What To Know About Forming An LLC

Limited liability companies (LLCs) were once thought to be comparatively “modern” legal frameworks. LLCs first appeared with the promise to offer liability insurance, distinguishing your personal assets from your professional assets. What if the small company went into bankruptcy or run into court problems, for example? Liability insurance assures that no one may take your personal property, such as your house or vehicle, from you. You could lose your shirt as well as your company if you don’t have it.

You are right in assuming that this sounds like a business. An organization also allows for the division between personal and professional assets. An LLC, on the other hand, has greater versatility than a company. In reality, the most complicated aspect of forming an LLC might be the initial phase itself.

The LLC system provides for an infinite number of shareholders, a simplified tax structure, and smoother maintenance, this review will walk you through the steps on how to file an LLC if you don’t know where to begin.

1. Understand your state’s LLC rules and regulations.

Each state has its own set of laws, and each small company is special. Companies forming LLCs in New York, for example, would meet Section 206 of the Limited Liability Company Law. This requires that a copy of their Articles of Organization or a notification relating to the creation of the LLC be circulated in two newspapers every six weeks. LLCs created in Delaware, on the other side, pay a $300 yearly tax rather than file an annual audit. Since these laws are subject to modification, don’t presume that forming an LLC is the same in any state. Although it is legally not necessary, I recommend consulting with a lawyer. A legal specialist may assist you in answering any concerns you might have and determining what your business’s priorities are on a state-by-state basis.

2. Check for your company’s name availability before reserving it.

You have a wonderful reputation for your business, but don’t think it isn’t still in use somewhere else. Before reserving the name or applying to license it as a trademark, conduct a name check by the Secretary of State. If you do not do this, you could inadvertently use someone else’s asserted name and infringe on their trademark. If that happens you will definitely need to understand the specific laws of your state just like for the LLC rules. For example, if you live in California and someone tries to oppose your trademark, you should definitely consult a California based trademark attorney.

3. File articles of organization.

Additional documentation will be requested, which varies by jurisdiction, but at the very least, your LLC would be required to submit articles of organization (also called certificate of organization or certificate of formation). The name of your LLC, the business title, the names and addresses of its founders, and the name and address of the LLC’s registered agent should all be included in this paper. A filing charge may also be required along with the articles of incorporation, which must be printed, signed, and filed by the organization’s representatives.

4. Appoint a registered agent.

This is a prerequisite for all corporate entities, not just LLCs. However, since each state is a little different, I suggest consulting with the Secretary of State to ensure that your LLC requires one. A licensed agent is a person or company who acts as the point of communication with the business and the state. The agent accepts official paperwork on your behalf, organizes and submits them to you, and assists your company in being in accordance with state law. The good news is that you may name yourself as your own RA if you want to. However, you must be present during regular business hours (Monday through Friday, 8 a.m. to 5 p.m.) to sign any paperwork. You must still be a state citizen, have a physical postal address (a P.O. Box is not acceptable), and be comfortable accepting classified paperwork in a public setting.

5. Draft an operating agreement.

Although most states do not need it, it is advised that you draft an LLC operating agreement. This guide details how you expect your LLC to be run and aids in the prevention of financial or management conflicts within its participants. Having it written down includes a tangible hard copy that you can turn to if you are unaware of how the LLC should be run. Luckily there are online LLC operating agreement templates to get you on the right track. Of course, this is just the foundation for what is needed for LLC forming. Of course, there’s a lot more you’ll need to get your company up and running, such as approvals, permissions, and business bank accounts, not to mention finding clients. However, getting liability insurance in the form of an LLC is a good place to proceed.

While the standards for LLCs differ from state to state, there are several commonalities across the board. The first step for owners or members is to come up with a tag. 

After that, the articles of organization must be registered and submitted to the legislature. These articles define each LLC member’s privileges, powers, responsibilities, liabilities, and other obligations. The identity and addresses of the LLC’s members, the name of the LLC’s licensed representative, and the business’ declaration of intent are also included in the documents.

A tax payable directly to the state shall accompany the articles of incorporation. To receive an employer id number, extra paperwork and payments may be paid at the federal level (EIN).

The predominant factor why company owners want to form an LLC is to restrict the principals’ liability. Many people consider an LLC to be a hybrid between a relationship, which is a simple corporate formation formed between two or more owners under an agreement, and a company, which has some liability rights.

While LLCs have some appealing characteristics, they also have some drawbacks, particularly in terms of corporate structure. An LLC may be required to dissolve upon the death or bankruptcy of a founder, depending on state law. 10 In comparison, a company will continue to function indefinitely. When the founder’s primary goal is to become a publicly listed corporation, an LLC will not be the best choice.

For your information, there are various LLC formation services available and if you’re interested to learn more about them, do check out the LLC services review by Business Fair Field.


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