Starting a limited liability company (LLC) is a big step for a business, and what you do after forming an LLC is just as important.
To help, we’ve put together these steps to take after starting an LLC.
Recommended: Set up a business bank account with Lili after forming your LLC.
9 Things to Do After Forming an LLC
Starting an LLC is a great way to start your small business journey. Once your new company is registered and official, there are things you'll need to do to keep things moving in the right direction.
It's important to comply with any relevant local, state, and federal regulations, keep your liability protection intact, maintain accurate financial records, and attract customers to your business. You can do that by following these steps:
1. Open a Business Bank Account
One of the biggest advantages of an LLC is the personal liability protection they provide. Limited liability protection means that the personal assets of the owner are not in danger if the business is sued or goes into debt.
However, this protection — sometimes called the corporate veil — is not absolute, and it can be lost under certain circumstances. The easiest way to lose personal liability protection is to mix your personal financial accounts with the business.
For this reason, it is essential that you open a business bank account before you start operating. A business bank account also provides credibility, the ability to accept credit cards, and the ability to accept checks in the business's name.
Recommended: Let us help you find the best bank account for your LLC— check out our review of the best banks for small businesses.
2. Establish Business Credit
Once you have your LLC in place, you'll need to start building business credit. Before your business can be approved for small business loans and other forms of credit, you'll need to establish and build your business's credit.
We recommend getting started right away because lack of funding is one of the most significant stressors for small businesses.
The first step in this process is to apply for net 30 accounts and apply for an easy approval credit card.
Need to Build Business Credit? Apply for an easy approval business credit card from Divvy and build your business credit quickly.
3. Create a Business Website
Every business, large or small, needs to have a business website in order to appear credible and trustworthy.
Beyond building credibility and trust, there are opportunities for:
- Organic web traffic
- Customer service
The good news is that it's really easy and inexpensive for small business owners to create and maintain a website. It can take as little as 5 minutes to set up a website with a modern website builder.
Website builder tools like the GoDaddy Website Builder have made creating a basic website simple and affordable.
4. Get an Accountant
Many small business owners think they can do their own accounting and are looking to avoid paying for a professional service. However, hiring an accountant can save you money, stress, and potentially legal troubles in the long run.
Here are some of the advantages of hiring an accountant for an LLC:
- Prevents the business from overpaying on taxes and helps it avoid penalties, fines, and other costly tax errors
- Makes bookkeeping and payroll easier, leaving you with more time to focus on your growing business
- Manages your business funding more effectively, discovering areas of unforeseen loss or extra profit
If you want to keep track of your LLC’s finances yourself, check out our guide to the best accounting software.
5. Get Business Insurance
Every LLC should have some type (or types) of business insurance.
At a minimum, your LLC should have general liability insurance, which is a broad insurance policy that protects your business from lawsuits. Other insurance policies an LLC may need depend on the type of business, if you have employees or not, and other factors.
In addition to general liability insurance, common types of business insurance include:
- Workers’ compensation insurance
- Professional liability insurance
- Commercial property insurance
- Commercial auto insurance
- Business owner’s policy
There are many other types of business insurance policies, and some are designed specifically for certain types of businesses.
Before you decide on which business insurance to get for your LLC, check out our review of the 7 Best Small Business Insurance Companies.
6. Research and Apply for Business Licenses and Permits
Getting the right LLC business licenses and permits can sometimes feel like an intimidating step, as the business license and permit requirements vary considerably from state to state and even between counties and cities. Different types of businesses may also have different licensing requirements.
Our state business license guides are a good resource for researching what permits and licenses your business might need.
There are three main licensing jurisdictions: federal, state, and local.
Federal Business Licensing
Not all businesses need a federal license. Only certain industries are subject to federal regulation. These include:
- Alcoholic beverage
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics.
State Business Licensing
State business licenses and permits vary state-by-state, but the most common one is the seller’s permit, which allows businesses to sell products and/or services in the state. Some states may refer to this as a “sales tax permit” or a “vendor license.”
In addition to the seller’s permit, there are a number of different types of state business licenses and permits, including:
- General business licenses
- “Doing business as” (DBA) licenses
- Zoning and construction permits
- Health permits
- Food service licenses
- Liquor licenses
- Medical licenses
- Electrical permits
- Fundraising licenses
- Farming licenses
- Real estate licenses
To help you figure out which business licenses you need in your state and how to get them, check our How to Get a Business License state guides.
Local Business Licenses
Some cities and counties require certain businesses (or sometimes all businesses) to have local business licenses or permits. If you have physical locations in more than one city or county, you may be required to have different licenses for each location.
Some of the common types of local business licenses include:
- General business licenses
- Zoning and construction permits
- Health permits
- Seller’s permits
- Professional licenses
7. Learn More About LLC Taxes
Owning an LLC comes with the responsibility of paying taxes. But before you start paying, you need to choose your LLC’s tax status and register with the necessary government offices.
Choose Your LLC’s Tax Status
One of the advantages of an LLC is that owners have flexibility in how the company is taxed.
An LLC is classified by default as either a disregarded entity or a partnership based on the number of owners (members). A single-member LLC is automatically treated as a disregarded entity by the IRS, and a multi-member LLC is considered a partnership.
