Starting a Business
Limited Liability Companies
An LLC, or Limited Liability Company, is a type of business structure that combines elements of both corporations and partnerships/sole proprietorships. Here are some key features:
Limited Liability: Owners (called members) are typically not personally responsible for the debts and liabilities of the business. Their risk is limited to their investment in the LLC.
Pass-Through Taxation: Profits and losses are usually passed through to the members, who report them on their personal tax returns. This avoids the double taxation often associated with corporations.
Flexibility: LLCs have fewer formalities and regulations than corporations. They can be managed by the members (member-managed) or by appointed managers (manager-managed).
Ownership Structure: An LLC can have one or many members, who can be individuals, corporations, other LLCs, and even foreign entities. There are no restrictions on the number of members.
Operating Agreement: While not always required, an operating agreement outlines the management structure and operating procedures of the LLC, and helps prevent and resolve disputes among members.
Overall, an LLC provides a flexible and relatively simple way to structure a business while offering protection against personal liability.
Do you need one?
Technically no, but you do need one to open a buisness banking account, and its free liability protection. I decided I wanted an LLC.
So, how do you create an LLC?
In the US, individual states monitor small businesses including LLCs and you can file an LLC on your Secretary of State website. The link for filing in Colorado can be found here.
Before you file, you will need a name. I recommend spending some time on this and sitting with the options you come up with—if it’s aligned, you’ll know it in your body, mind, and spirit. It is also important to check if the name you want is available in your state. Even if it is, I’d do a quick google search as well to make sure the name you choose isn’t associated with anything you want to avoid when client’s google your business.
You will also need a business address. While you can use your home address, remember that anyone can look up the address of your business online and so you may want to get a temporary address. You can change your address later by filing a form with the state when you have set up an office for a small filing fee. P.O boxes are not allowed, however services like iPostal provide mailboxes with physical addresses that you can use to initially register your LLC.
Lastly, after you have filed you will receive a physical letter at your registered address which you will need to fill out and send back to the state (don’t worry, it’s only one page long) in order to complete your LLC set up and be “in good standing”. To maintain good standing you will need to file an annual report with the Secretary of State updating your LLC information (though it’s a good idea to update it any time it changes to maintain liability protections of an LLC).
That’s it! Harder than it should be? Probably—our government still runs on snail mail after all. But, you can do it and having an LLC will help you set up your bank account and give your practice a name you can brand.
NEW! Beneficial Ownership Information Requirement
Beneficial Ownership Information (BOI) Reporting is the process of disclosing key information about individuals who own or control at least 25% of a corporation, LLC, or similar entity. This reporting is required under laws such as the Corporate Transparency Act (CTA) to promote transparency, combat financial crimes like money laundering, and ensure accountability.
Who Must Report: Most corporations, LLCs, and similar entities operating in the U.S. must file BOI reports, unless exempt (e.g., publicly traded companies). Counselors, if they operate their practices as LLCs or other non-exempt entities, are required to report their beneficial ownership information.
Why Counselors Need to Report: Reporting ensures compliance with federal regulations and avoids penalties for non-compliance, which can include fines or legal repercussions. It also supports broader efforts to create transparency and accountability in the use of corporate entities.
Entities Created Before January 1, 2024 have until January 1, 2025 to file their initial BOI report.
Entities Created On or After January 1, 2024 must file their BOI report within 30 days of receiving their creation or registration documents.
You can report your BOI at the link below:
https://boiefiling.fincen.gov/
You will need a copy of your ID available to upload as a jpeg or PDF, and will need to do so multiple times. This information unlike your LLC filing is not public and so you can use your home address for the Beneficial Ownership Section.