Steps to Forming an LLC

 

1. Choose a Name

2. File the Articles of Organization

3. Sign an Operating Agreement

 

See below for descriptions of each step to forming an LLC.

 

 

 

Step 1:  LLC Name Considerations

 

• Web Domain Availability:  Think about which website domain name(s) you want to use.  This may alter your choice in names for your LLC.  Domain registrars, such as GoDaddy and Network Solutions, offer searches for availability of web domain names. 

• Trademark Availability:  A search of intended names should be conducted.  If your LLC is only intended to operate within, and market to, consumers in the United States, then a search should be performed through the U.S. Patent & Trademark Office.

• State Name Availability: A search of intended names must be conducted through the state Secretary of State's office.  A name the same or similar that is already registered and active could disqualify theuse of your intended business name.  Some states will permit the use of a name for an LLC even if the same name is used for a corporation, but this is not recommended as it could cause confusion and lead to liability.

 

 

Step 2:  Adopting an Articles of Organization

The Articles of Organization are essentially a declaration of formation, and once filed with the state, legitimize the formation of the LLC.  In most, but not all, circumstances, the Articles of Organization need not contain much more information than the following:

 

• The name of the LLC;

• The principal address of the LLC;

• The mailing address of the LLC;

• The name and address of the Registered Agent of the LLC (the person who will accept service of process of legal documents on behalf of the LLC);

• The manager(s) or member-manager(s) fo the LLC (these are legal managers and not necessarily operational managers);

• The effective date of formation of the LLC; and

• The purpose of the LLC.

 

Even though often generally basic, the Articles of Organization could be greatly detailed, and great care should be given when crafting the Articles of Organization, as they may act as a declaration to the public as to who may bind the LLC to contractual obligations as well as could act as a restriction as to what and how business is operated.

 

 

Step 3: Adopting an Operating Agreement

The Operating Agreement is a set of rules on how to govern your LLC.  If drafted properly, the Operating Agreement will dictate the policies and procedures related to: 

 

• What the LLC is and is not permitted to do;

• What actions to be taken by the LLC require a vote;

• What percentage of membership interest is required to pass a measure;

• Which Members (owners) can vote on which matters;

• How to break a tie in votes;

• How to resolve disputes between the owners;

• How to resolve disputes between the managers;

• Who has authority to bind the company;

• In what instances a capital contribution may be required;

• Consequences if capital contributions are not made;

• Alternatives if capital contributions are not made;

• How distributions, capital accounts and tax allocations are to be made;

• When and how the company may be dissolved;

• Indemnifications of Members and Managers;

• Procedural protocals, such as notice provisions; and more.

 

If an Operating Agreement for more than one Member does not address all of the above and more, it may not properly protect you.

 

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