Forming a LLC

If you do your homework well, following through the formalities of forming a LLC will not be tedious. The steps that you need to follow while forming a LLC are:

1. Select your business name: This is the first step in forming a LLC. You must ensure that another company is not already using the business name you decided and that it abides by the state’s rules regarding selection of LLC names. This information will be available in the government office that looks after the LLC division. Apart from the specific requirement of each state, some standard criteria are:

  • The name must be unique. No two LLCs can be registered under the same name in the same state government office.
  • The company name must denote that it is a LLC. This can be done by adding a “limited Liability Company,” “Ltd. Liability Co.,” or abbreviations like “LLC,” “L.L.C,” etc.
  • Your LLC name should not infringe another company’s trademark.
  • Your company name shouldn’t adorn words forbidden by the state law like banks, corporations etc.

2. Collect information and start with the paperwork: The second step in forming a LLC is filling out documents which are termed as” Articles of Organization.” These may also be termed as “Certificate of Formation” or “Certificate of Organization.” These are simple documents that asks for your business name, the addresses and names of members (if more than one owner).  Either all the members or a single member can provide the signature. You need to provide one member name as the “registered agent” who will receive legal papers in case any lawsuit arises.

Filling fees for your paperwork: The filling fees are generally minimal (around $200). However, some states may charge you more.

3. The LLC Operating Agreement: Although all states may not require the operating agreement, it is advisable to implement it. The information that you need to define are:

  • The units (ownership) of the members
  • Their responsibilities and rights
  • The voting power they can exercise
  • Sharing of the profit and loss
  • The running of the LLC
  • The procedure for conducting meetings and casting votes
  • Options for selling or buying interests

4. Policy for Publication: If your state requires, you need to put up a notice in the local newspaper stating your intention of starting a LLC. You need to publish this for a couple of weeks before presenting the affidavit of publication to the concerned department in the state office.

5. License/permit needed for your business: This is the last step in forming a LLC.  You need to acquire the relevant permits and licenses to start your business.  This could be a zoning permit, a sellers’ permit, a business license also called as tax registration certification, or a federal employer identification number.

About Brian Davis

LLC expert author and advisor. Has advised thousands of entrepreneurs over the last 15 years on which business structure is right for them. Brian is not an attorney or tax professional. If you need tax or legal advice, seek the assistance of a local attorney or CPA.
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