One of the most exciting aspects of a limited liability company is that it prevents business owners from being liable for everything related to the company. It also offers a pass-through task status. Additionally, to form a limited liability company, you need fewer formalities and needless legal paperwork.
If you are planning to form a limited liability company, you need to ensure you have all your legal paperwork completed and filled in the correct way. The three most important documents you will need to form an LLC include:
Articles of organization
Also known as certificate of organization, articles of organization are the same as the corporation’s articles of incorporation. Pay attention to these as the building blocks of your limited liability company.
Basic components needed in certificate/articles of organization
- Business Name: ensure your name is unique and does not pose potential conflicts with other business names already registered in the region you are registering your LLC.
- Business purpose
- Principal place of business
- Registered agent: this is an individual or entity who will get official documents and legal paperwork on your behalf. This includes documents related to lawsuits. Note that the registered agent must be in the city where your company is registered, must have a physical address.
- Management structure: this means, does your company have one manager, more than two managers, or are all members managers?
- Duration of LLC: Some states will require you to specify the duration your LLC will be in operation.
Operating agreement
An operating agreement is a document that specifies the duties and rights of LLC members. It states the allocation of income of the company to its members.
Even though it’s not needed by law that you file an operating agreement to form a limited liability company, you must have a legal document ready to be compliant with the firm’s corporate formalities.
Things to include in the operating agreement will vary based on your company. An operating agreement will include:
- For more than one member, you must describe how key business decisions will be made
- Shareholder’s percentage of ownership
- Voting rights
- How losses and profits will be allocated
- What will happen if the owner wants to exit the business or dies?
- How the LLC will be dissolved
- All shareholders must sign the operating agreement for it to be valid.
Employee identification number
All companies must have an employee identification number (EIN) irrespective of their structure. Rather than using your social security number, you should use the EIN on all the business-related paperwork. You will need an EIN to open a business bank account. To acquire this number, you or your lawyer must file the IRS form SS-4.
Apart from the three documents listed above, you will need to file a biennial/annual report with the regions in which your company is registered.
