Steps on How to Form an LLC and the Legal Documents Needed
Getting the legal documents for creating a limited liability company or LLC is easy. You don’t have to hire a lawyer or professional to help you. In fact, the LLC was made for beginner businessmen and investors.
So what makes an LLC easy? First off, it is a unique business entity found in the US. It was created by businessmen who wished to be able to create companies without the hassle of a corporation.
One of the advantages of an LLC is of course, the limited liability. If the company is sued or becomes bankrupt, only the company is affected. The members of the LLC are not liable to pay anything or be entangled with the lawsuit. Next is the pass through taxation that is mandated by States. In a pass through taxation, the profits of the company go directly to the investors or members. The members then pay their individual income tax.
In regular companies, the company profit is taxed first which can be very enormous. The taxed profit is then distributed among the shareholders who have to pay their own individual income taxes, hence the term double taxation.
Still, learning how to form an LLC can be challenging. This is especially if you are a fresh business graduate or staring entrepreneur. Asking help from a lawyer, professional or veteran businessman can help. To make things easier, here are the documents and steps needed to make an LLC.
Step 1: File your Articles of Organization
The Article of organization is the definition of your LLC. It lists the requirements you need to form an LLC. This is the same as the certificate of organization.
Step 2: Create your Operating Agreement
The Operating Agreement is an important document that contains the laws of your LLC. It is an agreement between the State and your company. You declare that the company is an LLC and will function only as an LLC. The second part of the operating agreement is between the members and the company. It lists the rights, benefits and obligations of the members.
Step 3: Filing the documents
File the documents with your State Secretary. You need to learn how to incorporate other documents such as income tax form, employer ID and other documents your state may need.
These three steps are very basic. Be sure to read laws regarding limited liability companies in your State. Some States require more documents, others may require only one or two.
So what makes an LLC easy? First off, it is a unique business entity found in the US. It was created by businessmen who wished to be able to create companies without the hassle of a corporation.
One of the advantages of an LLC is of course, the limited liability. If the company is sued or becomes bankrupt, only the company is affected. The members of the LLC are not liable to pay anything or be entangled with the lawsuit. Next is the pass through taxation that is mandated by States. In a pass through taxation, the profits of the company go directly to the investors or members. The members then pay their individual income tax.
In regular companies, the company profit is taxed first which can be very enormous. The taxed profit is then distributed among the shareholders who have to pay their own individual income taxes, hence the term double taxation.
Still, learning how to form an LLC can be challenging. This is especially if you are a fresh business graduate or staring entrepreneur. Asking help from a lawyer, professional or veteran businessman can help. To make things easier, here are the documents and steps needed to make an LLC.
Step 1: File your Articles of Organization
The Article of organization is the definition of your LLC. It lists the requirements you need to form an LLC. This is the same as the certificate of organization.
Step 2: Create your Operating Agreement
The Operating Agreement is an important document that contains the laws of your LLC. It is an agreement between the State and your company. You declare that the company is an LLC and will function only as an LLC. The second part of the operating agreement is between the members and the company. It lists the rights, benefits and obligations of the members.
Step 3: Filing the documents
File the documents with your State Secretary. You need to learn how to incorporate other documents such as income tax form, employer ID and other documents your state may need.
These three steps are very basic. Be sure to read laws regarding limited liability companies in your State. Some States require more documents, others may require only one or two.
