How to Create a Limited Liability Corporation
A limited liability corporation, or LLC, is a relatively new method of structuring a business and has some major benefits. An LLC is versatile, helps provide more flexibility for tax issues and provides maximum liability protection in the case of litigation. Because of this, an LLC is the business structure of choice for many new small business owners.
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Instructions
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Choose a name that is not already taken or similar to an existing business. Your business name must end with "LLC" or the words "Limited Liability Corporation."
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File a document called Articles of Organization with your state's filing office (often the Secretary of State office) and pay a filing fee. Contact the filing office to get this document, which is sometimes called a Certificate of Organization. In many states you can also file online. You must list a registered agent and address in the Articles of Organization. Commonly business owners use their home address and name.
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Prepare an operating agreement and have all of the organizers of the business sign it. Although this is not required by the state, it is an important part of maintaining liability protection and also serves to prevent disagreements among the LLC's members. This document lays out the duties, obligations and rights of the members of the LLC. It also establishes ownership percentages and division of profits.
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Hold an organizational meeting. At the meeting the members of the LLC can approve or ratify the Articles of Organization and the operating agreement. Record these votes in meeting minutes. This will help strengthen the liability protection.
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Issue LLC certificates. These are similar to stock certificates and will help document ownership interest in the business. You can often get blank stock at office supply stores and fill in the information of ownership.
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Obtain an employer identification number, or EIN, from the Internal Revenue Service. This is not necessarily required if you form the LLC as an individual owner as you can report the taxes under your own social security number. If you need an EIN you can file form SS-4 with the IRS. You can get this from an accountant or apply online at the link provided in "Resources."
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Open a separate bank account for the LLC to prevent mingling business funds with personal funds. If you were to be sued, keeping the LLC's funds in a separate account will protect your personal funds.
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