The Nitty Gritty Guide to Starting Your Single-Member LLC
A step-by-step, specific, no-frills guide to legally starting your business and keeping it compliant with tax laws.
Instead of giving you a bunch of choices, I’ll tell you the services I think are the best for starting a single-member LLC. Feel free to research competitors, of course, but if you’re looking to get started ASAP, the companies listed here are all great. Please note that the advice below is coming from a fellow business owner. I cannot provide tax or legal advice. OK, now let’s get into it!
1. Name Yo’ Self
First thing: think of a name for your company. Make it short and easy to remember. Ideally it should be related to what your company does. Got one? Nice.
2. Get Organized
Create a folder in Google Drive to keep everything related to your business. I have a folder within that folder for all the forms I’ve received. Never put anything in the trash — some of it will come in handy when you need to prove that you’re legit.
Create a Sheet in that folder where you will keep track of expenses and revenues. Make sure to include the following fields:
Date — the date you paid or got paid
Dollar Value — the amount your funds increased or decreased. Don’t forget to include a negative sign if it was a payment!
Payment method — this very important to keep track of, as your business must keep its finances completely separate from your personal finances. More on this later. The next two steps (Get on the Interwebs and LLC + Registered Agent) are the only two for which you should use a personal credit card.
Reason — why you got paid or paid someone else.
Receipt — a link to the receipt for the revenue or payment. Usually your receipts will be electronic, but if you get a paper one, take a picture or scan it and email it to yourself, then use the url of that email as the link to the receipt.
Create another Sheet in that folder that will contain general information, such as your various government IDs.
Get on the Interwebs
I would recommend finding and buying a domain before doing any of the next steps. It would be super lame to throw money into creating a company with the perfect name — only to find out the domain name has already been taken. I use Namecheap because its name doesn’t lie. It really does have the cheapest domain names around. It also includes free lifetime WHOIS privacy protection, which is vital. I learned the hard way to opt-in to privacy protection; it isn’t fun to be bombarded with emails asking if I want a cheap website design.
Once you have a domain name, you can set up an email account, such as austin@mycompanyname.com. You can do this through Namecheap for around ten bucks a year. PEMA1LSALE is a discount code I found, it may or may not work by the time you use it.
You can use mycompanyname@gmail.com for free if you want, but it looks pretty janky.
LLC + Registered Agent
Some people say you should set up an LLC in Delaware or Nevada or some other state. I think it’s best to set it up in your home state to avoid all the extra paperwork and potential extra taxes. You can do this manually through your state’s website (google “set up LLC [my state]”), OR through your registered agent’s website, which is what I did.
I set up my LLC through Northwest Registered Agent, and then used them as my Registered Agent (RA). An RA will accept your government-sent mail for you. This is important because Uncle Sam requires you to have a place where you can receive mail in-person every workday during business hours. If your plan is to jet off to the Bahamas for a week, an RA will ensure you don’t get slapped with a fine from Big Brother for missing the mailman. Also, this keeps your own address off of the public record, which will ensure that you don’t get a bunch of junk mail.
Taxes and Compliance! Fun!
Now you’ll need an Employer Identification Number (also known as an EIN or TIN). Northwest Registered Agent can do this for you, but I wouldn’t recommend it, because they charge $50. If you do it yourself it’s free, and it takes about 15 minutes. Here’s a link to get your EIN from the IRS.
Google “LLC Annual Report” for your state. There may be a form you have to submit once a year. After reading through the page about your state’s LLC Annual Report laws, set a reminder in your calendar to fill it out when the time comes.
This part sounds scary, but I promise it’s not: it’s time to start calling people. You’re going to have to be on the phone a lot. Fortunately, people are generally very helpful and will gladly answer your questions as long as you seem like an upstanding citizen. Find the number of your state’s Department of Commerce and ask if you need to register as a retailer. If you do, register. If not, congrats, you get to skip a step! Before you hang up, ask them about any compliance paperwork you have to fill out.
Now call your state’s Revenue Service. Ask them these questions:
Do I need a State Tax ID? If so, how do I get one?
Do I need to collect sales tax? How often do I need to pay taxes? Where do I go (what website) in order to pay taxes?
Is there anything else I should know in order to ensure I stay compliant?
They may ask you how you’re going to file taxes for your company. Most single-member LLCs are known as disregarded entities. This means that the company’s taxes are filed on the owner’s personal income taxes in form 1040. At some point, once your company is making BANK, you will want to talk to a tax accountant to determine how you want to be taxed, as there are other ways that could decrease your tax burden when your business is rolling in dough.
Checking, Checking, 1 2 3
Things are starting to seem real! Pretty exciting, eh? As I mentioned before, it’s vital that you keep your business and personal finances separate. If you get muddy about what money is the company’s and what money is yours, it is known as “piercing the corporate veil.” Essentially, you can good sued and lose your limited liability status, which means your personal money can be on the line. It’s fine to pay for things on a personal credit card in the beginning, but now it’s time to split up the finances.
First you’ll need a checking account. For online businesses, I highly recommend Azlo. They don’t charge fees on pretty much anything, whereas with other banks you’ll be limited to a certain number of transactions before you have to start paying for each one. The only catch is that it’s known for having slower transactions than bigger banks.
Stash that cash
Now you can contribute money to the business in what’s known as a capital contribution. It’s easy: just transfer money from your personal account to the business account and record the action in your financial spreadsheet. Make it a large enough amount of money that you can pay for everything you’ll need to buy in the next few months, at a minimum. After this point, if you’re frequently transferring funds from your personal account to the business account, it can be considered piercing the corporate veil.
Put it on my card *wink* (optional)
Time for a business credit card! This is one of the only steps where I’ll give two recommendations:
Capital One Spark Cash for Business
+ 2% cash-back
+ $500 bonus if you spend $4,500 within the first three months
- $95 annual fee, waived the first year
American Express Blue Business Cash Card
- 2% cash-back on the first $50k of purchases, 1% afterwards
+ No annual fee
If you’re planning on spending a ton right away and throughout the year, go with the first card. Otherwise, go with the second. Also, this step is optional. It will be difficult to get approved for a credit card for a new company if your personal credit score isn’t stellar. You may need to wait until you have some revenue before your applications will get accepted.
A note about credit cards: don’t spend more money than you have! Interest rates on credit cards are astronomical, so it’s better to get an angel investment or a small-business loan if you need more cash than you currently have.
Let’s see how far we’ve come
You’ve just gone from a friendless, helpless, unemployed schmuck to a wildly popular business owner. Congrats! Now get that company rolling, I want to see you jumping into a pool of gold coins by this time next year.
Note: I am not employed by the government and am not an accountant or lawyer. I would highly recommend that you do additional research to ensure Uncle Sam knows you’re a nice, well-behaved business owner.
Note 2: Several of these links are affiliate links. It’ll be the same price for you if you pay for any of the services after clicking the links here, but the company will pay me a portion of the sale price.
Non-exhaustive list of resources I would recommend reading through:
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