Two of the most enticing things about an LLC is that it prevents business owners from being personally liable for things related to the business, and it provides pass-through tax status. It also has fewer formalities and requires less legal documentation.
If filing as an LLC is something you’re thinking about, you should make sure to have all your LLC legal documents completed and prepared in the right way. The three essential LLC formation documents are:
1) Articles of Organization
The Articles of Organization — also called Certificate of Organization — is the equivalent of the corporation’s Articles of Incorporation. Consider these the building blocks of your LLC.
The basics elements required in the Articles/Certificate of Organization include:
- Your Business Name: Make sure that your name doesn’t pose any potential conflicts with another business name already registered in the state where you’re filing your LLC.
- Business Purpose
- Principal Place of Business
- Registered Agent: This is the entity or individual who will receive official papers and legal documents on your behalf, including documents related to lawsuits. The registered agent has to be in the state where your LLC is registered, and must have a physical address.
- Management Structure: Meaning, does your LLC have a single manager, two or more managers, or are all members managers?
- Duration of LLC: Some states require you to specify how long your LLC will operate. A few states set a statutory limit on the duration (usually a few decades). But you can extend your LLC for longer if it’s still in business when you hit the end of this period.
2) Operating Agreement
An Operating Agreement specifies the rights and duties of the Limited Liability Company members. It also states the distribution of income of the LLC to its members.
While it’s not required by law that you file an operating agreement to form your Limited Liability Company, you need to have this LLC legal document prepared to be compliant with the company’s corporate formalities.
What you include in your operating agreement will vary depending on your business, but operating agreements commonly include:
- If there is more than one member, you need to describe the way key business decisions will be made
- Members’ Percentages of Ownership
- How Profits and Losses Will be Distributed
- Voting Rights
- What happens if an owner dies or wants to exit the business
- How the LLC Can be Dissolved
All members must sign the operating agreement in order for it to be valid.
3) Employee Identification Number
All businesses, regardless of the structure, need an EIN (Employee Identification Number). Instead of your social security number, you should use your EIN on all your business-related documentation. You’ll also need your EIN to open a business bank account. To get an EIN, you or your attorney need to fill out IRS Form SS-4.
In addition to the documents above, you also need to file an annual/biennial report with the state where your LLC is registered.
So what’s the most effective way to file an LLC? Let’s be real, there are a million online services you can use to do this, but they use generic descriptions and agreements. And they probably don’t cost much less than using an attorney. So is it worth gambling on whether you’re forming the foundation of your business the right way?
Since your legal needs are just as unique as the brand you work so hard to build, work with an attorney who understands your vision so you’re set up for success.
Less LLC filing requirements result in significantly more freedom with this structure when compared to a corporation. An LLC can be a single-owner business, a partnership, or a multi-member structure. In addition, the members can be individuals, corporations, other LLC's, or foreign entities. There is no limitation on the number of members in an LLC. However, certain elements of structure are requirements for an LLC.
Business Name
Your LLC must have a name that is unique and is not the same or confusingly similar to another business. In addition, the name must contain the term 'LLC' or 'Limited Liability Company'. The use of 'Inc.' or 'Incorporated' in the name of an LLC is generally prohibited. Finally, there are generally prohibitions on the use of financial names, such as 'Bank', 'Insurance', or 'Trust'. Each state has a unique set of name requirements that incorporate.com will follow when filing for an LLC.
Registered Agent
Some states require a registered agent to be a point of contact for all official paperwork. In many cases this registered agent must be a physical resident of the state you are forming in. The agent does not need to be an owner or employee of the LLC. incorporate.com provides registered agent services as part of your LLC formation package.
Operating Agreement
While an Operating Agreement is not part of the LLC filing requirements for the state, it is extremely important. In fact, it's best to have the Agreement worked out before you file any forms with the state. That way, you won't have an upset partner pulling out at the last moment, or be unable to add a new member that you wanted to include. The Operating Agreement spells out a number of very important details, including management structure, investment of additional capital, division of profits, and what happens to the LLC if a member leaves or passes away. This written agreement will be needed by courts, investors, banks, and creditors as you operate your business. While Operating Agreements are not an LLC reporting requirement, they are highly recommended.
Articles of Organization
The first step to the LLC application form is filling out an Articles of Organization form. This is a legal document that is filed with the state in which you are forming. There are many names for this form – Certificate of Organization or Certificate of Formation, for instance. Every state has its own form that must be completed in order to create an LLC. Some states may also have a Limited Liability Company Application to fill out. incorporate.com will use the information that you provide to us to complete the form correctly for the state that you select. We have a presence in all 50 states and the District of Columbia so that we always have the correct forms.
Business Licenses and Permits
Depending on what type of business you are forming, you will need a variety of business licenses to operate in your state. You may need a general business license, tax registrations, health permits, zoning or land-use permits, and state-issued occupational licenses. Getting everything in order can be overwhelming. Fortunately, incorporate.com can make it easy to obtain all of these documents for your business. We can research your Business License requirements and provide you with a detailed report based on the information that you provide us about your business.
Statement of Information Form
As part of LLC formation documents, some states require a Statement of Information form to be filed with the state along with your Articles of Organization. California calls this form LLC-12 or form LLC-12r. This form is a simple statement of your company name, who the partners are, and what the business address is. incorporate.com can also file this form on your behalf when we file a California LLC.
Tax Forms
LLC tax form 1065 is the form that is used to file a tax return on partnership income. This form is filed along with your other income tax documents. Partnerships and LLCs do not pay separate taxes, but pass through all profits and losses to the partners.We can help you get your LLC tax return form 1065 today!
Tax form 1099 is a form that other companies may issue to your LLC if they did business with you and paid you over $600. This form would be part of you and your partners' income tax filing.
An LLC tax extension form, such as Form 7004, is used to file for more time to fill out your LLC taxes. This would give you five months extra for your partnership to finish their tax documents. In a single-member LLC, you wouldn't need to file a LLC tax extension in addition to a personal extension. In a partnership, however, separate forms for a business extension and personal extension are needed. In addition, make sure your partners are filing extensions too – it doesn't work out well when you extend but your partner files!
Tax form 8832 is a form that an LLC would use if your partnership decides to elect a different tax standard. One of the great benefits of an LLC is that your group can choose to be taxed as a corporation, partnership, or disregarded entity.
You can find more information about all of these tax forms on the IRS website. At incorporate.com, we cannot give specific tax or legal advice, but we can help you obtain the forms you need.