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A New Year Is the Perfect Time to Start an LLC

By Lane V. Erickson, Idaho Business Attorney

If you are like most people, with a new year beginning there are likely new resolutions or plans or goals that you want to accomplish in 2020. If you are a business owner that has been operating as a sole proprietorship, perhaps the most important resolution or goal that you can set for yourself in this new year is to change from being a sole proprietor to being a limited liability company or LLC.

If you do this, you are not alone. Statistics show that there is a higher rate of filing with the Idaho Secretary of State’s office for new LLCs in the month of January and February than at any other time in the year. While I am not normally one who follows the crowd, in this instance it’s actually a good idea.

For more than 70 years, the business lawyers at the Racine law office have helped each business client determine the best type of business entity they can set up for their particular operation. For the last two to three decades, the best entity that most business clients can select is the LLC. Because of this, we help our clients with the process of setting up an LLC in Idaho and then begin operating their business through the LLC entity.

The business attorneys in our offices are knowledgeable and experienced in helping our business clients make this decision and then completing the steps to get it done properly. We are confident that we can help you too.

The purpose of this article is to describe some of the things that you should consider when it comes to starting an LLC in this new year as part of your business structure. Please keep in mind that this article is not designed to describe everything that you should consider. Rather, this article is a good starting place for you to review. But it is only a starting place. As you can see below, one of the most important things that we suggest you do is talk with a qualified business law attorney to help you reach this goal.

Talk with a Business Attorney

As stated above, the very first step that you should complete when you have made the goal to use an LLC is part of your business structure in this new year is to talk with a qualified Idaho business law attorney. This could save you a lot of time, a lot of misunderstandings, and can help get you on the right track when it comes to setting up a more effective business structure for your business.

At the Racine Law office, we offer a free consultation to meet with business clients and talk with them about setting up an LLC. The purpose of this meeting is to discuss the actual business that our clients are operating so that we can best describe the way that an LLC will help them. We also talk about completing the steps necessary to set up an LLC which include filing the right documents with the Idaho Secretary of State’s office, making sure all business licenses are completed, and creating all the internal business documents and steps necessary to most effectively operate an LLC.

We also talk about the costs associated with setting up an LLC, such as the filing fee and the attorney fee. Once this is done, we’ve established a good business relationship with our clients that they can continue to rely on whenever any questions arise about their business operations, structure, and so forth.

Sometimes people are hesitant to talk with a lawyer because they feel like it’s going to cost them a lot of money. I will say based on my experience that it is far better to spend a little bit of money up front to do things correctly, than a lot of money later when problems arise because it wasn’t done correctly. I have seen this happen time and again with well-meaning business clients who try to save a few dollars by not talking to an attorney at the beginning.

You Can Set Your Date as January 1st

One of the things most business owners who are thinking about using an LLC as the entity for their business don’t understand is that they are able to select January 1st as the effective date of the creation of their LLC business operation. This could be an important choice because of the tax ramifications it may affect.

It also creates a full year in which the LLC can operate the business. This is helpful when it comes to setting up accounts with suppliers, dealing with customers, and taking care of all accounting issues. The new year is a great time to start.

Create an Operating Agreement

The next thing that you should really think about if you are setting up an LLC as part of your business structure in this new year is creating an operating agreement. An operating agreement is a contract that exists between the owners of the business. Whenever there is more than one owner of a business that is structured as an LLC, an operating agreement is extremely important to have because the operating agreement accomplishes a number of important things.

The first things that an operating agreement does is to describe who the owners are and identify the percentage of ownership each owner has. The operating agreement could also be specific about percentages of distribution that each owner will receive which could be different than the percentages of ownership previously listed.

Another thing an operating agreement does is specifically describe how the management of the business will operate. The owners of the business can decide to operate the LLC by all of the members or owners being involved, or by specifically naming which owner has the manager of the business. Alternatively, the owners can get together and can hire a manager who is not an owner of the LLC. In other words, there are a number of ways that an LLC business can be managed. It is the operating agreement that describes how this will be done.

An additional thing that the operating agreement accomplishes is that it is specific about how current owners can get out of the business and what they can do with their ownership interests. The operating agreement will also be very specific about how new owners of the business can come in while the business is operating. Because the operating agreement is a contract, all of the owners will be bound by the terms and conditions set forth in the operating agreement as it applies to their individual ownership interests of the LLC.

The operating agreement can also be very specific about the location of the business, who the registered agent for the business will be, the actual business name of the business, and other similar specific things. As a result, the operating agreement is vitally important to an LLC, and should be created with care and with deliberate thought by the owners of the LLC before it is signed.

As we mentioned at the beginning of this article, our qualified business law attorneys at the Racine law office have helped business clients for more than 70 years. We have a good deal of experience in helping our clients make the transition from a sole proprietorship to an LLC. We also have experience in helping an individual begin a new business as an LLC. Because of our experience and skill, we are confident that we can help you too!

Enlist an Idaho Business Attorney to Help You

Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation. You can also email us directly at or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.

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