How Do I Set Up an LLC?

by Steve Aycock

An LLC is a business structure that shares features with both a corporation and a partnership. To set up an LLC you’ll need to choose a name, determine who will manage the corporation, file articles of organization with the state and, optionally, draft an operating agreement.

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Step 1

Choose a name for the LLC. In most states the requirements for choosing an LLC name are straightforward. A new LLC cannot have the same name as another LLC. The LLC name usually must include “LLC” or “Limited Company.” The business name is usually registered as part of the LLC's formation, so an additional step for registering the name with the state isn’t necessary.

Step 2

Determine who will manage the LLC. An LLC can be managed by one or more of its owners (called members), or by non-member managers. Some states require a statement in the formation document about whether the LLC will be member-managed, and a listing of the managers. Deciding how the LLC will be managed and whether one or more members will also be managing the LLC may be necessary before drafting and filing the LLC formation document, called the articles of organization.

Step 3

Complete and file articles of organization. An LLC is formed by filing the articles of organization with the state in which the LLC is formed. The articles of organization form is filed along with an official filing fee, ranging from about $50 to $300, depending on the state, as of 2010. The articles of organization can include information such as the LLC name, the business address, the registered agent (where legal process can be served on the LLC), the managers and its effective date (some states allow the articles of organization to list an effective date for the LLC formation that is different than the filing date of the articles).

Step 4

Draft an operating agreement. In addition to the articles of organization, another document to consider implementing is an operating agreement. Operating agreements aren’t required in most states, but it can be a good idea to have one in place, especially for multi-member LLCs. An operating agreement can document important business processes such as how the LLC will be operated, how profits will be distributed, and how voting takes place.