How to Start an LLC for Teacher Business Owners

What exactly is an LLC and why is it important?

LLC stands for a Limited Liability Company and it is a business entity structure formed at the state level. The forms are basically the same in every state, but there are a couple of nuances from state to state. 

The biggest advantage of an LLC is protecting your personal assets.  If your business gets sued, your personal bank account, your house, etc. are not accessible; only the business and business assets, are accessible. 

Therefore, forming an LLC is just a good practice whether you’re a single business owner or one person because it makes it a completely separate entity.  

At what point should a business owner form an LLC? 

I really like forming an LLC from the very beginning because as an LLC, you’re going to have an LLC name.  If you choose to wait and form an LLC later, you have to backtrack and rename or recreate things from BEFORE you had that LLC name.

A lot of people think there is an income threshold for when it makes sense to start an LLC, but I don’t actually believe that.  I think if you want to start an LLC from day one that’s the best place to start.  

The truth is you never know when a legal issue could pop up.  You may have your first client and a legal issue pops up or you could make it years and never have an issue.  It is almost like an insurance policy.

Anything you own personally is pulled into what somebody could potentially get.  With an LLC, you have that separation so if you do get sued only the business can be sued and not you personally.

Is forming an LLC expensive?

Starting a business costs money and even if you think, “All of my money is going to the start-up expenses…” it is such good use of your money.  Remember, your business is going to grow and will eventually get to a point where it is not all your income forming an LLC.

One good thing about LLC’s is that once you pay your initial investment to form it, your annual fee will be less.  I am in Kentucky, and it’s only $40 to start an LLC.  After that it’s only $15 per year, so at that price, it’s pretty much a no brainer.

Where can people find info about costs in their specific state?

You can simply do a search for your Secretary of State LLC filing fee, and it should come right up with the exact filing fee.  When you are ready to file, go to the Secretary of State’s website, click on business filings and then it will be right there.  

What type of stuff do people need to know BEFORE filing the LLC? 

Learning how to start an LLC for your teacher business can feel overwhelming, but we are going to walk through the process together. To make the LLC process flow more quickly and much more smoothly, there are a few things you will want to have already decided.

• The state you will register in – You don’t have to register in your home state.  However, this is usually what I recommend because then you’re not opening yourself up to other states laws just so you can have the advantages of their LLC statutes or their filing fees. 
• Your LLC name – Be sure to research the name you want to make sure you are not infringing on anyone else’s intellectual property. 
• Your addresses – Specifically, the location where you do business (usually a home address) and/or a PO box.
• Your registered agent

What is a registered agent?

A registered agent is the person or entity that will receive any kind of legal filings, and it is important to know that a physical address is required these.  Because LLC records are public information, if you run your business from home and you serve as your own registered agent, your home address will be listed online. 

If you are uncomfortable with your home address being accessible as a public record, I recommend using Northwest Registered Agent.  It is around $120 per year and this company will have a Registered Agent address for you to use. 

So, you sign up with them and they give you the address to use that you will put on your filings.  Then when any papers are received at that address, they scan them and email them to you.  This will give you notice of everything while still keeping your home address private.

What’s next after learning how to start an LLC for your teacher business?

As soon as your LLC is formed, you are ready to go, but there are some specific steps you will want to take to ensure that you and your personal assets are protected.

1. Always keep your personal and business funds separate. 

You don’t want any co-mingling of funds.  If you’re going to pay a personal bill from your business account, it needs to leave your business account and then go into your personal account BEFORE you pay it.

You really should not have any interaction between your personal funds and your business funds. 

That is one of the biggest mistakes I have seen people make.  If you were to get sued and there has been no separation of funds, the individual could be liable as opposed to just staying within the LLC. 

So NO co-mingling of funds; keep separate accounts.  

2. Get an EIN

You will need to get an EIN which stands for employer identification number.  This is basically just like a social security number for your business that you will use on your tax filings. 

You file for this directly with the IRS on their website.  The whole process takes about five minutes in most situations.  It is tied to your personal social security number, so you are really going to be taxed under your SS number.  But overall, it’s a very easy and quick process.

3. Create an operating agreement

You will need to have an operating agreement.  In most states, this is an internal document (meaning you don’t have to file it with the Secretary of State), but you need to keep it with your business records. 

While this may seem like an exercise in futility, it is just another way to protect your personal assets should someone choose to sue your LLC.  If you are acting like you are just an individual, comingling funds, using your personal Social Security number and just “making up the rules” as you go along, you are not treating your business like an actual business. 

So having an operating agreement is another layer of protection you are creating for yourself that is very important.  

