What to Do After Forming Your LLC: A Simple Guide for New Business Owners

Congratulations! You are now the proud owner of a bouncing baby limited liability company! Now that your LLC is alive and well (and fit with many of the same rights as a person thanks to the Supreme Court), what’s your next step? Here are five things you need to do immediately after you form your LLC.

1. Get Your EIN (Employer Identification Number)

This is like your LLC’s Social Security number and is the most crucial thing on your to do list once your business is up and running… especially if you plan to hire employees. The IRS uses your EIN to track your business for tax purposes and it also helps keep your business and personal finances separate. The good news is: you can apply for your EIN online for free on the IRS website. Not only is it quick and easy, but it’ll generate your EIN immediately. No waiting!

2. Set Up a Business Bank Account

To maintain the separation between your personal and business assets and expenses, you need to open at least one business bank account and start conducting all business through that account. You’ll need your EIN and LLC formation documents to get started and, depending on the bank, you may be required to open it in person, so make sure to set aside some time for this. A business account makes tracking income, expenses, and taxes easier, and it helps maintain your LLC’s liability protection.

3. Get an Operating Agreement

Even if you’re the only one running the business, an operating agreement is a good idea. An operating agreement outlines how your business will be run - who’s in charge, your initial capital contributions (i.e. how much money was put into the business to get it started), how decisions are made, how profits are split, how to sell of a piece of the business, etc. Some states don’t require you to have an operating agreement, but if you’re going to have partners (even if they’re not involved in the day-to-day operations), it’s more than a good idea - it can be a lifesaver.

4. Figure Out Your Tax Situation

One of the main benefits of having an LLC is that it’s flexible when it comes to taxes. By default, single-member LLCs are taxed as sole proprietorships (the IRS literally “passes through” the business to tax you on your personal income). However, you can elect to have your LLC taxed as an S-corp or C-corp if that fits your needs better. Before you make any decisions about your business’s tax status, consult with a licensed accountant to figure out what makes sense for you.

5. Stay Compliant

Starting your business isn’t the end of the paperwork, it’s the beginning. Most states require LLCs to file annual reports and pay an annual fee to keep the business active. Failure to stay on top of these requirements could mean the state steps in and shutters your business. This doesn’t just apply to the LLC, it also applies to any insurance you carry (whether it’s general liability, malpractice, E&O or a combination of those), any state-required licensure (i.e. for architects, attorneys, medical professionals, tax professionals, etc.), and any continuing education requirements.

Starting an LLC is a big deal, but it’s just the first in a long line of tasks you’ll need to do to be successful. Remember to sweat the small stuff, build it into your workflow, and you’ll be on your way.