After you’ve filed your articles of organization with the Florida Division of Corporations, your LLC will begin its legal life. But before you can throw that celebratory shindig you’ve been dreaming of, there are a few other things you need to take care of to make your LLC fully operational.
We’ve put together a list of steps that you need to take after you form your LLC. Some of them are legally required. Others aren’t mandatory, but they’re highly recommended by experts anyway.
Step 1: Draft and Sign an LLC Operating Agreement
First up, let’s discuss the need to draft and sign an LLC operating agreement.
What’s an operating agreement?
Basically, it’s a legal document that establishes how your LLC is run. It includes:
- How decisions are made
- How money is distributed
- How disputes are resolved
There are lots of details here, so take your time as you draft it, and really think about what you’re putting into your operating agreement.
All of the members of your LLC need to sign the agreement and agree to follow the rules that it contains. Obviously, if you’re the only member of your LLC, you’ll be the only one who needs to sign and follow it.
Do you need an operating agreement?
An operating agreement isn’t mandatory, but it’s a great idea to have one in place, even if your LLC only has one member and you’re in charge of making all of the decisions.
Why so important? Well, having a written operating agreement lends credibility to your LLC.
It shows that your LLC is a legitimate business entity that’s separate from you, not just some sham that’s been created to avoid liability. This is really important for single member LLCs (SMLLCs) because, without the formality of an agreement, an SMLLC can look like a sole proprietorship, which doesn’t provide limited liability.
Plus, lenders might ask to see an operating agreement before they’ll agree to issue a loan in your LLC’s name. If you’re planning on taking out loans to build your business, this simple document will definitely be helpful.
The good news is that your operating agreement doesn’t need to be complex or long, especially if you’re an SMLLC.
And, while you don’t need to file the agreement with the Secretary of State—or anywhere else, for that matter—you should keep this document with all of your other important LLC files.
Step 2: Get a Federal Tax ID (EIN)
Next up is the Federal Tax ID (or Employer Identification Number / EIN). You should obtain an EIN from the IRS.
This nine-digit number is used by the IRS to identify your LLC, so you’ll need to include it in all of your tax forms and communications with the IRS and Florida Department of Revenue.
If your SMLLC doesn’t have any employees, a separate EIN is, generally, not required by the IRS. Instead, you can use your personal Social Security number. But it’s still recommended that you get an EIN.
Why is an EIN an important part of doing business?
First off, it helps prove that your LLC is a legal entity that is separate from you personally, just like an operating agreement. Plus, using your EIN rather than your Social Security number helps avoid identity theft, which is frighteningly common today.
And, on top of all of that, many banks will actually require an EIN to open up a business bank account in your LLC’s name. Luckily, it’s easy and free to get an EIN and you can complete an online application on the IRS website.
Step 3: Get a Business License
Whether or not you’ll need to get a business license for your LLC depends on where your business is located. If you do need a business license to operate, you can get one from your city or county government.
The benefits of getting your business license
Like an operating agreement and EIN, obtaining your business license helps prove that your LLC is legitimate. It also helps preserve your limited liability.
More importantly, if your local government finds out that you failed to get a required license to run your company, it could impose penalties and fines that cost a lot more than it would’ve cost you to get the license in the first place.
Getting your business license is easy
Obtaining a local business license is usually simple and straightforward. The specific details for your particular license will be available from your local government, so some research is required. Once you know what you need, you’ll have to fill out an application and pay a fee.
Just keep in mind that, in addition to a local business license, you might also need to get a license or permit from the State of Florida, or even from the federal government. This depends on the work that you do. For example, real estate brokers and salespeople must be licensed by the state.
Step 4: Register with the Florida Department of Revenue
If you’ll be selling goods and collecting sales tax or if you have employees, you’ll need to register with the Florida Department of Revenue (DOR) by filing Form DR-1, Florida Business Tax Application.
You can register online or file by mail.
Step 5: Open a Business Bank Account
We highly recommend that you open a bank account in your LLC’s name, rather than use your personal bank account for business purposes.
Once again, it boils down to ensuring that your LLC is recognized as a separate, legal entity that’s a legitimate business. Combining your personal funds with your LLC’s funds in a single account does the exact opposite.
If you use your personal bank account for business purposes, you might even end up losing the limited liability that you obtained by creating your LLC. You definitely don’t want that!
Setting up a business bank account might seem daunting at first, but you can read through our article, Freelancer’s Guide to Banking to learn more.
Step 6 (Optional): File a Fictitious Name Registration
Did you know that you aren’t required to operate your LLC under the legal name that’s listed in your articles of organization? It’s true; you can use a different name. This name is referred to as a fictitious business name, or dba, which stands for “doing business as.”
To operate under a different name than your LLC’s legal name, you have to file a fictitious business name registration application with the Florida Division of Corporations.
You file the application online with the Florida Division of Corporations, pay a $50 fee, and your registration is good throughout the state.
Before you file, however, check the online Florida Division of Corporations Records Database to be sure that the name you wish to use isn’t already taken by another business.
Maintaining Your LLC Doesn’t Have to Be Complicated
Wow, those are a lot of rules! But try to relax, and just take things one step at a time so that you don’t become overwhelmed.
Also, know that Collective is here for you to help you with all of the important steps and more.
With the right strategy and the right support, you can rest assured that your LLC has everything it needs to operate legally and be recognized as the legitimate business that it is.
