Are you operating your business as an LLC? Did you form an LLC recently? And are you wondering whether or not you're handling everything properly now that you've started your LLC? Today, I'm going to share with you all the things that you need to do once you start your LLC to make sure you don't mess everything up with your business moving forward.
I'm here to talk with you about the things that you need to do after you have started your LLC to make sure that your business is protected moving forward. Now, most online entrepreneurs will start out as a sole proprietorship and if you're not making any money and you don't have any clients, that's probably the best way to go because, God forbid, I don't want you going out there and spending any money forming LLC if you don't have any money coming in yet. The big question people ask me about when I get on calls with them is when to form that LLC. Should they do it? And I've talked to a number of people who are just not at that point in their business yet where they're ready to start an LLC and that's fine and not everyone is at that point.
What To Do After You Form an LLC Step #1 – Get an Operating Agreement
But what we want to talk about today is if you've just formed that LLC and you're wondering, “Okay, now what do I need to do?” All right, there are a number of things that you need to do when you are starting out with a brand new business with a brand new LLC. Probably the first thing you need to do is make sure that you have an operating agreement drafted and that's something that you can do for yourself, you can find something online for free. We offer an operating agreement, you can check it out here, or if you use my services to sign up for your own LLC, or if you did use my services to sign up for your own LLC, then you'll get an operating agreement through that service as well.
But having an operating agreement in place is vital to making sure that if anything were to ever happen with your business, if you were to get sued, and I've talked to a lot of people who are in very high risk businesses where it's very possible that they can get sued in their business and you need to have a good operating agreement because that is going to show that you're following the proper procedures, the proper legalities, to make sure that your business can be protected so that plaintiff's attorney that's trying to sue you can't come in and say, “Judge, you know what? They don't even have an operating agreement so clearly this is just them and they formed an LLC, they formed some articles of incorporation,” or, excuse me, “…articles of organization, that's what they're called for LLCs. “And they formed that and they really haven't done anything, they're not operating as an LLC. Disregard the LLC and let's get at those personal assets, shall we?” Anyway, an operating agreement‘s going to help protect you from that so you definitely want to make sure you get an operating agreement in place.
What To Do After You Form an LLC Step #2 – Apply for an EIN
Number two and, again, this is something we do for you if you sign up through our service but you need to apply for your EIN. To apply for an EIN, you need a tax ID number or social security number in existence right now and there are services that will obtain an EIN number for you if you're a foreigner or if you're from out of the country and you do not have a social security number. There's ways to go about that, it takes a little bit more time. That's not something we offer right now but I've thought about it in the future but you need to get your EIN number for your business. This is vitally important because you need it before you can go to step number three.
What To Do After You Form an LLC Step #3 – Open a Bank Account
And step number three is you need to go and open up a bank account for the LLC so maybe you've been operating as a sole proprietorship up until now and you're switching to an LLC and so you need to make sure you transfer all the funds and all the money from the bank accounts you've been using for your sole proprietorship, which hopefully is segregated against your personal bank account. That's very important, to maintain that distinction between the two, hopefully you've done that. But you transfer all the funds from your personal business account into the account for the LLC but to do that, you need the social security number, which I just talked about. Open another bank account, that's very important. And you might want to open more than one. Check out my video on Profit First for Entrepreneurs and you might want to open two or three or four. In my case, I've got probably like six or seven. I'm not sure. I've got a lot because they all have a purpose, right? Do that.
What To Do After You Form an LLC Step #4 – Apply or Reapply
Number four thing you need to do is you need to apply or reapply, if you've already got them as a sole proprietorship for your personal business license and permits. Now, in some states and some municipalities, you're going to apply for those on a personal level anyway.
For me, for instance, I've talked about this before, as an attorney, I have to get what's called a privilege license in North Carolina. Well, specifically, in North Caroline, where I practice. As an attorney, we need to have a privilege license and that's something that I apply for, it's for me, personally, as a lawyer so if I were to leave my firm and go join another firm, then I would take that privilege license with me to the new firm. It has nothing to do with my LLC but in other cases, you need to have an actual license for the LLC. Make sure you apply for the proper things. Again, as part of the business formation package that we offer, we have an upgrade that you can get, which, basically, we will do a search in your local area for all the different business licenses and permits you need and prepare a report for you so you can go and apply for all those and make sure you've got everything you need for your business.
What To Do After You Form an LLC Step #5 – Make Sure Your Contracts are in Place
All right. Number five. You need to make sure that you've got your contracts in place for your vendors and your clients or whoever you work with and so if you had contracts in place previously for them with you, personally, you need to change them all and substitute for your name, the LLC name, and then making sure that when you sign those contracts, you sign it the proper way.
You want to sign it as the LLC by your name as member or owner of the LLC, something like that, so that you make sure that every contract you enter into with either clients or vendors or service providers, whatever, that it's between that entity or person and your LLC as opposed to you personally. Now, you may even need to go back with old clients and old vendors and say, “Hey, I just formed an LLC. We need to redo our contract.” That's possible and, in some cases, that's not going to be a problem, clearly with your clients. Hopefully that's not a problem if you've got clients that you're helping on an ongoing basis, then you just tell them, “Hey, we just formed this new LLC. We need to sign it.” Or if you have a really good contract in place, it's going to say something like, “This contract is going to extend to any future entities.” Or whatever. Probably need a lawyer to help you do that. You want to make sure you've got all your contracts in place and in order with your business.
What To Do After You Form an LLC Step #6 – Get a Payroll Provider
Another thing you need to do when you're signing up for your LLC is you need to get a payroll provider and so that's really important.
Related Resource: Here is the resource we recommend for payroll. (affiliate link)
If you missed my video on common mistakes that people make when forming their LLCs, you can check it out through this link. It's one of my most popular videos that I've got on my channel and it's definitely one that you should check out if you haven't already started an LLC and you're just trying to figure out what you need to do.