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Starting a Limited Liability Company (LLC) in Louisiana can be an exciting venture for any entrepreneur. This article aims to guide you through the process of forming an LLC in the Pelican State, from business name ideas to understanding the costs and benefits involved. Whether you're a seasoned business owner or new to the world of entrepreneurship, understanding how to navigate the formation of an LLC is crucial.
As we break down the details of starting a business, remember that the LLC formation process requires more than just completing paperwork, as with any business, it's about launching a stable and profitable venture.
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How to start an LLC in Louisiana in 7 steps
01. Pick your business name
The first step to starting a business in Louisiana is to select a name for your LLC. This isn't just a creative process, it's a legal one too. Your business name should be unique and must not be the same as or too similar to other names on record with the Louisiana Secretary of State. Ending your chosen name with "LLC," "L.L.C.," or "Limited Liability Company" is necessary to fulfill state requirements for naming a business. Make sure you don't include potentially restricted words in your business name, words that might confuse your LLC with a government agency or other official body.
When choosing a business name for your LLC it's important also to consider your domain name, for when you go about making a website for your new venture. You'll need to use a domain finder to check domain name availability and the right fit for your LLC.
Tip: If you're having trouble coming up with a unique name for your business, consider using a business name generator either for inspiration or to come up with your name.
02. Choose your registered agent
Every LLC in Louisiana must have a registered agent, an individual or company that agrees to accept legal papers on behalf of your LLC. Your registered agent must be available during regular business hours and have a physical address in Louisiana. This is a legal requirement for establishing an LLC in the state.
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03. Obtain state business permits
Depending on the nature of your business, you may need specific permits or licenses to operate an LLC and register a business in Louisiana. These could range from general business licenses to industry-specific permits. It's imperative that you check with your local and state agencies for the full list of required permits for your type of industry. Always fill out all paperwork correctly and submit as required by the state.
Let’s say you want to start a plumbing business in the state. First, you’ll need a plumber license from the the State Plumbing Board of Louisiana (SPBLA). You'll also need to obtain a state sales tax ID from the Louisiana Department of Revenue, as well as any applicable local licenses or permits.
Learn more: How to get a business license
04. File Articles of Organization
Articles of Organization is a critical document that officially creates your LLC in Louisiana. You'll file this with the Louisiana Secretary of State, either online or by mail, along with the required filing fee.
Filing consists of the following:
You'll need details like your LLC's name, registered agent information and management structure.
Fill out Form 365: This is the specific form used for filing an LLC's Articles of Organization in Louisiana.
Complete the submission process by paying the $100 filing fee.
05. Draft your LLC operating agreement
Although not legally required in Louisiana, creating an operating agreement is highly recommended for any LLC. This internal business document outlines the ownership structure of an LLC, it defines member roles and sets out operational procedures for this type of business.
Here’s why an operating agreement is important:
It sets clear expectations for members regarding operations and conflict resolution.
It can reduce potential disputes among members by detailing policies and procedures for how the business should be run.
06. Apply for an EIN and pay relevant taxes
An Employer Identification Number (EIN) is essential for when it comes to hiring employees, opening bank accounts and filing taxes. You can't start an LLC without one, in any state.
In order to secure your EIN, start with the IRS. EIN registration is free through their website or via mail submission. Once you've got your IRS, you'll need to fully understand your business tax obligations. In Louisiana for an LLC owner this includes a 15.3% self-employed tax (12.4% social security, 2.9% Medicare). For more information, visit the Louisiana Department of Revenue website.
07. Organize annual reports
Louisiana requires all LLCs to file annual reports to be compliant with state regulations on running a business. These reports keep the state updated on any changes within your company and typically involve a filing fee. Staying on top of this requirement helps ensure that your LLC continues operating without interruption.
To ensure you’re compliant with this make sure to:
Know due dates: Your Louisiana LLC’s Annual Report is due every year before your anniversary date. Your anniversary date is the date your LLC was approved by the state.
Fill out the required form: This is the specific form used for filing an LLC's Annual Report in Louisiana.
Submit and pay all fees: Complete the submission process by paying the necessary fee. This is $35 to file an LLC online or $30 by mail.
How much does it cost to start an LLC in Louisiana
The cost of starting an LLC in Louisiana is an important consideration as you plan your business finances and funding. Here's a breakdown of the expenses you can expect:
Filing the Certificate of Formation: This is the primary cost when starting your LLC as a legal business entity. This is a one-time cost that is mandatory for all new LLCs. For an LLC it costs $100.
Registered agent fees: If you choose to hire a professional registered agent, they'll charge a fee for their services. This fee varies depending on the agent or service company you select.
State business permits and licenses: The costs for these will vary based on the type and number of permits and licenses your specific business requires.
