How to Form an LLC

How to Form an LLC
Steps to forming an LLC

Forming an LLC (limited liability company) is an important milestone in starting your business. Here we provide a general overview of the steps that must be taken to fulfill the legal requirements for filing an LLC, which vary from state to state.

The first step is to select a name for your business.  Since the name has to comply with the rules of your state’s LLC bureau, this can be a more complicated task than it at first seems. (A state’s LLC bureau is usually combined with its corporation bureau in the secretary of state’s office. In Alabama, however, LLCs are filed in the Office of the Judge of Probate at the county level.) The name cannot be the same as any other name that is currently on file in that state, and it must end with an LLC designator (“LLC,” “L.L.C.,” “Ltd. Liability Co.” or “Limited Liability Company”).

Bear in mind that states may disallow business names that include certain generic words like Bank, Insurance Engineering, Loan, Title, Assurance, etc. Some words are completely prohibited while others require that you obtain consent from a regulatory department.  Once the name is determined, and you find that it is in fact available, some states allow you to reserve (for a nominal fee) the name you’ve chosen. In certain states, the name-reservation certificate from the Secretary of State must be attached to the Articles of Organization.

The second step is to file the Articles of Organization, Certificate of Formation or a Certificate of Organization (depending on the name given to the filing documents in the state in which you’re filing).  These documents must clearly set forth the LLC’s name, purpose, address, the names and addresses of the organizers (and managers, if any).  and the name and address of your “registered agent.”

This brings us to the third step: determining whether the appointment of a resident agent is necessary. A resident agent is a person or business entity who has agreed to act on behalf of the LLC to receive legal documents. (See “What is a Registered Agent?”). The resident agent must have a physical address within the state where the LLC is filed. Some states require that the agent be a business entity; others permit the agent to be an individual. In other states, such as New York, a third-party registered agent is not required.

There are other ways in which state requirements differ. Some states require a minimum of three (3) members, whose names and addresses must be listed on the filing document. Other states require you to state whether members have the right to admit additional members, or if the cessation of membership of one or more members will result in the LLC’s dissolution. Still other states don’t require detailed information. For example, in Kansas, all that is required is the LLC’s name and address and the name and address of the LLC’s registered agent. Indicate the closing month of its tax year and the effective date, and you are done.

Once the LLC is filed, it’s important to check to see if there are any publication requirements for the state in which you filed. A “publication requirement” mandates a newspaper advertisement announcing the LLC formation. For example, in New York, publication is mandatory; in New Jersey, it is not.

In addition, if your LLC has more than one member, or more than one managing member, an EIN (IRS Employer Identification Number) is required. This is required, whether or not you have employees.

You will also need to determine if your LLC requires a Business License. This will vary according to the type of business it is and the state in which it is located. There may also be a local requirement for business licenses in certain states.

In addition to the above, it is important to determine how the LLC will operate. All LLC’s should prepare and maintain an operating agreement to govern the business and financial affairs and set forth the rights and obligations of the members and managers and the voting requirements for major decisions.

The operating agreement does not get filed with the state. It is signed by the members and managers and kept in the LLC record book.  It is equivalent to the bylaws and shareholders’ agreement of a corporation.  Once your LLC is established, your EIN number (if required) is received, a fully-executed operating agreement is on record and you begin conducting business, the state may require annual reports to maintain the business as active. Annual reports are mandatory in Wyoming and New Jersey, while biannual reports are required in New York. Delaware combines the annual report and annual LLC tax return into one filing each year.

For more information on how to form an LLC, please reach out to our expert corporate service representatives. They will handle the step-by-step process required for the state in which you will be operating your business.

BlumbergExcelsior can help you navigate the LLC statutory requirements, create your filing documents, provide an LLC Kit, create operating documents, file your EIN application, act as resident agent, and prepare your annual reports.

In addition to LLC filing services, BlumbergExcelsior offers: a full line of LLC kits  and a choice of operating agreements.  These include a document-assembly version, a custom agreement created by our paralegals, a fillable pdf version (included with LLC Kits) and printed versions (all revised in 2016).

Click here for information to help you decide where to file.