Setting it up Right With a Limited Liability Company
Legal business structures are important in managing your business. Your business needs an identity and a separate existence from that of your person. Even if you are conducting business as a Sole Proprietorship, it is advisable to keep the business transactions separate from your personal life. When your business involves considerable transactions, the attendant risks are proportionate. To protect your personal assets from any risk arising from your business you can form llc or Limited Liability Company which limits business owner’s personal liability to business debts and obligations.
LLC formation is not too complicated and can be easily achieved. Limited Liability Companies are allowed by all the fifty state laws. Each state may have different regulations regarding LLC formation and you should consult your states agency which handles LLC formations. Generally this is handled by the Secretary of State’s office. For setting up an LLC, there are some basic actions to be taken. First you have to choose a name for your business. Care should be taken to choose a name that is not identical or closely similar to that of an existing business in the state. You can consult the Secretary’s office and check the availability of the name you have chosen. Then file an Articles of Organization with your Secretary of State’s office. You are required to pay a fee for filing the Articles and some states charge an annual fee or minimum tax until a Certificate of Cancellation is filed for dissolving the LLC.
The next step is drafting and adopting an llc Operating Agreement. Some states stipulate filing of an operating agreement along with the Articles. Even if you are a single member llc, it is advisable to adopt an Operating Agreement which will provide individuality or a separate existence to the LLC and protect your limited personal liability status. In a multi member llc, the operating agreement is imperative for the smooth functioning of the company. The operating agreement is between the members which should clearly state the rights and responsibilities of each member. The operating agreement will help override some of the default provisions in state statutes that may not be reasonable to your llc members. The operating agreement can include each member’s share of interest and profit, voting rights, operational rights and duties, organizational rules and regulations, divestment in the LLC, voluntary dissolution or when a member becomes disabled or deceased.
