What is an LLC?

Following LLC requirements is a must when you want to successfully form your Limited Liability Company (LLC).

An LLC is one of the most recently established designations that business entities can choose in the United States. Unlike traditional corporations, which have a legal history dating back centuries, LLCs are extremely new, and their rules are often vague and little understood. Because LLCs are an amalgam of other entities, such as partnerships and corporations, there is little legal precedent on how controversies involving LLCs should be settled. Over time, firm laws related to LLCs will be established, but currently, there are very few government guidelines that apply to these entities.

Fortunately, forming an LLC is usually very easy. While certain requirements can differ from state to state, the basic process of LLC formation is essentially the same across the country.

Who Can Create an LLC?

Any legal entity is able to form an LLC. This includes individuals or corporations. An LLC can be:

  • A multi-member structure.
  • A partnership.
  • A single-owner business.

Corporations are only allowed to transition into an LLC when the corporation is one LLC member. As long as they possess the legal capacity, individuals can form their own LLC. The majority of states determine legal capacity to be an adult of legal age that is capable of making their own decisions, meaning they are not limited by a mental disability or other ailment.

Required vs Needed Governance Documents

Certain governance documents are required for you to form your LLC. If you do not possess these documents as mandated by state law, your LLC will not be recognized or allowed to do business. A common required document is an article of organization.

There are also needed governance documents. While they are not required by law, these documents are vital to successfully creating your LLC, and may defend you from lawsuit and eliminate complications in the future. An operating agreement is the perfect example of a needed governance document.

How to Form an LLC

Choosing an eligible business name is the first of many LLC requirements. The name that you choose must comply with the rules for LLC naming in your state. For instance, your LLC's name cannot be the same as another LLC that has already been registered in your state. Names must also end with a designation such as “LLC” or “Limited Liability Company.” You are prohibited from using “incorporated” or “inc.” in your LLC's name.

Certain words are also restricted when naming your LLC. Some of these restricted words include:

  • Bank.
  • Corporation.
  • City.
  • Insurance.

You can contact the LLC office in your state to find out if your desired name is available for use and complies with LLC naming rules.

It may be possible for you to reserve your LLC name until you have filed your articles of organization by paying a small fee. You should also be sure that the name you have chosen is not in violation of the trademark of another company. Every state has their own unique rules for naming LLCs.

After choosing your LLC name, you will need to file your articles of organization, which are legal documents that are required to form an LLC. You will also need to pay any required fees. Although most states use the term “articles of organization," some states may call these documents a “certificate of organization” or a “certificate of formation.” The basic information about your business is established in your articles of organization. Generally, your state will offer a standard form that will help you create your articles of organization.

Basic articles of organization requirements include:

  • The name of your LLC.
  • Your LLC's purpose, which can be either a general or specific purpose.
  • The mailing address and business address of your LLC.
  • How long your LLC will last.
  • The contact information and name of your registered agent
  • What management structure you have chosen for your LLC

Depending on the state where you are filing, you may also need to list all of your LLC members, how much they initially contributed to the LLC, and a limitation of liability clause.

Most states require you to name a registered agent for your LLC, which is a person or company designated to accept legal documents on behalf of your company.

Your registered agent will need an address in your state that is not a P.O. Box and should be easily reached during business hours.

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