LLC Requirements by State: Everything You Need to Know
LLC requirements by states provides a variety of requirements for forming your LLC in each particular state in the U.S.3 min read
LLC requirements by states provides a variety of requirements for forming your LLC in each particular state in the U.S. An LLC, also referred to as limited liability company, is a business structure that operates similar to both a corporation and partnership, particularly for the limited liability protection provided by corporations and the management style that is identified in most partnerships.
Difference Between Required and Needed Documentation
Required documentation means that the LLC must include the documentation per state laws, and if its fails to do so, the state will likely not approve of your LLC formation and registration.
The needed documentation is not required by state law, but can help prevent potential legal disputes or complications involving your LLC.
Another important item to keep in mind is that most LLCs are not required to file an annual or biennial (once every two years) report with the state. However, some states do in fact require this.
Articles of Organization
Every state requires than an LLC file a Certificate of Organization, which is also referred to as an Articles of Organization. Some states have variations of this name, but the same information is included in this document.
This document is the main document that proves the existence and registration of your LLC.
Thereafter, if the state approves of your LLC, then you will receive a certificate by the State’s Secretary of State’s office.
When thinking of what needs to be included in the Articles of Organization, you will need to include the following information:
- Business name
- Principal place of business
- The purpose of your LLC
- The term (duration) of your LLC
- The name and address of your registered agent (all state’s have this requirement)
- How your LLC will be managed (single manager, multi-managers, member-managed, or manager-managed)
- Member names/addresses (not all states requires this)
- The amount each member contributed to the LLC (not all states require this)
Once you’ve completed drafting this document, you should keep a copy on file with your registered agent.
Most states don’t require LLCs to draft an operating agreement. However, most states do provide that, if an LLC drafts such an agreement, it will be legally binding. Therefore, if any potential legal disputes arise amongst members and non-members, then this agreement will be used in court to determine the procedural guidelines for such decision-making processes.
Remember that the operating agreement can help prevent future legal disputes, which is one of the reasons as to why it is very beneficial to have.
Furthermore, since the information provided in the Articles of Organization can be very minimal, most issues governing your LLC are left unwritten, which is another reason why the operating agreement should be drafted.
What Should Be Included in the Operating Agreement
The operating agreement will specify all governing aspects of your LLC. Therefore, while some high-level information is in fact included in your Articles of Organization, you should again reiterate these items in your operating agreement.
Other information that should be included in this agreement include:
- Voting rights among members
- Issuing and transferring interest among members
- How a new member will join, and if the members will allow a new member to join the LLC
- Profit/loss allocation to each member
- How the LLC will be dissolved
- What happens if a member dies, goes bankrupt, becomes incapacitated, or gets a divorce
- Financial provisions, including the specific accounting method that will be used and how the LLC will be taxed, i.e. corporation, sole proprietorship, or partnership (depending on how many members)
- The roles and responsibilities of each member
Most operating agreements also include indemnification clauses that protect all members of the LLC. Further, a severability clause should be included which allows the LLC to survive if any one of the other provisions identified in the agreement are deemed invalid.
Keep in mind that the information identified in the operating agreement must be consistent with what is mentioned in the Articles of Organization, i.e. member contributions, distributive shares, etc. If there are any such inconsistencies, the information identified in the Articles of Organization will prevail.
If you need help identifying the LLC requirements for your state, or if you need help forming your LLC, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.