Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
You might be surprised when you look at the to-do list that appears after setting up your new LLC.
You just finished going through several steps to help you establish the new legal entity. It’s common to feel excited about digging in and starting to conduct business.
You’ll need to slow down because several important tasks must get done after forming an LLC.
In this article, you’ll learn what those action items are so that you can get your business started off on the right foot.
Write a Business Plan
Ideally, you wrote out a business plan before forming the LLC (it’s an important step to starting a business). If this wasn’t done, however, then now is the time to get this task completed.
You’ve probably heard the saying, “If you fail to plan, then you plan to fail.”
Your business plan should include guidelines for why your company exists, how you’ll find and close customers, market research, management responsibilities, and financial records.
Start with an executive summary that includes an elevator pitch about the company. Write down the company’s background, financial highlights, competitive advantages, and market opportunities.
Describe why the company exists, what it sells, the manufacturing process, and how it will fulfill orders. Next, list market research details and the marketing strategies that will help you accomplish sales goals. Finally, round out the business plan with a description of the management team and the financial numbers, including cash flow and profit and loss projections.
Get a Domain Name and Social Media Handles
Don’t wait to get your online presence into place. Future projects will want to find the company website while conducting the research that helps them decide to become customers.
Use a domain name registrar or website host to buy the company domain name. Most website hosting companies include drag and drop website builders that help you turn the domain name into a simple website.
Create the company’s social media profiles on platforms such as:
Get an EIN
Your LLC needs an employer identification number (EIN) to file taxes properly. The IRS will provide you an EIN for free.
You should get the EIN even if you aren’t planning to hire employees. This number becomes the unique identifier for the LLC in the eyes of the IRS.
Later, you’ll find other entities, such as banks, will require an EIN when doing business with the LLC.
Get an Accountant
Unless you’re familiar with how taxes work when operating an LLC, you should consider getting an accountant to help you.
You need to select your LLC’s tax status. Typically, single-member LLCs get treated as disregarded entities by the IRS. The IRS views multi-member LLCs as partnerships. However, you can also choose to have your LLC taxed as a C corporation or S corporation.
Each tax status comes with different requirements, benefits, and tax filing rules. Use an accountant to help guide you into the area that makes the most sense for your specific situation.
Open a Business Bank Account
Benefiting from limited liability protection is most likely one of the main reasons you decided to set up your LLC.
Avoid commingling the company’s finances and assets from your personal finances and assets. Doing so helps avoid situations that might pierce the corporate veil and place your assets at risk.
Open a business bank account for the LLC so it can operate separately from you or other members.
Other benefits to having a bank account set up for the LLC include:
- You can more easily obtain business credit
- Employees can conduct banking on behalf of the company
- Your company looks more professional to vendors and customers
Get a Business Credit Card
It’s a good idea to obtain a credit card in the LLC’s name. Use the credit card for all company expenses to help you keep better track of expenses.
The credit card statements will come in handy at tax time when it comes to providing an annual audit trail of those expenses.
Using a business credit card further helps distinguish the separate business entity when protecting the corporate veil. Head over to our guide on the best LLC credit card if you want recommendations on which card to get.
Register for State Taxes
An LLC benefits you at tax time via its pass-through tax status. The LLC won’t file its own corporate tax return in most cases. Instead, your company’s income and losses will pass down onto your personal tax return.
Electing corporation tax status eliminates the pass-through taxation rules. In any event, the LLC will likely owe taxes to the state no matter how you decide to list its tax status.
State tax rules vary from state to state. You might need to pay sales and use tax, employment tax, or business income tax. Other state tax responsibilities may include:
- Temporary disability insurance
- Unemployment insurance
- Workers’ compensation insurance
The difference in each state’s tax rules represents another reason to hire an accountant for help in this area.
Research and Get All Required Business Licenses and Permits
Don’t forget to obtain any required permits and licenses that may apply to your type of business.
Each industry is different when it comes to these issues. Auto mechanics, for example, might need different permits and licenses than lawyers or food service providers.
The federal government might regulate your particular industry. In that case, you’ll need different licenses than businesses that don’t fall under federal regulation.
Investigate what types of state or city permits and licenses you need to operate legally within your local jurisdictions.
Get Business Insurance
The type of business insurance you need for your LLC depends on the type of business you operate and whether you have employees or not.
At the very least, you should consider taking out general liability insurance to protect your LLC from lawsuits. You might also want to take out commercial property insurance, workers’ compensation insurance, business owner’s insurance, or professional liability insurance.
Talk to an insurance broker to gain a complete understanding of which type of business insurance you need.
Research Requirements for Hiring Employees
Your LLC needs to follow certain rules and regulations when hiring employees. For example, you need to properly keep records, pay taxes, and maintain a fair and healthy workplace for employees.
You also must decide on whether hiring independent contractors or employees makes the most sense for your LLC. This decision affects how the LLC pays employment taxes.
When hiring employees, the LLC must adopt policies for notifying employees about company expectations and workers’ rights.
Write Down Your Ongoing Compliance Requirements
LLCs require ongoing compliance responsibilities that can get you into regulatory trouble when not met.
Make a list of compliance requirements, such as filing the annual report. This typically involves reporting to the state any changes with:
- Registered agent
- Ownership group makeup
- LLC address
Failure to maintain compliance requirements might cause your LLC to lose its good standing with the state, which can result in fines. If you let these types of requirements go for too long, your state may even step in to dissolve the company.
Keep in mind that LLCs don’t have as many ongoing regulatory compliance issues to maintain as corporations do. You should find that keeping up in this area becomes simple once you do it the first time.
Follow Income Reporting Rules
If you operate a single-member LLC, then you will simply report company profit and loss numbers on your individual 1040 tax return each year.
Use your operating agreement to help guide members of a multi-member LLC into how to report their share of business income at tax time. For example, a four-member LLC may list equal shares where every member reports 25% of business profits on their tax returns. Or, the percentages might look like this:
- Member one: 25%
- Member two: 25%
- Member three: 45%
- Member four: 5%
A multi-member LLC will file an IRS Form 1065 to help the IRS understand who’s responsible for the shared tax burden. During the annual tax preparation process, your LLC will provide you and other members a Schedule K-1 form. It reports each member’s share of profits and losses and makes it easy to report that responsibility on each member’s individual tax return.
Other potential tax responsibilities for LLC members include Social Security and Medicare taxes.
The Last Word
You have many responsibilities and action steps to fulfill after forming an LLC. At first glance, you might feel a little intimidated about getting all of this into place. To make it easier to accomplish, create a plan on your calendar to complete each step over the next few days and weeks. You’ll have it done in no time!
Filed under: Advice Columns