An LLC, or a limited liability corporation, is a popular type of business entity because of its unique features and benefits. This is because it offers the business owners many of the same benefits as both a partnership and a company without many of the drawbacks associated with these entities. For example, an LLC may have less up-front paperwork and lighter fees than a corporation. Understanding how to set up an LLC is the first step in creating an LLC for your business. While each state has unique requirements, there are some basic steps that are required in most locations.
Creating an Operating Agreement
An operating agreement for an LLC is not required in every location, but it can be useful even when not required. An operating agreement will list the names of the members, their ownership interests, their roles in the organization and specific rights of each member. Defining this up front may be beneficial for many reasons, so you may consider working with an attorney to create an operating agreement as a first step in the LLC formation process. This is an agreement that may legally protect the rights of owners.
Prepare Articles of Incorporation
The articles of incorporation may seem similar to an operating agreement, but they are often less detailed. It may be as short as one page long, and it lists the members in the LLC, their address and often their phone number. As with an operating agreement, you want to ensure that the articles of incorporation document is accurately prepared, so you may work with an attorney to prepare and file this form. This form generally must be recorded at a Secretary of State’s office, and the filing fee could cost as much as a couple hundred dollars.
It may be a smart idea to have an attorney review the documents before they are filed. These are legal documents that may offer protection to you and other members of the LLC in the event of a dispute or another type of court case. The attorney may provide you with insight and guidance on more strategic ways to state information or to define roles in the LLC. Furthermore, the attorney may offer filing services on behalf of clients, and this can save you time and effort. In some cases, annual filings are required by the state, and the attorney can help you to understand if these are required for your state and what the requirements are.
When you understand how to set up an LLC, you will see that this is one of the easier types of business entities to create. This type of entity offers protection to members, structure to the business ownership and even tax advantages for the owners. When you are setting up an LLC or another type of business entity, consider the benefits associated with obtaining professional legal advice from a business attorney and seeking personalized assistance with the formation of your entity.