My experience setting up a new LLC

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Many people are calling the Brex Cash bonus the early front-runner for Deal of the Year. It’s hard to argue: 110,000 transferrable points that could alternatively be worth $1,100 cash with very easy requirements indeed is hard to beat. The likely roadblock for some readers is the same one that I faced: Brex requires you to have an LLC, S-Corp, or some other type of registered business that is not a sole proprietorship in order to apply. It just so happens that I had a side hustle that was a nice fit for an LLC, so I went ahead and created one. It was surprisingly easy to create and register a new company, though I do question whether it makes sense for someone without a fairly serious side hustle.

Basics for forming an LLC

I have a good friend who has created several successful companies and who now primarily consults start-ups and companies that are looking for help with growth and planning. Since my friend has experience creating businesses in several states, I asked him about the general procedure that one might follow to create a new LLC. He was careful to advise me that the exact details would vary by state and that anyone considering this should talk to an accountant and in many cases a lawyer in advance. You can also hire a company to handle all or parts of the process. However, the general steps he explained are:

  1. Get an EIN from the IRS. This can be done instantly online here. It only takes a few minutes to enter the necessary information. At the end of the process, they give you the ability to get a PDF copy of your EIN information. Save that. I’m told that it can be a headache getting that document replaced if you forget to open it or save it.
  2. Get registered with your state. Generally speaking, your state likely has some sort of “Secretary of State” website (here is a link to New York’s as an example). You’ll look for the business section and instructions for how to organize the company with Articles of Organization (or incorporation or something of the sort depending on your company structure). This document can range from a simple template with a few lines to fill in (I used my state’s template here). There will be a fee to do this (New York was $200). Some states allow this to ne done online (New York does) and you may be able to expedite it (I planned to do this but then couldn’t find a way to add expedited processing; it happened so quickly anyway that I’m glad I didn’t waste money on that). You will receive a form with a state business ID and you’ll usually need that ID number to log in to your state business portal (which you should figure out and create an account once you have that info).
  3. Register with the Department of Finance / Taxation. Each state has a department that handles tax registration for the business and you must register with them. If you intend to have employees, you may need to register for things like worker’s compensation insurance.
  4. You may need to publish notice in the newspaper. This is a New York requirement, though I imagine it is not uniform in all states. In New York State, one must publish notice of formation of the LLC in 2 newspapers within the county where the business is to operate for 6 consecutive weeks and then file an affidavit proving this has been done (New York charges an additional $50 for this plus the newspapers charge a fee).
  5. You may also need to register with your city Department of Finance / Taxation. For example, New York City requires this.
  6. Keep in mind ongoing costs. In future years, you will need to pay a fee to keep the company open every year. I hear this can range from $50 per year in some states to $700 per year in California, so it is worth doing your research here. You must also file an annual report. You may additionally encounter significantly increased accounting costs, so it makes sense to speak to your accountant about this in advance.

While that may sound a bit intimidating, I found that it’s actually quite easy to do. As noted above, you certainly may want to consult with a professional depending on the type of business you are starting. However, it certainly can be done for oneself. If you have questions, don’t be afraid to call the department that handles registration of companies in your state. I also found my local chamber of commerce website had clearer instructions and more direct links to forms than my local county clerk’s office website, so that could be a resource.

Messing up my first attempt

Before speaking with my startup-experienced friend, my first instinct was to create an LLC for my Amazon / eBay sales side hustle. While I had  wound that down over the past couple of years (just not enough time for everything), it was the first thing I thought to turn into an LLC.

Unfortunately (though not necessarily), I messed it up. The first thing I did last week was to go to the IRS website to get an EIN for the business. That process asks you to identify the type of legal structure you intend to use. I chose Limited Liability Company (LLC).

A page or two later, it asks you to enter the the legal name of the LLC, which it notes must match the articles of organization. The fine print notes, “The legal name may not contain any of the following endings: Corp, Inc, PA. The trade name may not contain an ending such as ‘LLC’, ‘LC’, ‘PLLC’, ‘PA’, ‘Corp’, or ‘Inc’.

