After Forming Your LLC: 5 Essential Steps to Stay Compliant

Congratulations! You have successfully taken the major step of forming your Limited Liability Company. This is a huge milestone that protects your personal assets and establishes your business as a legitimate entity.

However, the job isn’t finished just because the paperwork is filed. To keep those legal protections intact and avoid hefty fines—or even the forced closure of your business—you must take proactive steps to maintain your compliance. Think of this as the "housekeeping" phase of business management. Failing to maintain these formalities can cause a court to "pierce the corporate veil," making you personally liable for business debts.

Here are the five essential steps to ensure your LLC remains in good standing.

1. Adopt an Operating Agreement

Even if your state does not legally require it, adopting an operating agreement is perhaps the most important internal step you can take.

This document serves as the "constitution" of your company. It outlines how the business will be run, who owns what percentage, how profits and losses are distributed, and what happens if a member wants to leave or the business dissolves. Without it, your business is subject to generic state laws that may not align with your intentions.

Pro Tip: For single-member LLCs, an operating agreement is still vital. It provides formal documentation that helps prove the LLC is a separate legal entity from you personally, bolstering your asset protection.

2. Separate Your Personal and Business Finances

To maintain the legal separation between you and your company, you must never commingle funds. If you use your personal bank account for business expenses, or vice versa, you risk losing your limited liability status.

Open a Business Bank Account: As soon as you receive your approved formation documents, open a dedicated checking account in the LLC's name.
Get a Business Credit Card: Use this card exclusively for company purchases to build business credit and simplify bookkeeping.
Pay Yourself Properly: Do not just withdraw cash from the business account. Transfer funds to your personal account and document it as a distribution or salary, depending on your tax structure.

3. Obtain Your EIN and Tax Registrations

Your Employer Identification Number (EIN) is essentially a Social Security Number for your business. Issued by the IRS, it is required for nearly every financial transaction your company will make.

Why You Need an EIN:

Banking: Most banks require an EIN to open a business account.
Hiring: You need it to report payroll taxes for employees.
Taxes: It is necessary to file federal and state income tax returns.

Additionally, you must register for state-specific taxes, such as sales tax permits if you sell taxable goods or services, and payroll tax accounts if you have staff.

4. Acquire Necessary Licenses and Permits

Forming an LLC tells the government that your entity exists, but it does not give you permission to operate in specific industries or locations. You may need multiple business licenses at the federal, state, and local levels.

Local Licenses: Most cities or counties require a general business license to operate within their jurisdiction.
Zoning Permits: If you are running a business from home, you may need a home-occupation permit.
Professional Licenses: Certain fields—such as real estate, healthcare, accounting, or cosmetology—require specific certifications.

5. File Annual Reports and Maintain Good Standing

To remain legally compliant, you must periodically update the state with your current business information. This is typically done through a filing known as an annual report or statement of information.

Consequences of Ignoring Compliance

Late Fees: Fines accumulate quickly for missed deadlines.
Administrative Dissolution: The state can legally shut down your LLC, ending your liability protection.
Loss of Name Rights: Other businesses may be able to claim your business name if your entity is dissolved.

Keep track of these deadlines, as they vary by state—some are annual, while others are biennial (every two years).

Summary Checklist for Post-Formation Compliance

Action Item	Frequency	Importance
Operating Agreement	Once (Update if structure changes)	High
Business Banking	Immediate	Critical
Get EIN (IRS)	Once	Critical
Licenses & Permits	Initial + Renewals	High
Annual Report	Yearly/Biennial	Critical

By staying on top of these tasks, you ensure that your LLC continues to provide the protection and credibility you started it for.

The Ultimate Guide to Forming Your LLC Online: A Stress-Free Path to Business Ownership