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Reporting
Your AccountLLC Playbook
As a Limited Liability Company, your company is registered with your state. This entity type offers limited liability protection to its owner(s) and pass-through taxation.
LLC Entity Formation: Overview
What it is: Forming your LLC by filing the required paperwork with your state’s Secretary of State or business registration agency.
Importance: Establishes your business as a legal entity that provides limited liability protection.
How to do it: Check your Secretary of State’s website for specific requirements, or you can use a third party provider such as Corpnet or Northwest.
LLC Entity Formation: What State Should I Choose?
What it is: Decide which state to register your LLC in.
Importance: The state you choose can impact the formation process, cost, compliance requirements, and other legal considerations.
How to do it: The best state to register your LLC is usually the one you live in. If you form an LLC outside of your home state, you’ll also be required to register your LLC as a Foreign LLC in your home state- that could mean 2 LLC filings, more fees, and more admin work.
One notable exception to this rule-of-thumb is real estate LLCs. It’s typically best to form a real estate LLC in the state where your property is located.
We recommend asking your CPA or attorney what’s best for you, given that your specific situation may differ from the general guidance above.
LLC Entity Formation: Choose your Business Name
What it is: Select a registered name for your company.
Importance: Choose a unique and distinguishable name for your LLC that complies with your state’s naming rules.
How to do it: Check that your chosen name is available through your state’s business name database or Secretary of State website. It must be distinguishable from other registered businesses. It typically must include “Limited Liability Company,” “LLC,” and may not include “Corporation” or “Incorporated.”
LLC Entity Formation: Select a Registered Agent
What it is: Appointing a reliable point of contact to receive legal and official documents on behalf of your LLC.
Importance: This is often a legal requirement and ensures you receive documents in a timely manner.
How to do it: You can choose an individual (including yourself) or use a registered agent service. They must have a physical address (not a PO Box) in your state of formation and be available during regular business hours.
Choosing yourself is usually the easiest and least expensive option, but if you don’t have an address in the state where your LLC is formed, or you’d prefer to hire a commercial registered agent (such as Northwest), your registered agent will receive and forward any documents to you.
LLC Entity Formation: Articles of Organization
What it is: Preparing and filing Articles of Organization with your state to officially create your LLC. (Sometimes also called Certificate of Organization or Certificate of Formation.)
Importance: This is a fundamental document required by the state to recognize your LLC as a legal entity.
How to do it: Check your Secretary of State’s website for the specific form required, complete the required information (business name, address, registered agent, etc.) and submit (usually electronically) with the required filing fee.
LLC Entity Formation: Operating Agreement
What it is: This outlines the ownership, management structure, and operating procedures of your LLC.
Importance: This isn’t usually required by law. However, it’s good practice to establish rules and responsibilities among members and define how the business operates, which can prevent misunderstandings in the future.
How to do it: There are lots of online templates that may be a good place to start- you can then modify to suit your specific business and state rules. This is an internal document, so you don’t need to mail it to the State or the IRS, just keep it in your business files.
Topics to consider include: who the members are and their ownership percentages, how the LLC is managed, how profits and losses are distributed, how taxes are paid, and what can trigger a dissolution of the company.
LLC Entity Formation: Apply for an Employer Identification Number (EIN)
What it is: An EIN is a 9-digit number assigned by IRS to identify businesses for tax purposes. It’s like a social security number for your business.
Importance: It helps identify your business separately from your personal entity. Some banks require an EIN to open a business bank account, and you’ll need one if you plan to hire employees.
How to do it: In most states, you should wait for your LLC registration approval before applying for an EIN (though two state exceptions are LA and WV). Apply for an EIN online through the IRS website. Your EIN confirmation letter is usually downloadable at the end of the online application process, and you’ll receive a copy in the mail weeks later.
Foreign LLC filing
What it is: Registering your LLC to operate in a state other than the one where it was initially formed. (This doesn’t refer to LLCs formed outside the US.)
Importance: If your LLC was formed in one state but doing business in another state, you may need to file as a foreign LLC in the second state to legally operate there.
