You need a legal business structure to start and operate a business. There are a few legal structures allowed by state laws for you to form and do your business with. All forms have their advantages and disadvantages. You may adopt a form that is suitable your business. If you operate business with low risks and potential liabilities you may adopt a sole proprietorship or a partnership if you wish to conduct the business jointly with another person or persons. The advantage of a proprietorship or partnership is they are easy and inexpensive to form and operate. The disadvantage is business owners liability is unlimited in these legal business structures.
If you are planning to start a business that may entail considerable debts and business risks, you have to protect your personal assets from getting drawn into the business. Corporations and Limited Liability companies limit business owner’s personal liability to a predetermined amount, usually the capital contribution. The business owners of a corporation are ‘share holders’ and that of LLC ‘members’. When compared to LLC, Corporations are more expensive to form and laborious to maintain. The Formalities and procedures for forming a LLC is simple and straight forward. These depend on the state law in which you wish to register your LLC. Contact the state agency handling LLC applications to know the correct formalities and procedures for forming a LLC in your state.
To start a LLC you have to select a name first. Name availability can be checked with the state business registry or other databases. You should not choose a name that is identical or deceptively similar to that of an existing business. If you do that you may be sued under the Trade Mark and Patent laws and end up paying damages. Once the name availability is confirmed, you have to file certain documents and pay fees for filing and registration. Each state has its own requirements for forming LLC. The basic document to be filed is Articles of Organization or Certificate of Organization. This document must contain all essential information about your LLC such as the proposed name and the address of the registered office of the business, the name and addresses of the initial members and resident agent of the LLC, general purpose of forming the LLC and the membership interests. Some states require that an LLC Operating Agreement also be filed along with the Articles and a public notice issued regarding the intent to form LLC.
