What to Consider when starting an LLC
Starting an LLC (Limited Liability Company) is an excellent way to upgrade your business. The process of starting an LLC is fairly simple though it takes time and patience as there are a lot of things to consider when trying to get it all up and working.
Name Your LLC
The simplest way to start the process of creating an LLC is to consider the name your new company will operate under and to research its availability through your Secretary of State website.
• The name of your new company must be in compliance with the rules of your state’s LLC rules.
• It cannot be the same as any other LLC incorporated in your state.
• It must end with the correct designator such as LLC, LP or LTD.
• The name you choose must not include certain words that are restricted for use by select corporate entities. These can include the words Insurance, Corporation, City, or Bank. Your state will have a designated list of “off-limits” terms.
State Rules and Regulations
You will need to prepare the paperwork for all the different documents to create an LLC. These are on your state secretary of state website. Most states will have Articles of Organization, a certificate of formation or certificate of organization that needs to be filled in with your important company information from your legal business office location to your business’s registered agent.
• Articles of Organization are fairly simple to file. They will list the new LLC’s name, address and the names of the owners. This publicly links people to the new entity.
• A registered agent is a designated person that handles any paperwork that gets received by the new company. This is also the person that can be legal “served” with papers if the company is involved with a future lawsuit. They are designated the correct “agent for service of process” on any legal paperwork the new LLC receives.
• Filling your new paperwork is not free. You will need the money to file all the different pieces of your paperwork with the state. The fees are state-specific so each batch of paperwork will require a different amount of money to file them. It’s usually around $100, but for some states, it is more like California’s paperwork can cost upwards of $800.
LLC Operating Agreement Terms
Your LLC operating agreement is one of the most important documents you will need to draft. Your state will have specific paperwork to go with it, but an LLC operating agreement will establish the terms your company is setting up for how the business is run and what to do if the terms are violated. It will also lay down specifically defined terms so there is no confusion when interpreting the document. The agreement will breakdown the finer details for
• Rules for meetings and how voting is to be conducted.
• Profits and Losses will be balanced and distributed
• The Rights and rules the members are expected to operate under.
• The percentages of interest each party has in the new company.
• Specific provisions for selling and buying interest should members become disabled, die or decide to leave the company
Licenses and Permits
Once your paperwork has been filed with the state to make your company official you will need to apply for licenses and permits you will need for operation. This includes the business licenses or tax registration certificate, a seller’s permit, a federal employer identification number and/or a zoning permit for your business location if you are going to be selling or operating a specific type of business like a restaurant.
Affidavit of Publication
In some of the states when you are filing your articles of incorporation you will be required to file an affidavit of publication. This can be a simple notice in the local paper that you are forming an LLC. This is a requirement for some states.