How to Structure a Limited Liability Corporation
A limited liability corporation, also known as an LLC for short, can be a good choice for a business owner who like the benefits of a corporation, but wants to avoid some of the complexity that goes with incorporating. A limited liability corporation can offer tax benefits and additional protection from personal liability that goes beyond a sole proprietorship.
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Things You'll Need
- Business name
- Formal articles of organization
- Money for state fees
- Operating agreement
Instructions
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1
Decide on a business name. Call your secretary of state to see if this name is available and legal. The acronym "LLC" must follow the business name.
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2
Obtain formal articles of organization from your secretary of state's website. This is typically a simple, one page form listing the name and address of the business, the number of owners (also called members) and whether the owners or a board of directors will manage the corporation.
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3
File the formal articles of organization with your secretary of state.
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4
Pay a filing fee to your state.
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5
Work with an attorney to write your limited liability corporation operating agreement. Many states do not require this, but a formal written agreement gives credibility to your corporation as a separate entity and is often required by banks in order for the corporation to get a loan. It should include owners' rights and duties, what percentage of the business each owner controls and regulations for meetings and provisions for owners selling or buying an interest in the corporation.
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6
Publish a notice in your local newspaper announcing the formation of your LLC if your state requires this. Your secretary of state's office will have this information.
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Tips & Warnings
Forming a limited liability corporation does not offer as much protection as incorporating. Owners may still be responsible for debts beyond what the limited liability corporation can pay.
Some states allow a one-person limited liability corporation. Your secretary of state's office has this information.
