LLC guidelines must be adhered to when you are incorporating your business. There are many rules and procedures that you must follow when starting your business.

LLC Rules & Guidelines

A limited liability company is meant to protect you as the business owner on a personal level from any legal responsibilities of the business. LLCs are not hard to start for smaller businesses. There are many advantages of doing so, including a firm tax structure as well as the distinction between personal and business finances.

Owners of an LLC are called members. The can be operated by one person, but you can open up membership to an unlimited number of people. A member can be a single person, a corporation or other LLCs.

The members of the LLC can run the operation of the company themselves if they choose. This is referred to as a member-managed LLC. You can also bring on outside managers to operate the business. This is referred to as a manager-managed LLC.

There are some rules involved with setting up an LLC, and they do vary by state. However, many of the same guidelines are applicable in all states. Entrepreneurs may have the flexibility to do business themselves or with a number of partners. There are no shareholder or annual meetings in LLCs, unlike corporations.

To create an LLC, you need to understand some important components of the process:

  • You first need to choose your business name. It should be unique; it may not be the same name as other businesses in the state in which you plan to operate.
  • You will need to file the official documents with your state, which can vary, but typically include the Articles of Organization as well as an operating agreement. This shows the state regulatory office how you intend to operate your business and will list how many owners there are.
  • The Articles of Organization will include the name of your LLC, your purpose, all contact information of the managing members and the street address where you plan to conduct business.
  • The operating agreement will outline how your business will function as well as the rights of all the owners. It will establish the rules, standards and responsibilities within the business.
  • You next need to determine member roles, rights, the percentage of profit and loss for each along with voting powers. It should also include how your members are added and removed from the business and how the assets of the business should be decided if it dissolves. Operating agreements are voluntary, but very important.
  • Although operating agreements are not a requirement in most states, they are very important. Without an operation agreement, a single-member LLC can lose the limited liability protection, as it will be treated as a sole-proprietorship. There would be no clear separation between the owner’s personal and business finances. The operation agreement provides that distinction.
  • You will need to file both Articles of Organization and your operation agreement with your state. This is typically the Secretary of State, the State Corporation Commission or the Department of Commerce and Consumer Affairs. You will need to call your state office to find out what you need to do.
  • It is crucial that you have all the licenses and permits that your state requires to operate your business. You also need to get an Employer Identification Number from the IRS if you plan to hire employees.

To file your Articles of Organization and your operating agreement to establish your business in your state, you need to understand the following:

  • Fill out the pre-printed forms, which you can get from your state’s governing office. Give them to the clerk for filing. Each state has an office for corporate filings where you will also get copies and receipts. You can also print the forms online and mail them to your state agency.
  • You must pay a filing fee to create your LLC. This is in addition to any costs of permits, license, obtaining fictitious business names and the like. Not all businesses are required to form LLCs. This would include insurance companies and banks.
  • You next need to determine the management structure of your LLC. The owner of an LLC is referred to as a member. Single-member LLCs are great for one owner. The business can be operated by members or managers, or a combination.

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