What Is An LLC License, And How Do You Get One?

If you don’t already have a name in mind when thinking about how to start an LLC, now’s the time to get thinking. Good business names are easy to remember and help establish your brand’s identity. 

When starting an LLC, you must be mindful of other legal considerations. First, you have to include either “LLC” or “Limited Liability Company” as part of your name. Before filling out an LLC license application, make sure there isn’t another business already using your name. Your state’s business office can inform you if another organization already uses that name. 

Some states may also restrict you from using certain words in your LLC’s name, like “insurance” or “bank.” Check your list’s restricted word list before selecting a business name. You don’t want to discover your LLC is invalid after jumping through all the required hoops. 

If you want your official name and the name you use in everyday conversation and wherever else you can to be different, you can also register a “Doing Business As” (DBA) name. 

While not required, you should also determine if your business name infringes on existing trademarks. You can check for this using the Trademark Electronic Search System (TESS) database.

The articles of organization are the legal documents you file when you apply for an LLC license. While they sound complicated, these documents are pretty easy to fill out. They spell out the key details about the legal operation of your business, including:

This information is all pretty straightforward, but double-check your document before submitting it to the state. If any information is inaccurate, you may risk legal problems in the future.

Even if your state doesn’t require an operating agreement, we strongly recommend having one. Your operating agreement outlines the rules and regulations you’ll follow when running your business. 

Your operating agreement can get much more detailed, but those are basics.

The registered agent for your LLC is charged with handling the necessary tax, legal, and government correspondence for your business. Usually, businesses designate an LLC partner or member to serve as the registered agent. Before you volunteer, please note that as a registered agent, you must have a physical registered address, not a P.O. Box. In other words, some of your personal information becomes public record.

Some states (Arizona, New York, and Nebraska) require you to publish a notice of your LLC formation in an initial report filing or your local newspaper. Contact your state’s business filing office to determine if you need to do this, and if they require anything else.

Check your state’s Small Business Administration website to determine what permits and licenses you’re required to get. These permits and licenses vary depending on what industry you’re in, and the rules of your local and state governments.

By definition, an LLC is a business structure that legally exists as a separate entity, shielding you from debts and liabilities your company may accumulate. You can’t accomplish this without your LLC having its own bank account.

Banks require certain documents (e.g., your business license, required permits, articles of organization, etc.) to open an LLC account. Consult your bank to see what you need to bring when you open your account.

Liability is the main difference between an LLC and a sole proprietorship or partnership. There’s no distinction between you and your business in sole proprietorships and partnerships. You are responsible for any debts and liabilities your business assumes. If your employee or business partner is accused of negligence, or if your business is sued or you have to file bankruptcy, your personal assets are at risk. 

An LLC legally separates you and your business. With few exceptions, your company’s debts are not your own, and if your business gets sued, your personal assets, including your home and bank account, are protected.

LLCs don’t have an official federal tax designation. Instead, they can adopt the tax status that most benefits them, whether it’s a sole proprietorship, a partnership, an S corporation, or a C corporation. 

As long as your company remains an LLC, you can keep your designation as a disregarded entity, regardless of how many owners and types of owners your LLC has. C corporations lack this privilege, and while S corporations can reap these benefits, they have multiple ownership restrictions (e.g., limited number of shareholders, no foreign shareholders, etc.). Owners of corporations also have fixed management structures and must meet annually to make key business decisions. 

LLCs aren’t bound by a formal structure and enjoy more freedom when deciding how to run their business. Most states require LLCs to submit annual or biannual reports, but that’s usually the extent of the paperwork. Meanwhile, corporations typically have exhaustive record-keeping requirements, need to hold annual shareholder meetings, and often pay annual fees to the state they’re doing business in.

Corporations are required to distribute profits based on the number and type of shares their shareholders hold. In an LLC, profit distribution isn’t tied to ownership percentage. If Brady and Kim each own 50% of their LLC, but Brady dedicates twice the amount of time Kim does, they can agree to distribute profits based on the work they put into their company. Conversely, if Brady owns 70% of the LLC and Kim owns 30%, they can agree to split the profits 50/50.