Legal business structures are important while conducting business. Your business should have a separate existence from that of yours for many a reason. It is also important that proper structure is adopted to maximize benefits and minimize the business risks. Limited Liability Company (LLC) is popular with small business owners for this reason. LLC definition is that the business owners of the company have limited personal liability for business debts and obligations. In a Sole proprietorship or Partnership (except limited partnerships) the business owners are personally liable for all their business liabilities. This means that if the business defaults payments to creditors or lenders, or a claim arises during the course of business, the business owner’s personal assets can be liquidated to pay those creditors or lenders and to settle the claim. In an LLC, the business owner’s personal liability is limited to a preset amount and their personal properties are protected from liquidation for settling business obligations.
Starting a LLC is fairly simple and straightforward. All the fifty states now allow Limited Liability Companies through their statutes. The rules and regulations regarding setting up llc may differ from state to state. It is advisable to consult the state agency which deals with the registration of LLC’s. Usually llc forms are handled by the Secretary of State’s office. You have to file the required forms and pay due fees to register your LLC with the Secretary of State’s office.
For setting up llc, there are certain basic requirements. You need a name for your limited liability company to operate under. The name cannot be very much similar or identical to an existing company. The name must end with “Limited Liability Company” or its abbreviation “LLC”. Words like “bank” “trust” “insurance” and a few others are prohibited from being a part of the LLC’s name. Each state may have its own prohibited names list for LLC’s. Once you have an acceptable name, you file the Articles of Organization of the LLC and pay a fee to register the LLC. Most states have preprinted formats for Articles of Organization and all you need to do is fill and sign according to the instructions. Adoption of an Operating Agreement, which details the organization, operation and dissolution functionalities are critical in functioning of an LLC. The operating agreement bestows a distinctive identity to the LLC from that of the owners and provides clarity to the member’s rights and responsibilities.
Some states prohibit Limited Liability Companies from conducting certain businesses or professions. Limited liability Companies cannot operate banking or insurance businesses under their name.
