A limited liability company (LLC) offers business owners limited liability for the acts and financial debts of the business. An LLC can be a sole proprietorship or a partnership. Either way, the business owners’ personal assets such as their homes and personal savings accounts cannot be used to satisfy business debts or court verdicts against the business in most situations. Instead, potential plaintiffs and creditors are limited to the assets of the LLC to satisfy their claims. This is an important protection for businesses. Therefore, many businesses chose to form limited liability companies.
Things to Consider Before Forming a Limited Liability Company
If a limited liability company is a business model that makes sense for your business then there are a few things that you should consider before you file the paperwork to make it official.
First, you need to pick a name for your business. The name must be different than any other LLC already registered with your state. You can search for LLC names with your state’s Secretary of State’s Office to make sure that your chosen name is not already registered. Most states require that you have LLC or some other designation of your limited liability status included in your company name. For many businesses, it may be as simple as adding the LLC designation. For example, ABC Accounting Firm may become ABC Accounting Firm, LLC. Once you have decided on a name you may be able to pay a fee to reserve the name with the Secretary of State’s office prior to officially filing your paperwork to become an LLC.
Second, you must prepare your Articles of Organization for the LLC. Many state Secretary of State Offices have Articles of Organization forms that you can complete. Generally, Articles of Organization must contain the name and address of the business, the names of the owners, and the name of the owner who will serve as the registered agent or agent for service of process.
Third, you may wish to draft an LLC operating agreement. While LLC operating agreements are not usually required by state law to form an LLC they are an important business document if you have more than one member, or owner, of your LLC.
How to Become an Official Limited Liability Company
Once you have decided on a name and prepared your Articles of Organization then you are ready to file with the Secretary of State’s office and become an official LLC. Generally, your paperwork must be either mailed, faxed or hand delivered because it must contain original signatures. Thus, many states do not provide for electronic filing at this time. However, you can do much of your research into names and find appropriate forms and applicable laws on your state’s website.
In order to obtain all of the benefits of a limited liability company, it is important that your LLC be properly formed in accordance with all of the requirements of your state laws. If you have any questions about your state requirements you should contact your state’s Secretary of State’s office or a business lawyer in your state.
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