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HomeRecruitment GuideWhat You Need to Know About Forming a Limited Liability Corporation
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What You Need to Know About Forming a Limited Liability Corporation

As you form a new business, you may hear other people say that structuring your business as a limited liability corporation (LLC) is almost an impossible task. However, you may be surprised to learn that it really isn’t that hard as long as you follow the right steps to formation and file your articles of organization correctly.

Steps to Formation

To legally form an LLC, you need to follow five main steps. These include the following:

  1. Determine what name you want your business to operate under and make sure it complies with the naming rules in your state.
  2. File the formal paperwork associated with forming your LLC. This paperwork is usually referred to as your articles of organization.
  3. Establish the rights and responsibilities of the members of your LLC by putting together an operating agreement for your organization.
  4. If your state requires it, publish your notice of intent to establish an LLC.
  5. Acquire any licenses or permits that you may need to run your business. During the formation process, it may be helpful to work with an attorney. He or she can give you a more in-depth overview of each of these steps and help you understand the specific formation policies in your state.

Solidifying Your Business Name

When you name your organization, it must adhere to the LLC naming rules in your state. Although every state has different rules, generally speaking, there are three main requirements your business’ name has to meet. First, your name cannot be the same as another LLC in your state. Second, you must end your business’ name with an indicator that lets others know it is an LLC. For example, if you ran a shoe company, you might call your business “Cool Kicks Ltd. Liability Co.” Finally, you cannot include any words in your business’ name that are prohibited by your state. For instance, in some states, these include “city,” “corporation,” and “bank insurance.” Keep in mind that in addition to following these naming rules, the name you use for your LLC cannot violate the trademark of another business.

Your Articles of Organization

Once your business has figured out its name, the next step involves filing your articles of organization. Keep in mind that while most states refer to these as “articles of organization,” certain states refer to this documentation as your business’ “certificate of organization” or “certificate of formation.” Your business’ articles of organization will be a relatively short, simple document. Some of the information you need to put on this document include the following:

  • The name of your LLC
  • Your LLC’s address
  • The name of your LLC’s owners or membersAlthough all of the members of your LLC can help with preparing and signing this document, it is acceptable for one person to manage this responsibility.

The LLC Operating Agreement

An operating agreement is often not required by the LLC office in certain states. However, as your form your LLC, it is absolutely essential that you put together one of these agreements to set out the rules for the way your business will operate and the regulations for ownership. Although all LLC operating agreements are different, many of them include things such as each member’s percentage interests in the business, the rights and responsibilities of each member, how much voting power each member has, and how both losses and profits will be allocated. These agreements can also outline the way the LLC will be managed, how meetings and votes will be conducted, and any “buy-sell” provisions.

Final Takeaway

As you can see, forming an LLC is a relatively uncomplicated process. Keep in mind that as you follow the steps for formation, following them with exactness will set your business up for success as your organization grows and develops.

Legal Disclaimer

The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.

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