Here’s the key part they leave out: while the trade name can’t contain ‘LLC’, the legal name can and your state might (probably does?) require LLC in the legal name. My state (New York) does require LLC in the legal name. I didn’t know that right away because New York State’s online fillable Articles of Organization template just says to insert the name of the Limited Liability Company.

I would have thought it redundant to fill in the blank above “Insert name of Limited Liability Company” with something that also says Limited Liability Company, but I’d have thought wrong. Later, after acquiring an EIN for a business name that matches my eBay / Amazon name, I went to file the Articles of Organization with the New York Secretary of State. I initially left LLC out of my company name and it gave me an error and the following tip:

If I added LLC on the New York State form, it wouldn’t match the legal name on my EIN form. Unfortunately, there is no easy fix for this online with the IRS. You can send a letter to the IRS requesting a change (in my case to add “LLC”), but I wasn’t interested in waiting weeks for a response. The same was true for shutting down an EIN – it looks like that can only be done via mail also (otherwise perhaps I’d have just closed out the first EIN and started a new one). I ultimately found this reddit discussion from someone who made the same mistake in leaving out “LLC”. Following through the discussion there, I found that the original poster was able to get it fixed over the phone in under 10 minutes once they got through to someone at the IRS. I gave it a shot. After 43 minutes on hold, it took two minutes for the gentleman who answered to look up my EIN and tell me that it was too new to fix and I’d have to call back in 2-3 weeks once it is “fully in the system” and then they could fix it over the phone.

I thought I had struck out for now.

A second business venture

When my entrepreneurial friend and I caught up and chatted about life and business over the weekend (and I lamented my silly mistake), he helped me realize that I had some other business activity that might be a great fit for an LLC.

I had a different full time job before I began working for Frequent Miler in 2017 and I had worked for the same company for many years. When I began working here at the blog full time, I turned that previous full-time job into a part-time side hustle because I still enjoyed it, could squeeze it into my free time, and it was reasonably lucrative. My free time has since squeezed down considerably now that I have two kids, but I have nonetheless maintained the side hustle to some extent. Recently, the company I worked for changed ownership and structure significantly, which my friend realized might present an opportunity to turn that side hustle into a business of its own and I found that there could be some advantages to doing that apart from the Brex bonus. And so early this week, I created a new LLC.

I first went to the IRS EIN website on Tuesday and created a new EIN — this time including LLC in the name. Then, I went to the New York State Department of State website (they have a lot of good information about forming an LLC here). They have an easily fillable online form for Articles of Organization (I’ll note that you certainly may want to speak to a lawyer about drafting something more tailored to your business). I then went to the online filing system for New York State businesses to register my LLC’s Articles of Organization. In New York State, the fee to file the Articles of Organization is $200. I paid an extra $10 for a certified copy (I don’t know as though I need it, but for ten bucks I figured I’d take an official copy rather than chase it down later).

As noted above, my state requires that I publish the information in two newspapers (chosen by the county clerk where the business is to operate) for 6 weeks within the next 120 days, so that will bring additional cost. I called my local county clerk’s office to confirm which two papers (a daily and a weekly) and get the contact information for the appropriate offices at those papers. In a big city, this might be a challenge and you might just want to hire a company to handle it.

Two quirky things to mention: The IRS website only allows creation of an EIN between 7am and 10pm Eastern. It seems weird to see a website shut down for business at night, but the IRS does. On my state side, I handled the New York filing late at night and the website gave me a message that because I was submitting my paperwork outside of business hours (I did it at 10 or 11pm), my application wouldn’t be processed until the next business day during normal business hours. Despite the fact that the New York Secretary of State website notes a 7 day processing time, I filed around 11pm on Tuesday night and I had an email confirming that my business was approved around 6:30am Wednesday morning.

Before applying for the Brex business account, I took a further step that may not have been necessary but I thought it wouldn’t hurt: I set up a website and email address.

Setting up a business website and email

I remembered hearing in the past that Brex preferred it if you had an actual business email rather than something like a gmail account. I don’t know if that’s still true, but I thought that it wouldn’t hurt the legitimacy if I had my own domain and email address and it could be useful for the business.

