Limiting personal liability for business debts is the most important reason to form an LLC. Only assets owned under the LLC’s name are available to business creditors. You pay yourself from a single member LLC with an owner’s draw. Report your LLC’s profits and income together on Schedule C of your personal tax return.
To start an LLC, choose a business name, appoint a registered agent, and file formation documents. Include "LLC" in the name to clarify it’s an LLC, not another entity. Make the name memorable and meaningful. Most states require the LLC designation in registered LLC names.
Should You Use Your Own Name for Your LLC?
Using your personal name for an LLC can limit growth or confuse customers. If you are a sole proprietor and operate the business by yourself, it may be appropriate to use your name for the business. However, there are situations when doing so can hinder the flexibility and expansion of your company or even cause confusion among clients. For service providers who act as both the product and the face of the company, naming your company after yourself is a great marketing strategy.
Pros and Cons of Personal Naming
Operating a limited liability company using a personal name can provide some personal liability protection. It’s easier to get approval for a business bank account. However, it can hinder the flexibility and expansion of your company and cause confusion among clients.
Limited liability companies can use personal names in a variety of ways: first names, last names, initials plus a last name, or a personal name that’s only part of the business name. You can also form an LLC under a different name and use your personal name as your DBA. The name must be unique to your business within the state it’s registered in.
Steps for Naming Your LLC
- Search for the business name on the Secretary of State website where the business will be registered.
- Check if the business name is trademarked.
- Focus on your customers more than personal appeal.
Each state has its own set of rules controlling limited liability companies. The relationships between the members of an LLC are governed by the operating agreement, and the creation and operation of LLCs are governed by each state’s statute which specifically provides for LLCs.