How to Form a Limited Liability Company (LLC) for Cheap

by Rob Jennings
    LLC formation is something than many startup entrepreneurs do on their own.

    LLC formation is something than many startup entrepreneurs do on their own.

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    While new business ventures can be long on enthusiasm and planning, they often fall short on startup capital. Fortunately for the do-it-yourself entrepreneur, the process of forming a limited liability company, or LLC, is relatively accessible. The availability of cheap pre-drafted online forms makes the process not only accessible, but affordable as well.

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    Step 1

    Choose a name for your new LLC. Check with the secretary of state or division of corporations in your state to see if another company is already using the name. A company in another state may also be using the name, so thoroughly research all states by using online search engines to make sure no other company is already using the name you intend to give to your LLC. If you use another company's name, you could be forced to change it after spending thousands in marketing.

    Step 2

    Draft your articles of organization, the key document in creating an LLC. The articles of organization contain critical information required by state law. While the specifics vary from state to state, the articles typically must include the names and addresses of the organizers and owners, the names of managers, a principal office address, a brief description of the business, and the name and address of a registered agent for service of process. As of late 2010, fees for filing LLC articles of organization range from less than $50 to over $500. Although you can easily purchase form articles and fill in the blanks, some states make downloadable online forms available for free.

    Step 3

    Develop an operating agreement even if your state does not require your LLC to have one. Operating agreements govern the internal operations of the LLC, including such matters as adding and removing members, the duties of members and the return of capital contributions. Having an operating agreement and following it makes it harder for a future plaintiff to pierce the limited liability shield and reach your personal assets in a suit against the company for wrongs committed by an employee or co-member. Although many entrepreneurs use attorneys to draft operating agreements, form agreements are also available for free online (see Resources).

    Tips & Warnings

    • Saving money on attorney fees often comes at a price. Business attorneys are not only well-versed in LLC laws in a given state, but also have the experience necessary to recognize common pitfalls and guide clients away from preventable errors. While form operating agreements are available, the layman may not recognize provisions that are inapplicable to his particular situation. A great deal of litigation happens due to mistakes made when an untrained individual decides to save money by preparing his own legal documents.

    About the Author

    A practicing attorney since 2003, Rob Jennings has written fiction and nonfiction since 2005, with his work appearing in a variety of print and online publications. He earned his Juris Doctor from the University of North Carolina at Chapel Hill.

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