After running a small family internet business with my husband for over ten years, I figured it was time to make it official and incorporate. I decided to form an LLC because our needs were basic. While an LLC is the simplest business structure you can have, the process took me a few months.
Picking a State
I learned early on in my research that I didn’t have to necessarily form my LLC in the state I was residing in. It turned out that picking a state for my LLC was perhaps the most important first step, because it would determine what sort of legal advice I would seek, if any. I considered both Delaware and Nevada LLCs, as they are well known to be business friendly states with a simple LLC structure. In the end, I went with a Texas LLC. I live and do business in Texas,
To Lawyer Up or Not
Many businesspeople form an LLC without legal help, and I considered going this route to save money and even a little time. I researched what it would take to set up a Texas LLC, and I felt like the process was quite involved and confusing. I didn’t know what sort of LLC would be best for me or exactly how to set it up correctly. Considering my main reason for forming an LLC was to limit liability for myself, I decided I rather spend some money at the beginning than risk losing all my assets later from not shielding myself properly.
Naming My Business
The first thing my lawyer asked me about my business was what I wanted its name to be. I did my research ahead of time and learned that many first time LLC creators are surprised to learn their business name is already trademarked. I had a unique name picked out, my lawyer confirmed that it did not come up in a trademark search.
Determining Ownership and Responsibility
My husband and I agreed that we would be the only owners and managers of the business. Even though we both would own part of the business, we had some unpleasant decisions to make. We had to decide who owned what percentage of the business, and we learned that a 50-50 split is not ideal in case of any disputes. We also had to decide how we would dissolve the business in case of a break up. This was the most difficult part of the whole LLC process, and I was thankful to have a lawyer to help us through it.
Keeping It All Separated
Once my business was set up, I had to make sure all my finances were separated. This was not difficult, but it was time consuming. I had to get a tax ID number, and I used it to get a bank account and credit card for my business. From that point on, I had to think carefully about what was a business expense and make sure I paid for it properly.