How to Form a Limited Liability Corporation

An LLC (Limited Liability Corporation) is a flexible business organization that offers the advantages of liability protection with the simplicity of a partnership. It is often described as a hybrid business form. It combines the liability protection of a corporation with the tax treatment and ease of administration of a partnership. It offers liability protection to its owners as well as protection from company debts and liabilities. An LLC is described as hybrid because it allows certain choices such as: an LLC can be managed like a partnership (member-managed LLC) or like a corporation (manager-managed LLC). Other features include the privilege to create a board of directors and the election or appointment of a president and officer just like a corporation. Management of an LLC can choose to have periodic or annual meetings of its members or choose to ignore such formalities.

There are a few steps that must be taken to form an LLC. The first step is to create a name for the LLC. Names that are chosen must be available, not already taken by another LLC. The chosen name must also comply with your state's LLC rules. Your state's LLC office can tell you how to find out if your proposed name is available for use. The next step is to file formal paperwork. This formal paperwork is usually called "Articles of Organization". These are short, simple documents that you can easily prepare on your own in a short amount of time. The documents have fill-in-the-blanks and check-the-boxes requirements. You must also provide your LLC's name, address, and usually the names of all of the owners as well as designate a "registered agent" for legal purposes. The filing fee can range from $100 to $800 depending on your state's rules.

The next step in forming an LLC is to create an LLC operating agreement. This agreement sets out the rights and responsibilities of the LLC members. The operating agreement isn't required by state law nor is it necessary to file with the LLC filing office but it is essential that one is created. The reason is because the operating agreement sets out the rules for the ownership and operation of the business. The operating agreement should include and address topics such as: the members' percentage interests in the business, the members' rights and responsibilities, how profit and losses are to be allocated, how the LLC will be managed, as well as many other rules deemed fit to be included into the agreement. In some states, it is required that the next step be to publish a notice of your intent to form an LLC. You will be required to publish the notice several times over a period of weeks. After that period of publication expires, you then need to submit an "affidavit of publication" to the LLC filing office. This can easily be done with the help of a local newspaper. The last step to forming an LLC involves obtaining licenses or permits that you may need for your business. These documents include business licenses, permits, tax registration certificates, sellers' permit, zoning permit, or other related documents required by law. Once all of these steps are complete then you have successfully established yourself as a full-fledged LLC.