Yes, it is a good idea to start an LLC for an ATM business because there is a moderate amount of risk involved with operating an ATM Business. The limited liability company (LLC) has in recent years become the most popular legal structure for small businesses seeking personal liability protection and flexibility.
The exact requirements vary slightly from state to state, but setting up an LLC is a relatively simple process that can usually be done in one to four hours, depending on the complexity of your organizational structure.
Even as digital payments become more common, there are still times when people require cash. ATM owners can take advantage of this by strategically placing ATMs where they might be needed. One unique advantage of an ATM business is that it is easily scalable. If you want, you can start with a small number of ATMs to keep start-up costs low and then add more as you can afford to.
However, ATM businesses face the risk of product liability, trademark infringement, and financial data breaches. For instance, a frustrated ATM user decides to shake a machine and tilts it over on himself. He sustains injuries and takes legal action against your company to cover the cost of those injuries.
Have it in mind that any business that carries such risk needs to be legally separated from its owner. This separation is known as limited liability protection. Limited liability protects a business owner’s personal assets (e.g., car, house, and savings) in the event that a business is sued or defaults on a debt.
Also, reports have it that an average ATM can make around $500 per month. An ATM business that earns a steady profit can benefit from the flexible tax options that an LLC offers. LLC owners can choose between pass-through taxation and the S corporation (S corp.) tax classification. Pass-through taxation are known to be ideal for businesses with less profit and an S corp. is best for businesses that need to carry substantial profit over from year to year.
How to Register an LLC for ATM Machine Business
Becoming an LLC is the next step in growing your ATM business and protecting your assets. Regardless of the state you live in, here are the basics.
Table of Content
- Obtain a Copy of Your State’s LLC Articles of Organization Form
- Choose a Name for Your LLC
- File Articles of Organization
- Submit Your Articles of Organization Form
- Choose a Registered Agent
- Decide on Member vs. Manager Management
- Create an LLC Operating Agreement
- Publish a Notice in Your Local Newspaper
- Comply With Tax and Regulatory Requirements
- File Annual Reports
Obtain a Copy of Your State’s LLC Articles of Organization Form
Note that you will obtain this form online from your state’s Secretary of State Website or office. When you contact them, also find out if the state (or county) in which you are setting up requires you to post a notice in the newspaper. Also, find out any specific rules regarding business names.
Choose a Name for Your LLC
The name of your LLC is expected to comply with your state’s rules. Although these rules differ, most states require 1) that your LLC’s name end with an LLC designator, such as Limited Liability Company or Limited Company, or an abbreviation of one of these phrases; and 2) that the name not be the same as the name of another LLC or business entity already registered with your state. Often, for a small fee, you can reserve your LLC name for a short period of time until you file your articles of organization.
File Articles of Organization
To create your LLC, you are expected to file articles of organization with your state’s corporate filing office, often the Secretary of State. Some states (including Delaware, Mississippi, New Hampshire, New Jersey, and Washington) use the term “certificate of formation” instead. Two other states (Massachusetts and Pennsylvania) call the document a “certificate of organization.”
Submit Your Articles of Organization Form
Have it in mind that you will have to send this document to your Secretary of State along with the appropriate filing fee when setting up an LLC. Be careful: some states may have a corporate tax that is separate from the filing fee but which must be paid at the time of filing. For example, California has only a $70 filing fee, but an $800 annual tax.
Choose a Registered Agent
LLCs are mandated to have a registered agent. Note that this is an individual or company that agrees to accept legal papers on behalf of the LLC if it is sued. The registered agent is expected to have a physical street address in the state where the LLC is registered. Most states maintain a list of private service companies (commercial registered agents) that will act as agents for service of process for a fee. An LLC member can act as a registered agent for the LLC.
Decide on Member vs. Manager Management
A good number of small LLCs choose to be managed directly by their members, but LLCs can appoint one or more people (outsiders) to manage the LLC – somewhat like a board of directors oversees a corporation. Managers vote on key issues such as taking out a loan, purchasing real estate, or changing strategic plans.
Create an LLC Operating Agreement
Even though most states don’t require it, it is advisable you have an operating agreement for your LLC. This is an internal document that notes how your LLC will be run, including how the LLC will be managed. In the absence of an operating agreement, state law will govern how your LLC operates.
Publish a Notice in Your Local Newspaper
Depending upon the requirements for your state and county when setting up an LLC, you may be expected to publish a notice in a local newspaper stating your intention to form an LLC (if not required by your state—don’t waste the money otherwise). This should be done prior to filing your Articles of Organization. Presently, this step is only required in Nebraska, Arizona, and New York.345 Check with your state’s Secretary of State to be certain.
Comply With Tax and Regulatory Requirements
Additional tax and regulatory requirements may apply to your LLC. These include:
- EIN: If your LLC has more than one member, it is expected to obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN only if the LLC will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website.
- Business Licenses: This will depend on your type of business and where it is located; your LLC may need to obtain other local and state business licenses. Check with the appropriate state agencies to ensure you are properly registered, licensed, and permitted to do business in your state.
- Sales and Employer Taxes: In some cases (for example if you will be selling goods and collecting sales tax or if you have employees), you’ll need to register with the appropriate state taxing authority. For more information on LLC tax registration rules, see LLC Tax and Annual Filings Requirements: 50 State Guide.
File Annual Reports
Most states expect LLCs to file an annual report with a filing fee. In some states these fees can be significant – as high as $800 per year in California.
An LLC will give you personal liability protection against potential business risks as well as give your ATM business more tax options and credibility. Also note that consumers love convenience, making an ATM business a worthy long-term investment. The potential for growth is significant as these small machines can be strategically placed wherever customers may need quick access to cash. A well thought out business plan will help you define and reach your short and long-term goals for growth and profit.