What Do I Need to Know Before Starting an LLC?

By Pantea I. Fozouni

August 28, 2020

What do I need to know before starting an LLC

What do I need to know before starting an LLC

We all are well aware that running any business comes with risks. For instance, a business owner fears losing to competitors, ending up with a bad brand image, not making enough sales, and, most importantly, being held responsible for major debts and losses. Therefore, many people opt to form an LLC. If you’re not aware of why people do this and what benefits an LLC holds for the owner, you’re in the right place.

Today, we will cover the question of “What do I need to know before starting an LLC” which will help you a lot!

What Is An LLC?

Well, before we head into what an LLC protects you from, we need to create an understanding of what LLC is. In simple words, an LLC is a limited liability company, and as the name suggests, it limits the liabilities of an owner. It consists of features that are similar to both partnerships and traditional corporations. The biggest advantage of this corporation is that it provides greater liability protection than any other individual ownership. When it comes to the management of an LLC, it is quite similar to traditional corporations.

Taxed In Multiple Ways

One important thing you need to know before you form an LLC is how the taxes work. Therefore, we have mentioned a few of the ways you might be taxed according to your LLC.

Sole Proprietorship

If you’re the sole owner of an LLC, tax collectors will see you and your LLC as a sole proprietorship, in other words, a disregarded entity. This means the taxes you will be paying will be similar of that to a sole proprietorship.

S Cooperation / C Cooperation

The difference between S and C cooperation is that if your LLC is being taxed as an S cooperation, you will only have to pay taxes when the funds enter your organization. On the other hand, if your LLC is taxed as a C cooperation, you will be taxed when the funds enter your organization. Moreover, you will be taxed again when the funds are distributed amongst shareholders.

How To Start An LLC?

Before starting any business, you must learn as much as you can about it. One of the biggest mistakes entrepreneurs make is taking the risk of diving into something new and unfamiliar. However, if you want something to work and for it to be successful, you need to know a few things. If you’re planning on starting an LLC, consider these factors that we have mentioned below.

Never Use Online Documents To Sign Up

Most people are looking to form an LLC find tools online that help. However, if you take a closer look at these online document preparation tools, you’ll notice it clearly states that lawyers don’t prepare these documents. Therefore, avoid using these tools online, and instead, you should contact a lawyer to help you out.

Find A Good Business Attorney

Find A Good Business Attorney 

When starting a business, one must receive as much support as possible. The biggest support one can receive when starting an LLC is from a business attorney. As you might know, business attorneys specialize in legal matters and situations that are related to businesses. These lawyers are good at handling any legal matter that a business faces. Therefore, it is quite essential that you get in contact with us so we can make sure your LLC forms are filed and filled according to the state’s laws and that whenever you face any complications, we are here to help you.

Things You Have To Do To Start Your LLC

There are certain things you need to learn before you begin to form your LLC. This will help you go through the process much easier as you’ll know what you have to do. However, it would be best if you also kept in mind that the cost and terms of signing up your LLC might differ in other states. For example, suppose you’re planning on setting up your LLC in California. You must know that you will have to file your articles of organization with the California Secretary of State. You can submit it online, and it would only cost around $70.

Forming an LLC isn’t that simple; there is much more involved. First of all, you need to name your LLC so that it gives your organization an image. After this, you need to choose a registered agent responsible for receiving important tax forms. Next comes the Articles of Organization, this will include your LLC name, registered agent, the purpose of forming LLC, operations within the business, and names of the people involved.

The final steps of forming an LLC include filing the initial statement of information. The name suggests you create a document that outlines the ownership and operating procedures of your LLC. After this, once your LLC is formed, you must get an EIN. This step allows you to open bank accounts for your business and to hire employees.


As you can see, we have mentioned all there is for you to know regarding how to set up an LLC. You must keep in mind that setting up your LLC the right and the legal way will protect you from complications. If you don’t set up your LLC legally, your business might be shut down, and you might find yourself in court.

This article is a service of Pantea I. Fozouni, Family Business Lawyer®.

The Palm Desert Law Group specializes Trust Administration, Business Law and Planning for Parents of Minor Children.

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