LLC Documents: Everything You Need to Know
There are multiple LLC documents involved in the entity. 5 min read
LLC Documents: Everything You Need to Know
There are multiple LLC documents involved when establishing your LLC. Don’t worry, knowledge is power and getting a better or new understanding on these documents will get you going in the right direction. For countless small business owners contemplating how to establish their company, becoming a Limited Liability Company (LLC) is a huge choice, but thanks to the liability protection, you can be in good hands.
Once you’ve created your LLC, you can draft an LLC Operating Agreement to describe your establishment's operating terms and assist in protecting your responsibilities and legal rights. Also, it is wise to use an LLC Operating Agreement if you're ready to create an LLC and you want to define its business terms.
Nonetheless, the guidelines in every state are not the same; LLCs enjoy the flexibility that their corporate cousins are not. The rules for C-Corps, S-Corps, and particularly Non-Profits are much more specific due to taxation and stock issues that arise.
What is an LLC?
An LLC is a corporate structure in which the members cannot be held personally liable for the debts and obligations of the LLC. Therefore, personal liability cannot pass onto the members for any debts that the LLC incurs.
What Legal Documents do I Need to Form an LLC?
You will need the Articles of Organization and an operating agreement. You will also need a Federal Employment Identification Number (FEIN) as well as a state EIN (in most states) in order to conduct business and open a bank account for your LLC.
What Should I Name My LLC?
There are rules and regulations in what you can title your LLC. Every state has its own rules to abide by. However, most states follow similar outlines, i.e. you cannot use the terms Bank, University, School, Education, Insurance, etc. Further, you want to ensure that you use a name that isn’t already being used by another LLC. In order to do this, you’ll want to run a search on your Secretary of State’s website to find a name that if free and available for use. Either way, at the end of your title, you’ll need to have an identifier that specifically indicates that you operate as an LLC. This includes either L.L.C. or LLC.
Do I Need an LLC Business Purpose?
You must have a general business purpose for your LLC. Certain states require that the owner provide detailed information regarding the types of services/products that will be offered.
Who is the LLC Registered Agent?
Virtually all states require that LLCs appoint a registered agent for service of process. Therefore, if any legal proceedings should arise, your registered agent will act on your behalf to send or receive service of process.
Who is the LLC Organizer?
The LLC organizer is the business owner and organizer of the company. Therefore, the actual owner, also referred to as the member, will assist in the organization of the company, even if the member hires managers (directors) to help in the overall operations.
What is the LLC Management Structure Like?
The members themselves can manage LLCs, whether it be 1 or 5 members. However, the members (owners) can also delegate the work to the managers (directors) to assist in the operations of the LLC. Keep in mind that, the more members you have owning the LLC, the more problematic this can become due to a difference in opinions with regard to running the business. This is why LLCs run by several members often do delegate the work to managers who can assist in running the business smoothly, and help determine the needs of the business and the direction it should go in.
What About the Legal Address of the LLC?
A lot of states require that the names and addresses of the members be used in all formation documents. Further, if the members hire managers, those managers names and addresses must also be disclosed.
Roles Within the LLC
Your LLC Operating Agreement gives you the chance to consider the roles every one of your members can play in the operation of your company, as well as their everyday duties. For example, an LLC manager is available to do half the work nevertheless only put in 10% of the currency. This can be noted in your operating agreement. Plus, figure out what portion of the business this person will own. These roles are particularly important for directors within the company. So long as you own the LLC, however, all of these individuals will report directly into you.
LLC Accounting
You’ll want to identify who is keeping the books and records for accounting purposes. Will you do it yourself? Assuming you hire an accountant to assist, who will you hire? What type of work will you have him or her do? You’ll want to be specific with what type of work you want your accountant to do for you, as your LLC may incur a lot of bills, expenses, sales receipts, and potential employee payouts.
Member Withdrawal and Dissolution
Because LLCs don't have stockholders, the results regarding how to handle an LLC member leaving is one you can assign in your LLC Operating Agreement. Numerous LLCs choose to allow its members the choice of acquiring the leaving member's shares of the business in either a lump sum or as periodic payments.
Can My LLC Have an Unlimited Life Span?
Current variations to the IRS code have endorsed changes in state laws authorizing LLCs to be established with a limitless life. You’ll want to check with the Secretary of State’s website in the state in which you plan to operate to be sure.
What is the Difference Between a Member and a Manager?
A member is an owner of the LLC, similar to a stockholder of a corporation. A manager, however, is chosen by the member to manager the operations of the LLC. This would be similar to a director.
Do I Need an Attorney to Form an LLC?
No you do not need an attorney to form an LLC; however, if you are unsure of how to do it, speaking to an attorney may be a good idea. Further, if you want to draft a complex, yet concrete operating agreement, an attorney can assist you with that.
How Much Will it Cost to Form and Operate an LLC?
Every state charges an annual fee to maintain an LLC. In several states, additional fees are required, particularly depending on the type of company you operate. Be sure to visit your Secretary of State’s website to understand the exact costs to form and operate your LLC.
What are the Main Differences Between an LLC and an S Corporation?
- S Corporations cannot have over 100 stakeholders
- S Corporations cannot issue beyond one class of dividends
- LLCs are required to pay Medicare taxes and Social Security on proceeds whereas Corporate stockholders are not required to pay such taxes on incomes over and above the stockholder’s income.
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