Many small businesses are forming a Limited Liability Company (LLC) because it is a flexible form of enterprise in terms of management and contracting. Some advantages for members include controlling how the company is taxed, and being protected from debts and lawsuits of the LLC. The process of setting up a Limited Liability Company is simple and can be finished in an hour. To form a Limited Liability Company, just follow these steps:
1. Go to your state’s Secretary of State office.
2. Ask for a copy of your state’s LLC Articles of Organization form. While you are there, ask about state regulations regarding notices in the newspaper and business names.
3. Select a business name. There are restrictions on words like “Corporation”, “City”, and “Insurance” among others, so check your state’s prohibited words. You cannot use the same name as another LLC in the state and your business name must end with an LLC designator such as “Limited Liability Company” or “LLC”.
4. Complete the LLC Articles of Organization form. The form includes basic information such as the purpose of the business and the names of the members. You are not yet required to specify more complicated information such as ownership distribution and management structure.
5. Submit the LLC Articles of Organization form.
6. Pay the filing fee, which ranges from $40 to $900. Along with the filing fee, you must also pay an annual fee at that time. Contact a local accountant for the amount of the annual fee.
Designate a Registered Agent
A registered agent is the person who receives important information on behalf of the LLC. The registered agent must be available at the legal address of the LLC (cannot be a post office box) during all normal business hours. Make sure your registered agent complies to these requirements and researches other responsibilities, or else your LLC will face legal consequences.
Remember to follow up with tasks unique to your state, such as posting a notice in your local newspaper if necessary. You are now finished with the legal requirements, but it is highly recommended to follow up with an LLC Operating Agreement if the LLC has multiple members.
Create an Operating Agreement
The purpose of the Operating Agreement is to outline basic rights and responsibilities of the members. If a dispute ever occurs, an Operating Agreement can quickly resolve any discrepancies. You can find free templates of operating agreements online.
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