How to Found an LLC

by Lee Roberts

A limited liability company (LLC) is an unincorporated business organization. State law governs the formation of an LLC. Relative to other business entities, LLCs are a new option for business owners. The primary features of LLCs are that, similar to partnerships, it is comparatively straightforward to form an LLC, yet they provide their principals with protections that are more akin to the corporate form.

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Name Your Company

The name for your company must signal to the public, creditors, clients and customers that you intend to limit your personal liability in your dealings with them. The majority of the state statutes direct companies to include the words "limited," "limited company," "limited liability company, " or some form of the abbreviation "LLC" as part of their business name. Companies should avoid selecting a name that is likely to cause confusion about its purpose or its connection with other business entities registered with the state.

Compose an Operating Agreement

Draft an operating agreement to set forth the rules and guidelines by which you will run your company. Delineate the rights, duties, liabilities and obligations of the members of the LLC. Strive to create a complete document that is relevant to the specifics of your circumstances. You do not file this document with the state; it is an internal document, but state laws require you to put an agreement into writing. Other elements that may be useful for your operating agreement include specifying when regular meetings are required; an explanation of the methods for admitting new members; and the procedures for members to withdraw and to dissolve the company.

File Certificates

Companies file a certificate of organization, certificate of formation, or article of organization, depending on the state's preferred term, with their state. This document is the means by which you inform the state of the details of the company, including such things as the company's name, the address of the principal place where it conducts business, the purpose of the company, and a listing of the founding members of the company. These documents typically are patterned on the certificates or articles of incorporation that businesses file when they wish to form a corporation.

Additional Considerations

Some states, notably New York State, require companies seeking to form an LLC to publish a notice of their intentions in at least two newspapers. Companies may publish their articles of organization or provide substantially the same information. Most states require you to designate a person who will serve as your registered agent, to accept service of legal papers on behalf of the LLC. Consider contracting with an experienced organization to guide you through the formation process. You can choose an online legal company to help you draft your operating agreement, file the right documents with the appropriate state agency and search through databases to confirm your name choice.