Monday, June 17, 2013

Setting Up an LLC: What You Need to Know

Many people think that starting a company is a complicated task. This is why many people are discouraged to start their own business. But with a limited liability company or LLC, starting a business is really easy. Procedures are also self-explanatory and a company can be set up even without hiring a lawyer.

What is a limited liability company?

A limited liability company is one of the business structures like a corporation, partnership or sole proprietorship. An LLC has the features of other business structures making it a better choice. It has the legal protection of owners' personal assets like corporations and it has simple processes and tax benefits like partnership or sole proprietorship. This makes setting up an LLC much simpler than corporations.

Setting up an LLC: Things needed in starting a company

As mentioned, setting up a limited liability company is very simple. There are no complicated procedures and documents just to start the business. In fact, there is only one document that is required by law in order for the company to start.

The first thing that you need to do if you want to set up an LLC is to choose a name. Like any other businesses, the name should not be similar to any limited liability companies and should not violate any trademark. There are also additional and specific rules in naming an LLC depending on the state where the business will be located.

In setting up an LLC, the name of the company should have designators such as Limited Liability Company, Limited Company or abbreviations such as LLC, L.L.C and Ltd. Liability Co. The name of the company should also not include certain words such as Bank, Insurance or city name (unless permitted by the state).

After choosing a name for the LLC, the next thing that you need to do is to file the Articles of Organization, the only document required by law. This is the document that has the basic information about the company such as business name and owners' names and addresses. A registered agent and corresponding address should also be indicated in this document for future lawsuit. This registered agent is the designated person to be contacted for legal proceedings.

Filing for Articles of Organization has a fee. Different states have different amount of filing fees but the usual amount is $100. There are states that charge as much as $800 just for filing the document.

Setting up an LLC does not require having an operating agreement but it is better if you have one. This document sets out rules for the company such as members' rights and responsibilities, percentage interest in the business, allocation of profits and losses, voting power of the members, management of the company, and "buy-sell" provision that sets out procedures in case a member dies or leaves the company. This document can help the company and its members face future legal proceedings.

Setting up an LLC: What happens next?

After submitting the Articles of Organization, the company can start its operations. But before opening the business, it should have the necessary licenses and permits to ensure that everything will go smoothly once the company opened its business to people.

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