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6 Steps to Form an LLC


Every business venture involves risks. Just as there are two sides of a coin, a business may broadly have two possibilities – it may either be successful or it may fail. While the former is a mouthwatering prospect, the latter can be highly damaging. There cannot be a worse scenario than being held personally liable for the settlement of company debts. In order to avoid such risks, it is important to have an arrangement which can offer protection to the personal assets of an individual from debts or unfulfilled company obligations. Therefore, most entrepreneurs consider the idea of setting up an LLC before the launch of their products or services.

Steps to Form an LLC

Here are the steps to form an LLC successfully:

Select a Name: If you are planning to form an LLC, the first step in the process is to choose the name of your company. It is important to remember that no two LLC Companies can operate with the same name. The name of your company would be your chosen name with an LLC designator. Check with the LLC office in your state to find out whether the name chosen by you is available for registration or not. In case your chosen name is available and you wish to apply for LLC registration after some time, you may reserve the same by paying a small fee.

File Articles of Organization: After choosing the name of your company, the next step is to prepare articles of organization and file them with the LLC filing office of your state. For the purpose, you will be required to furnish certain details like the name of your LLC, its address and the names of the owners or members. Some states designate the articles of organization with different names. For instance, Mississippi, Delaware, Washington, New Hampshire and New Jersey designate it by the term “certificate of formation”. Similarly, Massachusetts and Pennsylvania call it “certificate of organization.

Create an Agreement for Operating an LLC: The agreement for operating an LLC is similar to a partnership agreement and describes the rules pertaining to the operation and ownership of a business. In a broad sense, it includes aspects such as the percentage interests of the members, their rights and responsibilities, profits and losses, management and so on.

Obtain Permits and Licenses: It is important that you acquire the requisite licenses and permits associated with your business before you start operating it to avoid legal issues. Apart from a business license, you will need to have a seller’s permit if you if your business deals with products.

Retain Limited Liability: After forming an LLC, the owners are required to observe certain formalities. These include maintaining a detailed record of financial records and minutes of important decisions.

Publish a Notice: This step is applicable to the LLCs in Arizona or New York. The individuals of these two states need to publish in a local daily that they have planned to form an LLC.

Although it appears to be simple on pen and paper to set up an LLC, there is more to what meets the eye. The success of setting up an LLC according to the legal requirements in the United States necessitates a detailed knowledge of the requirements. Seeking the advice of a business attorney is a wise decision in this regard.