However, an LLC also has the option to be taxed as an S corporation (S corp) or as a C corporation (C corp).
The best tax structure depends largely on how much profit the business makes and what the owner’s financial plans and goals for the company are.
Our How to Choose Your LLC Tax Status guide details the pros and cons of the different options and can help you figure out the best option for your LLC.
Register for Taxes
Tax requirements vary by state and by an LLC’s tax status. It is a good idea to consult with your state’s tax office to determine which taxes you need to register for and pay.
The following are some common types of state taxes an LLC might have to pay:
- Franchise tax
- Sales tax
- Employment tax
- Withholding tax
- Unemployment insurance tax
Depending on an LLC’s tax status, it may or may not have to pay corporate federal taxes. Either way, you do not have to register ahead of time (aside from potentially getting an EIN) for federal taxes. That being said, whether your LLC is taxed as a C corp that pays federal income tax or as a pass-through entity where only the owner pays personal income tax, you should be aware of how to file your LLC taxes and understand the differences between each tax status.
8. Set Up Business Phone Service
A business phone line lets clients know they are dealing with a legitimate company and sets the tone for future communications.
A business phone service can be used to create a separate line for business calls, on the same phone. This helps keep personal and business calls separate, which can be helpful in organizing and prioritizing tasks. Additionally, it can help protect personal contact information from being accessed by unintended individuals.
9. Create an Operating Agreement
An operating agreement is a legal document that outlines the ownership and member duties of an LLC.
A handful of states (California, Delaware, Maine, Missouri, Nebraska, and New York) legally require LLCs to have an operating agreement, but it is optional in most states. However, even if it is not a requirement in your state, we recommend having one for a few reasons.
First, an operating agreement can help prevent or resolve disputes between LLC owners by laying out specifics of how to handle various situations your business will or might face. And, if your business is a single-member LLC, an operating agreement can bring the company credibility and ensure courts uphold its limited liability status. In many states, if you don’t have an operating agreement, your LLC might be subject to default regulations concerning certain business operations.
- Operating agreements usually have at least six main sections:
- Management and Voting
- Capital Contributions
- Membership Changes
You are free to add any additional sections you like that apply to your business. You can use our free LLC operating agreement tool to create the document in an easy-to-use question-and-answer format. Or, you can download our free operating agreement template if you prefer. If you’d rather not write it yourself, you can also hire an attorney to assist you.
Maintaining the LLC Corporate Veil
The corporate veil is the legal protection that separates a company from its owners. It acts as a shield to protect the owners from personal liability in the event of any legal issues or debts the company may incur.
You should know that the corporate veil is not absolute, and it can be lost under certain circumstances. The easiest way to lose personal liability protection is to mix your personal financial accounts with the business. This includes things like buying business supplies, accepting payments, and paying bills with your own personal checking account or credit card.
For this reason, it is essential that you keep business finances separate by opening a business bank account and getting a business credit card before you start operating.
Note, it's important to apply for an employer identification number (EIN) or what's commonly referred to as a federal tax id number after a business owner forms an LLC. Small business owners operating a limited liability company will need a federal employer identification number when they hire employees and usually when they open a business bank account and business credit card.
To maintain the corporate veil, you must:
- Keep your business and personal finances separate
- Avoid commingling funds and assets between your company and personal accounts
- Correctly sign on behalf of the company (e.g., John Doe, as Authorized Member of Example LLC, for and on behalf of Example LLC)
- Hold and record LLC meeting minutes
- Have adequate startup capital (e.g., business loan, business credit card, etc.)
- Follow all state and federal laws governing LLCs
If you do these things, you can rest assured that your LLC will offer you some key protection from personal liability in the event of any legal issues or debts your company may incur.
After Forming an LLC FAQs
What is the next step after forming LLC?
There are nine next steps after forming an LLC: create an operating agreement, get an EIN, register for taxes, get an accountant, apply for business licenses and permits, open a business bank account, get insurance, establish your web presence, and publish a press release.
How do you know when your LLC is approved?
The state government office with which you register your LLC will inform you when it is approved.
How long does it take for my LLC to be approved?
Approval time for an LLC varies depending on the state and whether you register online or by mail. In many states, an LLC is approved immediately after registering and paying online.
What happens when you get an LLC?
When you get an LLC, you have limited liability protection for your personal assets as long as you don’t pierce the LLC’s corporate veil.
Does my LLC need a federal tax ID?
An LLC needs a federal tax ID (called an EIN) if it is a multi-member LLC or if it has employees. Additionally, most banks require businesses to have an EIN to open a business banking account, so we recommend that all LLCs get one.
Does an LLC pay quarterly taxes?
LLCs do not pay quarterly taxes, but owners of LLCs (who are considered self-employed) are supposed to pay estimated quarterly personal income tax payments.
What are the benefits of becoming an LLC?
Some benefits of becoming an LLC include personal asset protection, tax flexibility, and management flexibility.
Check out our 7 Benefits of Starting an LLC article for more details.
Do I need a business license if I have an LLC?
You might need a business license if you have an LLC, depending on the type of business and location.
Check out our state business license guides to see what licenses you might need for your LLC in your state.