You’ve Created an LLC… Now What?
In case you haven’t noticed, many so-called business “experts” and other entrepreneurs like to use the terms LLC and company interchangeably. This might not sound like a big deal, but it can be if you personally heeded their advice to “start an LLC” when perhaps they should have advised you to “start a company.” In reality, an LLC is just one type of business structure but not necessarily the right formation for everyone depending on their goals.
But, alas, if you started an LLC, what should you do next? This article will walk you through the first five steps you should take after forming your very own LLC.
Step #1: Obtain a Tax ID Number
To start, go to IRS.gov and apply for an Employer Identification Number (EIN). The IRS is the only tax agency that issues this type of identification number, and it’s an important one to have because it will allow you to conduct business and tax-related tasks without having to use your personal Social Security Number (SSN). Your EIN will be associated with your LLC.
Step #2: Open Separate Business Bank Accounts
Next on the agenda is to visit your bank and open both a business checking and savings account. You’ll likely need your LLC formation papers and EIN to do this. Going forward, you’ll want all of your business financial activity, including the income you generate and expenses you pay, to take place within these business accounts – separate from your personal ones.
Step #3: Move Business-Related Automatic Charges
Now that you’ve created separate business bank accounts, you’ll want to ensure that all of your business-related expenses – including automatic subscriptions – come out of these accounts and not your personal ones. Again, the idea is to keep your personal finances separate from your business finances.
Comb through your personal transactions and move any that are business-oriented (like web hosting fees, business utility or cell phone charges, company travel or transportation costs, or advertising expenses, for example) to your newly opened business accounts. In most cases, you’ll need to either call the vendor or change your billing information online with them.
Step #4: Create Federal and State Tax Accounts
At this point, you’ll want to open tax accounts online with the IRS and your state (if you live in one that taxes personal income). Why? So you can pay your company’s quarterly estimated taxes on time throughout the year. As the sole owner/member of an LLC, you’re responsible for paying taxes on your net income, and unless you’ve specifically requested the IRS to tax you differently, you’re likely taxed as a sole proprietor. Establishing and accessing these accounts will enable you to easily make your quarterly tax payments, in addition to providing you with tax-related information and records of your past tax deposits.
Step #5: File Your Tax Returns on Time
The final step you should take after forming an LLC is to set up your business bookkeeping so it’s organized, accurate, and timely. Doing so will help you consistently pay your taxes on time so you avoid being charged penalties and interest for non-payments or underpayments. Tax season arrives at the same time every single year (the big date is April 15th for LLCs unless this falls on a Saturday, Sunday, or holiday, in which case, your company’s tax return will be due the following business day) so there’s absolutely no reason to be surprised or unprepared. Keep your financials lookin’ pretty, and you’ll be all set!
So if you’ve gone ahead and formed an LLC but are unsure what to do next, follow the five steps outlined above, and, trust us, you’ll be perfectly fine. Breaking down what seems intimidating into smaller tasks will make it easier to build and maintain your momentum. So don’t psyche yourself out – keep moving forward, and before you know it, you’ll be reaching and crushing all your professional goals and aspirations!
