How to Operate an LLC

by Pat Fontana; Updated September 26, 2017

A Limited Liability Company (LLC) is a relatively new legal structure available for a business. As its name indicates, an LLC offers protection for the owners, or members as they are called, who have limited liability in regard to financial obligations arising from their company’s operations. An LLC can consist of a single member in most states. This article provides information on operating an LLC, from forming the company to complying with paperwork and tax requirements.

Step 1

Determine whether you will be a single person LLC or if you will bring in other members or owners. Most states allow LLCs to operate with one member.

Step 2

File your Articles of Organization with your state’s Department of the Secretary of State. Each state requires a filing fee and several days to process the paperwork.

Step 3

Write your Operating Agreement. Collaborate with the other members of your LLC to determine how you will operate, how your management will be structured, and how decisions will be made for the company.

Step 4

Set up an employee withholding tax system, which will include issuing W-2s or 1099s for employees and consultants. According to the Internal Revenue Service, if you are a single member LLC with no employees you can file a simple Schedule C; however, if you have multiple members you will be required to file a partnership return.

Step 5

Include LLC behind your company name everywhere it appears, such as on your business cards, letterhead, promotional materials, and website. When writing contracts and employee agreements, in particular, specify that your company is an LLC and provide details on the liability protection that legal structure provides.

Tips

  • Put everything in writing, including your Operating Agreement and employee agreements. Keep tax records current and ensure that you are completing the appropriate returns for your organization.

Warnings

  • Members are responsible for their own self-employment tax.

About the Author

Pat Fontana began her career in 1981. Her extensive experience includes work in small business, entrepreneurship, marketing communications, adult education and training. She has written for Entrepreneur, Atlantic Publishing and other clients. Fontana earned a Master's degree in English with a concentration in Technical and Professional Communications from East Carolina University.