How to do it: We most commonly see this situation arise when people form an LLC outside of their home state in an attempt to save money on filing fees. The process of registering a foreign LLC includes designating a registered agent, paying filing fees, and getting a Certificate of Good Standing from the original state. You don’t need a new EIN.
You can usually file online from the Secretary of State’s website.
Business Bank Account
What it is: Opening a separate bank account exclusively for your business.
Importance: Keeps your personal and business finances separate. This will make bookkeeping and tax filing much easier and more accurate, and allow you to more easily track your business finances. Having a separate bank account also reinforces your LLC’s limited liability protection, as your business entity is separate from your personal finances.
How to do it: To open an LLC business bank account, you’ll need your EIN confirmation, LLC registration approval, and photo ID. Check with your bank, since some require additional paperwork.
Once your business bank account is open, all business transactions (income and expenses) should happen there, and NOT in a personal account.
Bookkeeping
What it is: Maintaining accurate and organized records of your business income, expenses, and transactions.
Importance: Bookkeeping is critical for monitoring your business’s financial health, preparing for taxes, and making informed business decisions. It also helps properly identify and support your write-offs so you save money on taxes.
How to do it: Kick makes bookkeeping easy by putting your books on autopilot using AI-powered software. We’ll categorize your transactions, maximize your write-offs, and give you clarity about your finances.
Paying Taxes
What it is: Fulfilling your tax obligations, which may occur quarterly and/or at year-end.
Importance: You must comply with tax laws to avoid penalties or legal issues.
How to do it: You can file your own taxes using IRS Free File or third-party software, though most Kick users end up hiring a CPA as their business grows.
Invoicing
What it is: Sending payment requests to your clients for goods or services rendered.
Importance: Ensures you get paid promptly, and supports record-keeping for you and your clients.
How to do it: Lots of solutions exist, but we like Stripe for its clarity, intuitive infrastructure, and widespread adoption.
Paying Contractors or Employees
What it is: Handling payment for anyone working for your business.
Importance: Ensure you’re compensating those who are doing work for your business, and comply with applicable documentation rules.
How to do it: We like Gusto for setting up both payroll for employees, and facilitating contractor payments. Gusto walks you through setting up your payment details, collecting required information, and compliance with applicable laws.
Issuing 1099s and W-2s
What it is: Providing necessary tax forms to independent contractors (1099s) and employees (W-2s) for reporting income to the IRS.
Importance: Comply with tax regulations and helps individuals file their own tax returns accurately.
How to do it: If you use Gusto for paying contractors and employees, they handle this step for you based on the information they already have on file.
Mileage Tracking
What it is: Keeping a record of business-related travel for tax deduction purposes.
Importance: Allows you to claim mileage deductions to reduce your taxable income.
How to do it: We like MileIQ for mileage tracking. It’s a simple app that automatically tracks and logs your drives, which you can flag for business reporting.
Retirement accounts
What it is: Setting up retirement accounts for yourself, such as a Simplified Employee Pension (SEP) IRA or a Solo 401(k).
Importance: Helps you save for retirement while potentially offering tax benefits.
How to do it: We’d recommend consulting a financial advisor to talk through which option is best for your situation.
Insurance and Compliance
What it is: Acquiring the necessary insurance coverage and complying with any regulations relevant to your industry.
Importance: Protects you and your business from potential risks and legal issues.
How to do it: Make sure you research if specific regulations, license or permit requirements exist for your specific industry or jurisdiction.
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- LLC Playbook
- LLC Entity Formation: Overview
- LLC Entity Formation: What State Should I Choose?
- LLC Entity Formation: Choose your Business Name
- LLC Entity Formation: Select a Registered Agent
- LLC Entity Formation: Articles of Organization
- LLC Entity Formation: Operating Agreement
- LLC Entity Formation: Apply for an Employer Identification Number (EIN)
- Foreign LLC filing
- Business Bank Account
- Bookkeeping
- Paying Taxes
- Invoicing
- Paying Contractors or Employees
- Issuing 1099s and W-2s
- Mileage Tracking
- Retirement accounts
- Insurance and Compliance