After a little bit of research and conferring with Stephen and Carrie, who already have more combined experience in setting up websites than I am likely to ever accumulate, I settled on what I thought was a pretty good deal: Bluehost.com is a hosting platform that will sell you a domain name and hosting package. I found that their “Basic” package, which includes 5 email accounts, would cost about $83.28 for 1 year with private domain name registration. The good news is that TopCashBack was offering $65 cash back on any package purchase.

That would drop my net cost to about $18.28 to have a website for a year and up to 5 email addresses. That sounded well worth it to me. I went through TopCashBack and bought the package. I was glad to see an email confirming that my purchased tracked just a little while later and then the purchase was pending in my TopCashBack account.

Since I am familiar with WordPress thanks to Frequent Miler, it was really easy for me to set up a basic landing page and “contact us” form. What was less easy was figuring out how to set up the included free email accounts. When logged in to Bluehost, the tab that says “Email” & Office” brings you to a page that tries to sell you an integration with Office 365 or Google for five or six bucks a month. That didn’t seem right since the package said it included 5 email addresses. Still, I couldn’t figure out how to set them up. I chatted with support and found that email account setup is under “advanced” and “email”. Who woulda known?

The free web interface for that email is ugly and slow and awful. Luckily, the first email they send you explains how to set it up with Outlook or Gmail. I had the email account loaded on my phone within minutes.

Once I set up my email account and website, I went ahead and applies for Brex Cash.

Brex Cash

Greg has previously covered the Brex Cash account with a couple of posts:

Since those other resources explain the process, I won’t go into extensive detail here. The application is really simple. One part threw me: I didn’t immediately know which of the following account types to apply for. However, the One Mile at a Time landing page for the offer notes the Cash Account on the left is the one that most businesses probably want (and indeed it is what I thought I wanted, I just wanted to confirm it was the right selection for the purposes of the bonus).

I ran into one snag in the process: after submitting the application and verifying my email, it asked me to upload a copy of my photo ID. I tried my license and it gave me an error saying that they couldn’t scan it despite the fact that it was a very clear photo. I then tried a scan of my passport next and it said they were having a connection issue. In the end, I had to upload a photo and it says that the team will manually process it. Unfortunately, that meant that I couldn’t immediately get the account number I need to transfer cash into the account. However, I was able to get the Brex card number itself, so I’ll be ready once I can fund it.

Again, I did instantly receive an approval message and a “Welcome to Brex” message. After the ID snafu, it asked me to upload a copy of my EIN document, which I did immediately. Now I’ll just have to wait to be able to fund it and I should be off and running. I’m certainly excited about that.

Bottom line

The process of forming an LLC was surprisingly easy: I set up an EIN and filed my Articles of Organization with my state on Tuesday, received confirmation that everything was approved on Wednesday morning, set up a website and email Wednesday evening, and successfully applied for Brex that same night. My total time investment for the EIN and New York State filing was well under an hour and the process of setting up my website and email through Bluehost was also under an hour. My cash cost for initial setup will be a bit over three hundred dollars ($200 for New York State filing, $10 for a certified copy, $50 for newspaper affidavit, TBD newspaper filing cost, net $18.28 for my website and email). That’s not bad at all, but the real cost is going to be accounting. I expect long-term savings of making this change to be worth the additional cost, but you should talk to your accountant to be sure that tax time isn’t going to eat up the entire Brex bonus.

For that reason, despite the relative ease, I don’t necessarily recommend converting your sole proprietorship to an LLC – at least not without doing your homework as to how that may affect your taxes and administrative costs. In my case, I anticipate that it will be worth it, but your situation may be different. I recommend doing some reading and consulting with your experts before you jump off the deep end. Still, this Brex bonus alone is huge. My wife has also been pondering a new business of her own for quite some time and Brex may just be the kick in the butt we needed to get the wheels in motion on that. Whether we take the bonus as $1100 or 110,000 points, it will sure go a long way in offsetting startup costs — and I guess that is exactly why Brex is offering a bonus like this. Long term, I am also excited about 4x airline miles with no annual fee. While I love Membership Rewards points, this might make me question the value in keeping the Amex Gold card long-term, but that’s a question for another day. For now, Brex got me in business.

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