When forming a limited liability company (LLC) for your business, you need to have a street address in order to register your LLC with your state. States do not allow you to use a P.O. Box, but you can use what is called a virtual address. When you register your LLC, you will simply use your virtual address rather than your home or actual business address. It’s a different story, however, for your registered agent’s address.
What is a Virtual Address?
A virtual address is an actual physical street address at which neither you nor your business reside. Mail is delivered to the address, where a mail service company accepts it, scans any relevant documents and materials and puts them in your cloud-based virtual mailbox.
You can keep items in your virtual mailbox or delete and have them shredded. It’s basically an internet-based mail service.
Registered Agent Address vs. LLC Address
You can use a virtual address when you register your LLC, but your registered agent must register an address at which the agent is able to physically receive mail. In most states, when you form an LLC, you need a registered agent. A registered agent is a person or business authorized to accept legal, tax, or financial documents on behalf of your business.
You can check your state’s website to see if you are required to have a registered agent for your LLC. Your registered agent must be available at their address from 8 a.m. to 5 p.m. Monday through Friday to personally receive official correspondence.
Why Use a Virtual Address for Your LLC?
If you run your business from home, a virtual address offers privacy. Your home address remains unaffiliated with your LLC, unless you serve as your own registered agent. Also, virtual addresses are generally in metropolitan areas, so it might look like a more credible and impressive business address than your home address.
Also, it’s more convenient. You don’t have to deal with paper mail that you have to throw away or shred, and you can keep it in your virtual mailbox as long as you wish.
How to Form an LLC
1. Choose Your State
The first step is to choose the state in which you plan to do business. LLC processes and requirements vary by state, so visit your state’s website for details. Generally, you can form your LLC with an online application.
2. Choose Your LLC Name
Your business name is extremely important. It should reflect the brand you plan to build, tell customers what you do, and be memorable. Once you’ve chosen a name, you’ll need to make sure that it’s not already taken. You can do a search on your state’s website, and on other state websites if you are doing business in more than one state. You should also check the US Patent and Trademark Office to make sure the name hasn’t been trademarked.
3. Choose a Registered Agent
A registered agent is the person or company that sends and receives legal documents on behalf of your business’s LLC. The registered agent can be a member of the LLC, or you can choose a third party such as an attorney, or a company that offers registered agent services. Most states require you to have a registered agent. The agent must be a resident of the state where you do business, or a corporation authorized to do business in your state.
4. Determine Your Management Structure
There are two types of management structures:
- A Member-Managed LLC is managed by the members of the LLC. This is usually chosen by smaller LLCs with few members who will be involved in various management roles.
- A Manager-Managed LLC is managed by people who are not members of the LLC and are employees of the business. This structure is often used when an LLC is larger and has multiple members.
5. File Articles of Organization
The articles of organization is the form you file to create your LLC. These forms vary by state but can generally be filed online. You’ll need to fill out the LLC name, the name and address of the registered agent, the names of the LLC owners, and in some states, the way the LLC will be managed. Fees are generally around $100.
6. Draft an Operating Agreement
An operating agreement is not usually required but is highly recommended for your business. The operating agreement should clearly define the following:
- The percentage of each member’s interests in the LLC
- How profits and losses will be allocated to each member
- Each member’s rights and responsibilities
- The management structure and management roles of members
- The voting rights of each member
- Rules for meetings and voting
- What happens when a member sells their interest, becomes disabled, or dies
It’s a good idea to have an attorney’s help when creating your operating agreement so that you can be sure you’re covering all bases to protect all members and avoid future issues.
7. Apply for Business Licenses
It’s important to make sure you’re in compliance with all laws at the local, state, and federal levels. It’s likely, depending on your location and type of business, that you’ll need business licenses and permits. Do some research to determine which licenses you need. At the very least you’ll need a sales tax permit to sell products and collect sales tax.
8. Obtain an EIN
EIN stands for Employer Identification Number and is like a social security number for your business, allowing the IRS to identify your business easily. It is also known as a Federal Tax Identification Number (FTIN), or sometimes for corporations a Tax Identification Number (TIN). An EIN is required if your LLC has more than one member, if you plan to hire employees, or if you choose to have your LLC taxed as a corporation. The application is free and can be found on the IRS website. The application is form SS-4, and it can be mailed to the IRS or submitted electronically, and once your information on the application has been validated, the EIN is assigned immediately.
After LLC Formation
File Annual Reports
Your state may require you to file annual reports for your LLC, which may involve a fee. Check your state for requirements.
A virtual address offers convenience and privacy, and you can use it as your business address when you register your LLC. Just remember that your registered agent, no matter who that might be, cannot use a virtual address. The registered agent must be available at their physical address to personally accept correspondence during normal business hours.