Limited Liability Companies or LLCs are suitable for small businesses with considerable business volumes. The limited liability of the business owner in an LLC protects personal assets from business obligations. Unless your business involves cross border transactions or you are planning to go public, there are few advantages in forming and operating your business as a corporation. LLC’s can operate like a corporation with the flexibility of a partnership. Business continuity can also be ensured if the members of the LLC choose to do so. The Operating agreement can structure the memberships in such manner as to be easily transferable.
Don’t get excited by the advertisements about the Delaware or Nevada corporations. Those are for the big corporations with muscle and money. Even if you set up an out of State Corporation, you will have to qualify to do business in your state. This entails additional expenses and you do not get the tax benefits you angled for with an out of state Corporation. Register LLC in your hometown and avoid a lot of hassles involved in out of state Corporations. Forming LLC in most states is quite simple. States encourage small business registrations and have simplified procedures for LLC formation. Check with the state department that deals with business registrations in your state on how to form an LLC. Generally business registrations are handled by the Secretary of State’s or Corporations Commissioner’s offices. Detailed instructions are available on all State websites.
State statutes govern the LLC formation. Rules and regulations and formalities may differ in each state. In all states the LLC needs a name to operate under.
Care should be exercised while choosing a name. The LLC name cannot be identical or deceptively resemble the name of an existing business. Databases and registries are available with states or on the internet and can be freely accessed to check the name availability.
The basic requirement in all states to register LLC is to file an Articles of Organization. Some states have additional requirements such as filing the LLC Operating Agreement and issuing a public notice about the intent to form LLC. A fee has to be paid in all states to register LLC, which vary in each state. The Articles or Organization should contain all essential information regarding the purpose and organization of the LLC. The Operating Agreement is imperative to the proper functioning of the LLC and to provide it with individuality from that of its members.
