It is clear that many entrepreneurs have seen the advantages and benefits of limited liability corporations, as there are over 2.5 million LLCs operating in the United States. This showcases significant growth, LLCs seem to be the way forward for many seeking to start a smaller business that is either digital or retail.
LLCs are fairly simple to establish, but seeing as different states follow different laws and regulations, there are various requirement rules that differ depending on the state you are starting your business in. These requirements range from minute differences that are barely noticeable, to significant ones that are very important to follow. Here is a breakdown of some of the current formation requirements differences per state.
What Is an LLC and How Do You Form One?
An LLC is a type of private entity that can be created and run from anywhere in the world as long as certain steps established by each state of the United States are followed. It has become popular because of the simplicity to establish one and the flexibility it gives to entrepreneurs to operate any type of business, either in person or remotely.
Formation requirements do vary state by state, but there are certain set in stone formation rules that have to be followed by every state:
Different Formation Requirements
Within each state, there will be slight alterations or additions to the base formation rules and policies, and it is important to take these into account when you begin the process of establishing your very own LLC.
When forming an LLC, some states such as Nevada, Texas, Iowa, and more allow the formation of a series LLC. This is a collection of LLCs that are grouped under one main LLC, allowing the owner of the businesses to separate a variety of parts of the company into different LLCs. The owner can separate the liabilities of each entity. Forming a series LLC follows the same rules as the base LLC. This is why Nevada LLC formation alongside the LLC formation of other states is slightly different, as this formation rule adds new possibilities to entrepreneurs.
When forming an LLC in Nevada for example it is important to note that biennial reports need to be filed every two years. This is crucial so that your LLC can continue to operate. Most states require an annual report to be filed in a set amount of time (depending on the state it could be yearly or every 2 years), but Ohio is the only state where that is not required in any stage of your LLC formation or operation period. While it is common for most states to require such a form of filing, it is important to check the details of the report filing system in your state. Missing a filing date could lead to your LLC being in trouble.
Naming your LLC is a crucial aspect of the formation process, and certain states have different rules and regulations when it comes to naming your business.
Most states like Nevada and Texas require you to include the phrase “limited liability company” or LLC in the actual name, and words such as “bank”, “university” and so on require additional paperwork and an employee or owner who has a license to operate in one of those industries to be a part of your LLC.
But, states like Alaska have a few additional rules, such as the fact that you are not allowed to use the word “city”, “borough” or “village”. These names could infer that your business has municipal ties so it is not allowed in the name of your LLC for legal reasons and to avoid confusion.
Different states require different regulations when it comes to the formation of an LLC. While there are basic requirements mandatory in each state it is important to take note of the slight alterations that are apparent in each state to allow for a smoother formation process.
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