Annual report fee: There is an annual fee for filing your LLC's report with the state. This fee is recurrent and must be paid yearly to maintain good standing.
Legal or financial consulting fees: If you seek professional advice during the formation process, these services will add to your startup costs.
Domain registration and website creation: Some potential costs involved here include domain registration and potentially hiring a web designer or using a website builder like Wix.
Business insurance: Depending on your industry, you might need various types of insurance to protect your LLC.
Learn more: Cost to start an LLC
Who can start an LLC in Louisiana
To form an LLC in Louisiana, there are specific eligibility criteria that need to be met. It's crucial to understand who can start an LLC in the state before you begin.
You must be at least 18 years old to form an LLC in Louisiana.
There's no residency requirement to start an LLC in Louisiana, meaning you don't have to live in the state to form an LLC there. However, your LLC must have a registered agent with a physical address within the state.
You don't need to be a US citizen or permanent resident to start an LLC in Louisiana. However, non-residents may need to fulfill additional requirements.
Certain types of businesses may have additional regulations or may not be permitted to form an LLC. It's important to check if your business type is allowed under state law.
If you've previously been barred from holding a business or professional license, this could affect your eligibility to form an LLC.
Benefits of starting an LLC in Louisiana
Starting an LLC in Louisiana provides business owners with a range of advantages. These include legal protections and tax benefits, making it a favored choice among entrepreneurs.
Learn more: Benefits of an LLC
Limited liability protection
As the name suggests, an LLC provides its owners with limited liability. This means your personal assets are typically protected if your business faces lawsuits or debts.
Pass-through taxation
LLCs often benefit from pass-through taxation where the business itself is not taxed. Instead, profits and losses are passed through to the individual members' tax returns.
LLCs offer the flexibility of filing taxes as a sole proprietorship, partnership, or corporation. Shylene D’Addario VP, associate general counsel at LegalZoom.
Flexibility in management
LLCs have fewer formalities than corporations and can be managed by the members or appointed managers, providing flexibility in how the business is run.
Ease of formation and compliance
Compared to other business entities, forming an LLC in Louisiana is relatively simple, with fewer formalities and compliance requirements.
Credibility with customers and partners
Having 'LLC' after your business name can enhance your credibility with potential customers, suppliers and financial institutions. You can then choose an .llc domain for your website to reinforce this credibility.
Potential drawbacks of starting an LLC in Louisiana
When considering if you should start an LLC in Louisiana or not, it's important to weigh the benefits and potential drawbacks. Understanding these disadvantages will help you decide if an LLC is the right fit for you business. Some of the main ones include:
Self-employment taxes
Members of an LLC are usually subject to self-employment taxes on their share of the profits.
Limited growth potential
Some businesses may find that the structure of an LLC limits their ability to raise capital since it's harder to issue shares compared to a corporation.
Annual fees and paperwork
Although less burdensome than for corporations, LLCs still need to file annual reports and pay fees which can be seen as a disadvantage for some small businesses.
Why start an LLC over another business entity in Louisiana?
Choosing the right business structure is crucial for entrepreneurs. In Louisiana, forming an LLC is often the structure of choice due to its unique advantages. But it's important to compare it with other types of business structures to understand why an LLC might be the best choice for your situation.
Here's how an LLC stacks up against other business entities:
Sole proprietorship: Unlike a sole proprietorship, an LLC provides personal asset protection, separating your personal liabilities from those of your business.
Partnership: An LLC offers more protection for each member compared to a partnership, where each partner can be personally liable for the debts of the business.
Corporation: While corporations also provide limited liability protection, they’re also subject to double taxation (taxes on both corporate profits and shareholder dividends). An LLC avoids this with pass-through taxation.
You've formed your LLC in Louisiana, what's next?
After all the paperwork is filed and your business is officially established, there are several next steps to consider to influence your business's success.
Keep your personal and business finances separate by opening a bank account solely for your LLC. This will simplify accounting and tax filing.
Protect your LLC with the appropriate insurance policies. Common options include general liability insurance, professional liability insurance and property insurance.
Always keep up with annual report filings and with renewing any necessary permits or licenses.
Implement an accounting system to manage your finances, track expenses and prepare for tax season. Consider using accounting software or hiring a professional accountant.
Create a marketing strategy to promote your business. This could involve building a website, establishing a social media presence, networking or traditional advertising.
Design a logo with a logo maker and work on your brand identity.
Looking to start an LLC in a different state?
How to start an LLC in Louisiana FAQ
How long does it take to form an LLC in Louisiana?
The time it takes can vary. Once the Certificate of Formation is filed with the Secretary of State, it typically takes a few days to a few weeks for the LLC to be officially formed.