Because forms for creating a limited liability company, or LLC, are usually available online, setting up an LLC is a relatively simple process for the do-it-yourself entrepreneur. However, even though the actual work involved in LLC creation may be easy enough, failure to follow the proper procedures can result in a court's disregard of the legal existence of the company in an attempt by a civil plaintiff to pierce the limited liability shield and reach the members' personal assets. Therefore, it's important to follow your state's specific guidelines for forming a legal LLC.
Fit your business needs with the right LLC package
Pick a name for your company that is not already in use. In order to avoid taking another entity's name, perform a search of your state's secretary of state or corporations website, then broaden your search to ascertain whether a company in another state is using your proposed name. Having to change your company name after several months or years of marketing the business can be an expensive and laborious task. Additionally, using another company's name can put you in danger of being sued for trademark infringement. In such a case, the plaintiff would probably be able to get around the limited liability shield because you picked the company name yourself.
Prepare the articles of organization. Some states have forms available for LLC articles online for free or for a nominal cost. If your state has no such forms available, consider purchasing them from a reputable online source. Attempting to draft your articles from scratch going by the statute may result in an expensive mistake, as will using a friend's company's articles of organization as a template. Investing a little money to purchase the right forms can save thousands of dollars in terms of lost limited liability in the event of a lawsuit.
Prepare an operating agreement for your LLC even if you will be the only member. As with the articles of organization, form operating agreements may be available online from the state; if not, these can also be purchased from a reputable online source. Operating agreements contain the key rules for running the LLC, such as the selection of managers, adding and removing members, and the disposition of company assets upon dissolution. Make sure your operating agreement is appropriate to a single-member LLC if that's what your company will be.
File your articles of organization and operating agreement with the secretary of state or corporations in your jurisdiction. Each state requires a fee for LLC registration, ranging from just under $50 to over $500. These fees can vary from year to year, so check your state's website to make sure you send the correct amount.
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