Organizers are individuals or business entities that play key roles in forming limited liability companies (LLCs). While their exact functions vary in each state, LLC organizers are most often used to file forms that establish the company’s authority to transact business. Knowing your state’s guidelines for choosing organizers and assigning them additional duties can help ensure approval of your formation application and a smoother start-up for your business.
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Organizers are needed to sign the LLC’s formation application, called in most states the articles of organization. By signing the articles, the organizers affirm that the information contained in the application is true. The signature also confirms that the applicant will pursue business activities allowed by the state’s LLC rules. Individuals acting as organizers sign and print their names and also provide their addresses. If the organizer is a business entity, it must provide the entity’s exact name, and the name and title of the individual signing on its behalf.
The LLC’s owners, who are known as members, can choose individuals, corporations, LLCs or partnerships to serve as organizers. Many states require that individuals be at least 18 years of age. Although not required, many LLCs choose a member to act as an organizer.
While organizers are not required to perform any function aside from executing the formation documents, some LLCs assign them other duties permitted by state law. Organizers in some jurisdictions can act as the LLC's registered agent and receive legal paperwork filed against the LLC; they can also reserve a business name before the company submits formation documents. Additionally, organizers can also participate in drafting the operating agreement, a formal agreement among the members that outlines how the LLC will be run. In doing so, organizers help make decisions about topics such as members’ voting rights, duties and the allocation of profits.
Historically, organizers had no duties or liabilities stemming from their involvement in the LLC. However, as of 2010, an appeals court in at least one state had handed down a decision that might expand the liabilities of organizers. The decision suggests that organizers might be considered fiduciaries, or people entrusted to help others, if they solicit members to join the LLC. According to the court, this fiduciary duty requires that, when soliciting members, the organizers fully disclose whether they will benefit from profits made by the LLC.
References & Resources
- Vermont Secretary of State: Limited Liability Companies
- Med Law Plus: How to Form an LLC
- “Asset Protection Strategies”; Lewis D. Solomon; 2008
- Illinois Secretary of State: Guide for Organizing Domestic Limited Liability Companies
- California Secretary of State: Limited Liability Companies
- Missouri Secretary of State: Limited Liability Company Instruction Sheet
- Citizen Media Law Project: Limited Liability Company
- Jupiterimages/BananaStock/Getty Images