question.jpgIn Business Law

How do I set up a limited liability company?

Ever state has its own laws regarding LLCs, with its own requirements about what steps must be precisely followed for an LLC to be setup. For example, many states will let you set up an LLC that only has a single owner/member, but some states will not allow this. That said, when you are setting up an LLC (and as the person setting up an LLC, you are known as the organizer) you would generally follow these steps:

1. Give some thought to how the company is initially going to be financed, because that may affect some of the later things you will do (although you would not really be locked into anything at this point and would obviously have some flexibility down the road, should your circumstances change).

2. Determine whether you will be hiring an attorney to help out in the process.

3. Figure out what state you are going to organize the business in.

4. Pick a company name.

5. Determine who is going to be the company’s registered agent.

6. Decide how the LLC ownership is going to be structured (as with corporations, owners hold some ownership shares, called units, which are issued by the LLC to the owners).

7. Draft and file the articles of organization.

8. Determine how the company will be controlled and managed (i.e., whether it will be member-managed or manager-managed).

9. If the LLC is going to be member-managed, you must determine who the managing members will be, and appoint them in the operating agreement.

10. Draft and approve the LLC operating agreement.

11. Obtain a federal tax ID number (known as the employer identification number) for your company. You can obtain this number, which is essentially the business version of a social security number, from the IRS. It will be necessary to have this federal tax ID number to conduct many transactions on behalf of the LLC (opening a bank account, for example).

12. If you have elected to have your LLC use the double taxation method of corporation, you must file a form with the IRS notifying them of this.

13. Address any other legal requirements that might apply - for example, some states require companies to make additionally filings, or to obtain licenses, depending on what type of business they will be engaging in.