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Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP
How is an LLC formed?
The LLC does not arise by default and must be filed with the secretary of states office. The process for filing the LLC is relatively simply in every state. Most states have an electronic system that allows the organizer of an LLC to easily create the entity. The process and information required in most states is as follows:
- Choose your LLCs name. The state provides a directory of business entities registered with the state. The organizer will search this database to determine if the intended LLC name is available for registration. If so, the organizer can reserve the name prior to registration. The name must contain the suffix LLC or other state recognized indication that the business operates as an LLC. Note: You may register a name in one state that is similar to the name of a business registered in another state. Registering an LLC name under state law does not assure that another person or business does not have intellectual property rights (trademark rights) in the name.
- File the Articles of Organization. The articles of organization are the LLCs founding documents. The organizer can either prepare the articles and file it as a document or enter the information via the forms on the website. This document contains essential information about the ownership of the LLC. It generally identifies the LLC business purpose, the members and contact information (members are the owners and there must be at least one), a registered agent for the business (for official communications and service of process), the business location, and whether the business is manager-managed or member-managed. The organizer will self-identify and sign the articles on behalf of the LLC members. The organizer must certify that she has authority to do so. Any time any of the information in the articles changes, it must be updated with the state.
- Note: The operating agreement is the governing document for the LLC. Most states do not require that the LLC file the document; rather it must be maintained as a business record at the primary place of business.
- Registration Fees. The cost for registering an LLC varies by state. Generally, there is an initial cost and an annual filing fee that must be paid annually by specific date.
- Publication. A few states require that the LLC organizer file notice of the LLCs formation in a newspaper of general circulation. This is a legal formality that is intended to put the public on notice of the existence of the business entity.
- Other. Other steps in preparing the LLC for business include: requesting a business license with the local government; registering with the state or local government any name used by the business other than the legal name; and securing any occupational licenses for the operators.