Yahoo – congrats on your new LLC! You are now a separate legal entity from your business and are able to have the legal protection that the LLC offers. And we can also now look at some higher levels of tax strategy that are open to you under this new structure by electing S-Corp Status.
And those are great benefits of the LLC – and to be able to receive those benefits, you have to operate your LLC properly – otherwise, there’s no point in even having the LLC.
Here’s what you need to know to operate it properly:
1. Keep your corporate documents in a safe place
These are official records, just like your birth certificate, social security cards, marriage license, etc. (Please share them with your accounting team as well!)
You will want to keep not only the documents from the attorney/creation service – but also the stamped record from the state showing the date your LLC was officially accepted/created. That date is going to be your business formation date, which is very important. Think of this as the birth certificate for your business.If the LLC creation service that you used didn’t get you a Tax ID number for your new LLC, then you will need to apply for a Tax ID number for this business. You can do that online with the IRS directly right here. This number is like the Social Security number for your business. You will receive it right away online – please print & save this confirmation. You will also receive a letter in the mail from the IRS, this is the official assignment of your Tax ID number, and a very important corporate document to keep on file & share with your accounting team.
If you had a Tax ID number from your business previously when you were a Sole Proprietor, this is associated with you personally, not your business. So you will want to be sure you stop using that number and get a new Tax ID number for your newly created LLC.
If you will be electing S-Corp (talk with your accounting team about this before doing it yourself…), then you will also want to keep a copy of both the application you submitted and also the confirmation letter you receive back from the IRS. These are both very important as well.
Finally – check to see if you need to update your name on any licenses or permits that you have in your local area and update them with the name of your LLC.
2. Open new bank accounts
All of the assets that your LLC owns must be in bank accounts that have the LLC name on them; otherwise, they are not protected since your LLC designation protects its assets – not your personal assets.
The bank will likely want to have copies of all of the above documents in order to open these accounts for you. I always like to recommend that you call them before going in person to confirm you have everything they will want to see.
It’s not as important to have a credit card in the name of the business – but it’s important that you use a credit card for business only to keep things separated between business & personal.
3. Separate your cash & update your accounts
Once you have your new bank account opened, the next step is to update all of your income & expenses to go into and out of the new accounts. You can do this gradually over a few weeks, but it’s important to take care of it. Not having your business and personal money separated out can nullify your LLC (among other problems) and you will lose any legal protection you were receiving from having it.
The easiest way to know what you need to update is to go through your most recent bank statements and see what things were being auto-charged and contact those companies to update your payment information with your new business bank account.
If you use PayPal, you will also need to set up a separate PayPal account that is linked to your business bank accounts as well. Just linking your business account into the same PayPal account as your personal account usually creates a mess when the incorrect account is used for paying bills. It’s much easier to have two separate accounts set up.
On the income side, look at your payment processing account, maybe it’s Stripe or Square, and update that account with your new LLC name and the new Tax ID number and the new bank account for your deposits to go into.
4. Check your state requirements
An LLC is a state-governed entity, meaning that the requirements for your LLC in Maryland are different from your friend’s LLC in California.
Some states require that you complete a simple annual report to confirm your mailing address, and some require a more intense report to be filed, more like a tax return – and some don’t require anything. If you have a state requirement and you don’t take care of it, the state can suspend your LLC and charge lots of fees to get things reinstated. Check your requirements and mark your calendar to be sure you take care of this each year.
5. Other Updates
Depending on your business, there are probably other places where you need to update your business name with your new LLC name. This might include your client agreements, your team contracts, your website disclaimers/agreements, and more. Anywhere you are doing business or entering into agreements needs to be updated with your new LLC name.
Also, if you move, you will need to go through a process to update your mailing address and contact information with the state, with your LLC documents, and the IRS as well.
Want Empowered Profit to help you with this? Book a call with us today and we will help you get it all sorted out!
This is provided as information only and as a starting point for a conversation with your own legal and accounting team, this should not be considered legal or financial advice.
All of these decisions are based on a number of factors and we cannot guarantee that you will experience any specific results based on any information provided. Please speak with your own retained professionals to ensure that you are making the best decisions for your business & personal situation.
Please speak with your own retained professionals to ensure that you are making the best decisions for your business & personal situation.
I Have My LLC, Now What?!
