A limited liability company, or LLC, is a “hybrid” business organization that combines the limited liability benefits of a corporation with the pass-through federal taxation and easier filing requirements of a partnership. The owners of an LLC are called members. State laws uniformly permit the creation of LLC’s with multiple members. Creating an LLC with multiple members requires filing a document, called the articles of organization, with the state agency responsible for registering business organizations.
Choose a state in which to organize your LLC. If you are part of a group forming a small business that will only conduct business operations in one state, it is likely that the best option will be to organize your LLC in that state. However, some states such as Delaware, Nevada and Wyoming offer business-friendly climates with low income and corporation taxes. However, if you organize your LLC in one of these states but wish to conduct business in another state, you must register in the second state as a “foreign LLC” and pay registration fees and annual fees in multiple states. If you expect your company to conduct business in many states or attract outside financing, organizing in a business-friendly state may be beneficial.
Download the appropriate LLC forms. In most states, the public agency responsible for regulating business organizations is the state treasurer or the secretary of state. The agency will likely provide the forms for organizing an LLC on their website.
Fill out the Articles of Organization Form and indicate that there are multiple members of your LLC. While the required information varies by state, an Articles of Organization Form will generally require you to provide the name of an LLC, the name and address of all persons organizing the LLC and the address of the business. You will also have to provide the name and address of a registered agent, which is a person or business that will receive service of process if your LLC is sued or subpoenaed. You will also need to list the name and address of all LLC members.
Draft an operating agreement. An operating agreement is a contract formed among LLC members to govern the LLC. Operating agreements typically cover issues such as the addition and subtraction of members, distribution of profits and losses, ownership interests and voting procedures. While operating agreements are not required in most states, If you do not draft one, state statutes provide default rules for the governance of an LLC.
File the Articles of Organization Form. Depending on the state, the agency responsible for registering business organizations may accept the Articles of Organization Form by mail, fax or Internet. The fee for organizing an LLC ranges from $50 to $300.