Europeans starting an LLC: Five things to know in 2021

EU businesses that become transatlantic tend to follow the same pattern: They all move into the US first. The LLC (limited liability company) is a popular business structure for startups. LLC’s are formed in accordance with state law and provide limited liability protection for owners. Setting up an LLC varies state by state, although general requirements are quite similar. The process can be eased by making use of a registered agent.

What is a registered agent?
The Really Useful Information Company (TRUiC) says that Florida, California and Texas are buzzing with demand for Registered agents. Registered agents are businesses or individuals that can accept tax and legal documents on behalf of a business entity. Most states require the LLC to have a registered agent and this agent can be a professional service, yourself or even a colleague if the state’s criteria are met.
It is possible to change your registered agent by filing the correct paperwork with the Secretary of State. A filing fee may be applicable, depending on the state you are in. When changing the registered agent it is important to submit the new registered agent’s signed consent form if required by the state.

Pick The State

The first major decision when it comes to LLC formation revolves around where your chosen LLC will operate. LLC’s are formed in accordance with state laws and these laws may vary slightly from state to state. It is best to form an LLC in the state where business will be operated, but if the business will operate in several states you may be required to register in the relevant states.

LLC Articles of Organization

Once a suitable name has been decided on, the next step is to file the Articles of Organization, although this is sometimes called the Certificate of Organization. It is a legal document required to establish a limited liability company. A few things to keep in mind when filing this important document includes that a registered agent for the LLC should be designated, the nature of the business and names of managers and owners are indicated. A filing fee is payable and in some states a minimum annual tax is applicable as well.

LLC Operating Agreement

This document helps to outline the financial and functional decisions of the business. Some key issues that need to be addressed in the LLC Operating Agreement are how profits and losses are distributed among the owners, any penalties or remedies if capital contributions are not made, who will manage the LLC and voting rights for major events such as the sale of the business among others. Most lawyers and online filing services have standard operating agreements that can be tailored to suit the business needs.
If there is no operating agreement the LLC will be required to follow the state default operating conditions which may vary slightly from state to state.

Raising Money

Money can be raised from angel investors, venture capital firms, crowdfunding and a myriad of other ways. When raising money for the business it is important to bear in mind that many investors and venture capital firms could prefer to invest in a corporation. The rights of investors should be clearly stipulated in the LLC’s Articles of Organization.

Employment Identification Number

The Employment Identification Number (EIN), also referred to as the “Federal Tax Identification Number”, is obtainable from the IRS and is necessary for employees. Obtaining the EIN can be done online via the IRS website. Most banks will require you to have an EIN before opening an account for your LLC.

Most states require a form of annual report filing. Missing the deadline for filings can incur penalties and late fees or even the suspension or dissolution of an LLC. Registered agents assist in this matter and a good registered agent should keep a compliance calendar. The compliance calendar helps to provide enough forewarning for upcoming deadlines. If the information in the LLC filings should change, such as updating the business address, the changes should be reflected appropriately in the filings.

Limited liability companies are a popular choice due to the protection they can offer. When forming an LLC, the business entity is established as legally separate from its owners. This separation is where limited liability protection steps in. Should the LLC become unable to pay its debts, creditors can not go after the personal assets of owners. In certain cases this protection is voided or weakened, making it vital to comply with state rules in LLC formation.