A limited liability company, or LLC, is an organization run by a member or members. Unlike a corporation or partnership, members of an LLC have limited liability for the company's debts. An LLC can be created by filing a legal document, usually called Articles of Organization, with an appropriate state agency. Although it may sound simple to file one document, there are many legal intricacies of which you should be aware when endeavoring to start an LLC.
Fit your business needs with the right LLC package
To become a legally recognized entity, every state requires that an LLC must file a document, usually called Articles of Organization, with an appropriate state government agency office. As of November 2010, filing fees range from $30 to 200, depending on the state, according to the "Wall Street Journal." Articles of Organization ask you to identify the name of the LLC, which must be original and unused in the state of incorporation. The Articles will also ask for the name of the agent, or a resident in the state of incorporation, who will receive all correspondence for the LLC. The agent need not be a member of the LLC.
Beginning the Business
While most states do not require that LLCs have operating agreements, most LLCs create operating agreements anyway. An operating agreement is a legally binding document that establishes the business and financial responsibilities of each member of the LLC to other members and the LLC itself. If an LLC does not have an operating agreement, the LLC must defer to default state statutory laws. Many states have specific requirements should an operating agreement be created, such as the Arkansas law that requires this agreement to be in writing.
Taxes and the IRS
Every LLC must file for and receive an EIN, or employee identification number, from the Internal Revenue Service, or IRS. Without an EIN, it is impossible to open a bank account or hire legitimate employees. The employee identification number application is free, and the application process can be completed online (see Resources).
Most states do not require annual dues or documentation from LLCs, according to the "Wall Street Journal." Because of the less stringent paperwork requirements for LLCs, many LLCs are remiss in their documentation protocols. However, should an external audit occur, LLC status can be challenged if improper or incomplete paperwork and records are discovered.
References & Resources
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