A limited liability company (LLC) is a corporate structure whereby the owners are not personally liable for the company’s debts or obligations.
Limited liability companies (LLCs) are a hybrid type of entity that has characteristics of a corporation, partnership or sole ownership. A key benefit is that owners have limited liability when it comes to the debts and liability of the organization. Click here to find pros and cons of LLC, best time to form LLC .
Steps forsetting up a Limited Liability Company (LLC):
Attain a copy of your State’s LLC articles of Organization Form
You will receive this form online from your state’s Secretary of State website or office. When you contact them, also ask if the state (or county) in which you are setting up requires you to post a notice in the newspaper.
2. Choose a name for your business
When setting up an LLC, you will need to choose a business name that follows with your state’s rules for LLC names. While requirements differ from state to state, typically:
- The name can’t be the same as the name of another LLC on file with the LLC office.
- The name must end with ‘Limited Liability Company,’ ‘Limited Company,’ ‘L.L.C.,’ ‘LLC,’or ‘Ltd. Liability Co.’
- The name can’t include certain words prohibited by the state, such as Bank, Insurance, Corporation or City.
3. Fill out the required information of Organization Form
This is generally a simple process, as the only things you need to inform the state about regarding your LLC are items such as name, head office address, its business purpose, the registered agent for receiving any legal documents, and the names of the initial members.
- Submit your Articles of Organization Form
You will send this document to your Secretary of State along with the applicable filing fee when setting up an LLC. Some states may have a corporate tax that is distinct from the filing fee but which must be paid at the time of filing.
- Create an LLC Operating Agreement
However, the operating agreement is not required by the state and can be designed after the legal filings are done. If you are the sole owner of the LLC, you don’t need it. However, if there’s even just one other owner, it’s best to form a written agreement of the terms.
A typical operating agreement includes:
- The members’ percentage interests in the company.
- The members’ rights and liabilities.
- The members’ voting rights.
- How profits and losses will be divided.
- How the LLC will be organized.
- Buy-sell provisions, which define what happens if a member wants to sell his or her interest, dies or becomes disabled.
- Get Licenses and Permits
After you have completed the steps described above, your LLC is official. But before you open your doors for business, you need to attain the licenses and permits. These may include a business license (sometimes also known as a “tax registration certificate”), a sellers’ permit, a federal employer identification number, or a zoning permit.