Most jurisdictions throughout the country only require the submission of the articles of organization to create an LLC. Drafting the articles requires the business name you choose for the LLC, the address of its principal office and the contact information for an agent you authorize to accept legal service of process on behalf of the business. Once the secretary of state reviews and files the articles, the formation process is complete. For example, the state of New York provides business owners with a two-page standard form where you fill in the pertinent information and mail it with a $200 filing fee (as of 2010) to the secretary of state. Most jurisdictions require that at least one member of the LLC exist before the articles can be filed. Although you can deliver the articles prior to a member joining the business, the document becomes void if you do not provide the state with notification of membership within a specified period of time, usually 90 days.
Most jurisdictions allow existing LLC members to convey membership interests as they see fit. There is no requirement that you provide the LLC with a money or property contribution as a prerequisite to obtaining an interest unless the operating agreement requires it. In the event an agreement is silent or does not exist, state laws generally require the unanimous consent of all current members to admit a new member. The time it takes to acquire a membership interest varies depending on the restrictions imposed by the LLC. Completing the acquisition may take longer where unanimous member consent is a prerequisite.
State laws provide all owners who obtain a membership interest in the LLC a right to actively participate in LLC business and a legal claim on a portion of the LLCs assets and earnings. However, if you purchase a preexisting member’s interest in the LLC, you only receive the financial interest that member has, and not the rights to participate in the business. The purchase of a financial interest in the LLC can be done in as little as one day.
At the moment you complete the LLC formation process or obtain a membership interest, you must comply with the federal tax regulations that govern LLCs. Federal tax law designates a single-member LLC as a sole proprietorship, and all other LLCs as a partnership solely for tax purposes. Both types of taxation require the member to report and pay tax on their proportionate share of LLC earnings on a personal tax return. However, the LLC may elect corporate tax treatment which shifts tax reporting and payment requirements to the LLC itself.