Entity Documents for LLC: Everything You Need to Know
Entity documents for an LLC are the documents required by a state to register a limited liability company (LLC) to conduct business legally in that state.3 min read
2. Formation Documents for an LLC
3. LLC Operating Agreement
4. Employer Identification Number
5. Where to File LLC Documents
Entity documents for an LLC are the documents required by a state to register a limited liability company (LLC) to conduct business legally in that state. The same documents are required by most states, but they sometimes go by different names.
What Is an LLC?
LLCs are one of the most popular structures for businesses in the U.S. today. They provide liability protection for the owners, also called members, of the company. LLCs also offer pass-through taxation, which means that they avoid the double taxation that corporations are known for.
Other advantages of an LLC include:
- Fewer regulations for profit distribution.
- Flexibility concerning the management and overall structure of the company.
- Fewer requirements from the state.
- Lower costs for formation and upkeep.
Formation Documents for an LLC
Once a business owner has filed to start an LLC, they'll get a Certificate of Formation that will include the LLC's articles of incorporation, or articles of organization. These documents can sometimes go by different names in different states, but they are essentially the same thing.
Articles of organization should include basic information about the LLC:
- Names of the members.
- Address of the business.
- Registered agent information.
- Purpose or mission of the LLC.
- Duration of the LLC (if not perpetual).
No matter which state an LLC is formed in, it cannot have the same name of another business registered in that same state. The best way to avoid this issue is to perform an LLC name search through the SOS (Secretary of State) website of the state in which you hope to register. There are other rules regarding naming an LLC that vary from state to state, so it's always a good idea to look up the rules for business names in the state.
A registered agent for an LLC is a person who accepts official correspondence on behalf of the business. This is mostly to make sure that there is always a representative available to accept service of process for the company. Registered agents can be hired or can be a member or friend of a member of the LLC.
LLC Operating Agreement
Operating agreements are similar to partnership agreements, but they are meant for LLCs. An operating agreement should outline how the LLC is meant to be operated and how it will handle certain issues. Specific issues that should be covered in an LLC operating agreement include:
- Management structure.
- Voting rights.
- Profit distribution practices.
- Adding a new member.
- Dissolution of the LLC.
Each state provides its own blanket operating agreement for all LLCs formed in the state. If an LLC doesn't have their own operating agreement, they are required to follow the rules of the state by default. Very few states require LLCs to form and file their own operating agreements.
While operating agreements are rarely required, they are beneficial to LLCs because they get all of the members on the same page at the start of the business. If a dispute comes up between members down the road, they can refer back to the operating agreement to help settle it. A well-written operating agreement will help its LLC avoid legal issues and costly disputes.
Employer Identification Number
An EIN (employer identification number) is like a Social Security number for a business. This number is used on tax forms and to get a business bank account. EINs are obtained through the IRS (Internal Revenue Service). Not all LLCs hire employees, but if they do, they must have an EIN.
Where to File LLC Documents
Articles of organization for an LLC are always filed with the SOS for the state in which the LLC hopes to conduct business legally, whether as a foreign or domestic entity. If an LLC does business in different states, it needs to choose one state to be its home and then file as a foreign LLC in the other states. Typically, the domestic state for the LLC should be where the business's physical address is found and the registered agent does business.
If an LLC is required to file their operating agreement, that will also be done with the SOS. Otherwise, the operating agreement should simply be kept in a safe place at the office of the LLC. Certain licenses may be required for a particular type of LLC; this information is also found through the SOS.
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