Secretary of State will let you know – typically in the form of a certificate – when your business filing has been accepted. When filing online, it will likely only be a matter of minutes.

Are We Done Yet?

Probably. If you have the certificate from your Secretary of State, you absolutely have an LLC and are able to use it to do all the things that LLCs can do: enter into contracts, sue, be sued, etc.

If you plan on doing any banking, you might need to create an Operating Agreement.

This isn’t a legal requirement. It’s just something banks need to protect themselves. If it’s just you and your single-member LLC, it can be a simple one- or two-sentence document stating that you’re the only member and you have all the ownership and voting rights. Then – and yes, this is weird – you sign the contract with yourself. Make sure you indicate that you’re signing as a “Member” of the LLC.

You can contact me if you want to pay for a form but you really should not.

Are you sure I don’t need more than one?

No, I’m just a guy on the Internet. I don’t know you or your situation. If there’s some circumstance making you uncomfortable, then you might need to see your lawyer

I can certainly think of a hypothetical situation where you WOULD need a second LLC. Remember the firewall analogy? It could be true that you want to shield a highly successful business (e.g. “Pat’s Ponies, LLC”) from a highly risky one (e.g. “Pat’s Thirty-Second Skyscraper Demolitions”).

Like all things in life, your mileage may vary, but if you’re just starting out or dabbling in things, it would definitely be wasteful to buy a bunch of LLCs.

If you have specific questions about your situation, you can contact me, and I can point you in the right direction.