4. Keep accounting records

Make sure you are keeping good track of your accounting records.  You will need to file taxes and keeping all of your accounts separate using some kind of system to make sure you are tracking your income, expenses, etc. is essential. 

While this is more an IRS thing rather than an LLC thing, you will have to do that no matter what. 

5. Purchase business insurance

This is just one more safeguard for you to have in place in the event you were to get sued.  Even if you are just starting out, the last thing you want is to lose everything you have built (or are starting to build) in the event you are sued.  So business insurance can protect you.

6. File for any additional licenses and permits

Whether you are a sole proprietorship or sole LLC, your state, county, and/or city might have certain licenses and permits you will need to run your business.  You will do this after you have received your LLC because you are required to include your LLC name on these particular documents.

So just to recap, here are the nine steps for how to start an LLC for your teacher business.

• Choose the state
• Pick the name (including addresses + contact information) 
• Articles of Organization (form you file with your Secretary of State’s office that will actually form your LLC) 
• Get your EIN
• Create your Operating Agreement
• Start accounting (spreadsheet or some form of documentation of expenditures + open a business account and taking care of all of your accounting stuff. 
• Apply for any applicable licenses and permits in your state, city or county; 
• Get business insurance
• Keep up with the business filings. 

At least once a year, you will have to file an annual report to make sure your LLC stays current, updated with the latest information.  Step nine is ongoing as in you will have to make sure you do this annually, but the first eight essentially once you do them you won’t really have to do them again.

In most states, the deadline is July 15.  But be sure to find out what the date is in your state because it could be different.  It is a super-simple process that takes just a couple of minutes to do each year.

Is this process something individuals can do on their own? 

I think it is a personal choice. 

People have different comfort levels on what they are willing to do themselves as opposed to feeling like I am just going to hand this over so that I know it is correct.  I will say that filing the Articles of Organization or whatever it is called in your state, is typically a one-page form and you just go through and enter in your business name, your addresses, and things like that. 

The content of the form is already there so you just put your information in.  The process of filing is very easy, and I think it is something that everybody can do on their own. 

There are a couple of states that have additional requirements like Arizona and New York.  You have to file for a publication, but even there it is such a streamlined part of their process you could just contact your state agency and they will just say this is the newspaper you need to contact to advertise. 

The newspaper is used to that so they can help guide you through the process, but I truly believe this is something people can do on their own.  

What kinds of resources do you have to help business owners?

I have a free workshop that walks you through each of the LLC steps in more detail and we discuss exactly what a Registered Agent is, along with your principal place of business, and more.  We go through the forms and talk about what you put here and what you put there and the process of filing for your EIN. 

You can find that on my website yourentrepreneurschool.com/workshop. 

I also have a special deal just for podcast listeners and blog readers on my Operating Agreement template for 30% off using the code HTM30.  Remember, this is not something you file with the state, but you are responsible for writing your own Operating Agreement and it does have to have certain clauses in it that are keeping you protected.

It is really easy to fill out; you just put in the highlighted parts of your business information, print it out and sign it and just keep it in your business binder so it is with all of your filings if you ever need it. 

Andrea’s closing thoughts

Don’t let the legal stuff hold you back because you can figure it out!!  Even if you plan to hire someone to do everything, you are the general counsel of your business.  So, you need to have information to be able to make decisions day to day and know how that might affect you.

My number one legal tip is “Don’t ignore it.”  Things don’t just go away or get easier if you put it off; actually, in a lot of ways, it gets harder.

Just know that if something needs to be done you can totally do it.  If you get to a point where you’re ready to hire somebody, do it!  There is definitely no substitute to working one-on-one with an attorney.

But don’t let the fact you can’t afford an attorney or you aren’t ready to invest in your business right from the beginning keep you from putting those protections in place as soon as you get started. 

Be cautious about where you invest for legal information and direction.  Just because a company or brand uses the word “legal” or “law” in their name does not mean their information is correct.

Even as a really small business you are still held to the same standards as a big business in most situations.  Just saying “I am a little business, and I didn’t know,” is not going to cut it.  When it comes to the law, it doesn’t matter whether you knew it or not because the rules are the rules. 

Be sure to take the time to inform yourself on how to start an LLC for your teacher business so you are covered no matter what. The truth is, there are many worrisome things about starting a business, but the legal stuff doesn’t have to be so scary. Just take these tips and do them one at a time to keep your business & family protected.

If you want FREE step-by-step instruction & assistance with filing your LLC, be sure to sign up for Andrea’s workshop here.

If you want access to Andrea’s LLC checklist, be sure to check out this post entitled 9 steps to starting an LLC!