Typically when you first start a business, it is considered to be a sole proprietorship. Meaning, you are the sole owner and 100% responsible for your business.
In other words, if you damage someone’s property or sell a harmful product, then you are completely liable. Then your customer can sue your business and may be entitled to your personal savings.
To prevent this and become legitimate, you should file your business as a Limited Liability Company (LLC).
There are two things you need to do to file your business as an LLC.
RESERVE A NAME
Before you can file as an LLC, you need to reserve the name of your business with the Secretary of State. This prevents other people from using your business name. However, it only protects you from within the state your register. For example, if Joe lives in Colorado and has a business named Outstanding Lawn Care, then he needs to register “Outstanding Lawn Care, LLC” with Colorado’s Secretary of State.
Here is a 6-step process detailing how to reserve your business name:
- Make sure you have made a final decision with the name of your business. Once you register this name, you can’t change it without paying another fee. Also, remember to put “LLC” or “L.L.C.” at the end of your business name. For example, JuniorBiz is registered as JuniorBiz, LLC.
- Do a search to find your state’s Secretary of State. To do this, go to Google.com and search “[Your State Name] Secretary of State Reserve a Name LLC.” Using Colorado as an example, it came up as the first link. Depending on where you live, you may have to click around for awhile. You can try adding “File a Document” to the end of your search if you have trouble finding it.
- Once you click on “Reserve a Name” you will have to perform a name availability search. Type in the name of your business exactly how you want it to appear (remember the LLC) on your official documents. If that name is available, then you can continue. Otherwise, you will have to choose a different name.
- Now you will have to fill out the “Statement of Reservation of Name” form with your business information. Typically this consists of your name and the address of your business. Fill this out and press submit.
- Next you will have to pay a small fee to have this document filed with the Secretary of State. Typically this fee ranges from $10 to $50. You will most likely have to provide a name and credit card number. If you do not have a credit card, ask a parent or guardian to use their card. Make sure they know you will pay them back.
- Finally, you are taken to a confirmation page. Print out this page for your records and you are done!
FORM A NEW LIMITED LIABILITY COMPANY
Just because you have registered your business name, your business is still considered to be a sole proprietorship. The next step in order to create an LLC is to file the Articles of Organization. Once again you will need to visit your state’s Secretary of State Website.
Here is a 6-step process detailing exactly how to form your new LLC:
- Start by performing a search to find your state’s Secretary of State. To do this, go to Google.com and search “[Your State Name] Secretary of State Articles of Organization LLC.” Using Colorado as an example, it came up as the first link. Again, you may have to click around for awhile.
- Once you find the right site, click on either “Form a new limited liability company” or “File articles of organization LLC” (or maybe a similar link).
- Then you will (likely) have to perform another “Name Availability Search.” Type in your business name exactly how you reserved it and click submit.
- Next you will be taken to the “Articles of Organization (LLC)” form. Similarly to when you reserved your name, this form will ask you for your name and business address. It will also ask you a few other questions about your business. Finish filling out the entire form and click submit.
- Now you will have to pay another fee to file this document with the Secretary of State. This fee can range from free all the way up to $1000 in some states. Typically, it is on the lower end of the spectrum though ($25 to $100). Again, fill out the credit card information and click submit.
- After taken to the confirmation page, make sure to print out this document for your records and you are DONE!
Once you have completed both of these tasks, your business is officially registered as a Limited Liability Company! Your paperwork will be automatically mailed to your address within about 2 weeks. Delivery time may vary depending on where you live.
Still having trouble naming your business? Check out: What to name a company.
Photo by: heather