LLC or limited Liability Company is a merging of the best aspects of corporations and partnerships.
While and LLC isn’t technically a corporation, the LLC articles of incorporation are the documents used when starting the company and they lay out the specific legal rights and responsibilities of the LLC.
Now, I must tell you, I’m not a lawyer and I’m not giving you legal advice, just an idea of what an LLC is all about. When it comes time to set up your own LLC make sure you talk to your lawyer first.
Some of the advantages to forming an LLC can include: tax advantages since all profits are taxed at the individual members rate rather than the potentially higher corporate rate, as long as any and all debt is incurred by the LLC and not the members personally the members are exempt from being held liable by creditors for the debts of the LLC, there is a great deal of flexibility when running the day to day operations of the LLC compared with the more rigid corporate structure.
These founding documents can vary in name from one state to another, and they can also vary with the exact information they contain, but for the most part you’ll find the following in the LLC documents:
1. The first thing you’ll find included in the founding documents is the name of the company.
The name will be followed by either the words Limited Liability Company or LLC.
A search should be done to make sure that the name you’ve chosen is available since it can hold up the process if the name is already taken.
2. The next thing that will be included in the documents is the name and address of the registered agent.
Every state has it’s own rules about who can act as an agent, in Delaware, for example, and agent does not have to have an address in the state in order to act as a registered agent for an LLC.
Most states do require that there be a physical address and not just a post office box.
3. The next item in the documents is the name and amount of shares owned by each member of the LLC (the owners of the LLC are referred to as members).
Again, the exact information required will vary from state to state but most states require the name of every member along with a percentage of their total ownership interest.
4. While it may seem silly, most states will also require the documents to include the purpose of the business and how long they expect to be in business.
Generally you don’t need to be too specific here when it comes to the type of business. For the duration, most businesses will simply put something like ‘perpetual duration’.
When you’re ready to form your own LLC, you can use this overview of LLC articles of incorporation as a place to start.
Deciding if an LLC is the best option for you and your company is a question best answered by your attorney, even though LLC’s offer many benefits to the business owners, they do have some drawbacks. Your lawyer can help you make the decision.
Also published on Medium.