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How to Start an LLC for a Fintech Startup | The Detailed Guide

How to Start an LLC for a Fintech Startup | The Detailed Guide

The fintech sector provides infinite opportunity for innovators, entrepreneurs, and visionary thinkers. When pursuing your dreams of a fintech startup, however, it’s important to remain earthbound, at least long enough to handle some of the business basics.

For example, have you considered the type of legal structure you’ll choose for your fintech company? One of the most popular options is the limited liability company, or LLC. Whether you’re starting an LLC in Texas, Tennessee, or Washington State, there are a few steps you’ll need to follow to ensure your company is on sound footing.

What is an LLC? And Why Choose One for Your Fintech Startup?

This is important because it provides you with limited exposure to legal risk. Consider the prospect of a lawsuit, something that’s not uncommon in the fintech sector. When you have an LLC, your personal assets are protected from legal seizure. In other words, the person bringing a suit against you may lay claim to business assets, but not to your personal bank accounts, your family car, or the home you share with your spouse and children.

The legal structure you select also dictates taxation. Here again, LLCs are advantageous, offering business owners a high level of flexibility. You can choose to be taxed on a “pass through” basis, meaning your profits are taxed on your personal tax returns, but not at a corporate level. If for any reason you want to be taxed the same way that a Corporation is, that’s also something you can elect to do with your LLC.

For these and many other reasons, the LLC structure is an ideal entity for businesses and a popular choice among fintech entrepreneurs. The question is, what steps do you need to take to get your LLC off the ground?

How to Start an LLC for Your Fintech

While the steps may vary slightly from one state to the next, the process usually follows this basic trajectory.

1) Choose a name for your business.

Choosing a business name is about more than marketing and branding. There are also certain legal stipulations you’ll need to keep in mind. For LLCs, these stipulations include:

  • You’ll need to check your state’s business registry to ensure you’re not selecting a name that’s already claimed.
  • You’ll need to avoid any misleading claims; you can’t use words like “insurance” or “banking” in your business name unless you actually offer these products and services.
  • In most states, you’ll be required to use “LLC” or “Limited Liability Company” somewhere in your business name.

2) Appoint a registered agent.

Every state requires LLCs to have a registered agent. This is basically someone you appoint to receive business and tax documents on your behalf. Some states will allow the business owner to serve as their own registered agent, while other states will require you to hire someone from outside the company.

3) Get a copy of the articles of organization form.

To make your LLC official, you’ll need to complete a legal document that’s commonly known as the articles of organization. (Some states may use different terminology.) You can usually obtain this document pretty easily by heading to the website of the state department for the state where you plan to base your LLC.

4) Complete your paperwork.

Once you obtain your articles of organization paperwork, you’ll actually need to complete it. This is usually pretty straightforward, and involves providing the state with a little bit of basic information. Again, you might see some state-by-state variation, but you’ll usually be asked to provide details such as:

  • The name of your business
  • The principal address for your business
  • Contact information for your registered agent
  • Details about the purpose of your business and how it will be managed

After filling in this information, you’ll simply need to sign the document and then you’ll be ready to file!

5) File your paperwork.

Filing your paperwork will require you to pay a nominal fee. Note that the fees for creating an LLC vary wildly from state to state, so you could be looking at anything from a $25 check to a few hundred dollars.

6) Get an EIN.

Once you’ve filed and received word from the state that your LLC is official, your next step is to request an employer identification number, or EIN. This unique number is required for filing taxes and for doing payroll. You can request an EIN simply by visiting the IRS website; doing so is totally free of charge to US citizens.

7) Start a bank account for your fintech company.

Before you start handling any financial transactions, you’ll need to have the appropriate bank accounts established. Since one of the main benefits of the LLC is its separation between business and owner, we highly recommend starting a business bank account rather than relying on your personal one.

With these steps, you’ll be ready to start operating your fintech company as an LLC, and enjoying the unique benefits that come with this particular legal structure.

Protect Your Fintech Company with an LLC

Ultimately, LLCs provide meaningful layers of protection that fintech entrepreneurs often crave. Since LLCs are usually quite easy and inexpensive from an administrative standpoint, it’s well worth considering one for your fintech venture.

Author Bio

Amanda E. Clark is a contributing writer to LLC University. She is a graduate of Eastern Michigan University and holds degrees in Journalism, Political Science, and English. She became a professional writer in 2008 and has led marketing and advertising initiatives for several Fortune 500 companies. She has appeared as a subject matter expert on panels about content and social media marketing. She regularly leads seminars and training sessions on trends and tactics in professional writing.

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