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How to Create an LLC

A limited liability company (LLC) is an attractive business structure for some small businesses. It’s easy to form and low-maintenance.

The first step is to file the necessary paperwork with your state. This paperwork, called articles of organization, outlines the details of your LLC.

Articles of organization

Articles of organization are the documents you need to form a limited liability company (LLC). They are a legal document that outlines your LLC’s basic information, such as its name, purpose, and day-to-day operations.

These documents can be tricky to complete correctly, so it is important to get help from a lawyer who understands the business laws in your state and can help you file your articles of organization accurately. Not only can this ensure your business is properly established, but it can also save you money in the future by avoiding costly mistakes.

You can complete your articles of organization yourself using the form that your state provides or hire a legal services company to handle it for you. Either way, make sure you have a registered agent in place before filing your articles of organization. A registered agent is a person or service that provides your company with legal advice and receives legal paperwork and correspondence on its behalf.

Operating Agreement

An operating agreement is a key document that will govern how an LLC is structured and operates. It may be required by your state, or it can be drafted independently by you and other members.

The operating agreement should include information about how the business profits and losses will be allocated among the members for accounting purposes. It should also address member compensation, based on how the members assess their contributions to the LLC.

Another important function of an operating agreement is to outline the process for transferring or withdrawing interest in the company, including for estate planning purposes. It will likely provide for a right of first refusal, which allows other members to purchase a departing member’s interests.

An operating agreement should also define voting procedures and rules for meetings. These can help avoid the risk of misunderstandings, which can result in legal disputes over business matters.

Registered Agent

An LLC’s registered agent is the person or company listed as receiving legal documents and tax notices on behalf of an LLC. These include official correspondence mailed by the state government or a business owner’s tax office, and legal documents sent in response to a lawsuit filed against the LLC (service of process).

The registered agent is required for a number of reasons. First, it helps ensure that important documents are received and handled in a timely manner.

Second, it provides business owners with peace of mind that their business’s legal documents are being handled correctly. Third, it allows business owners to focus on their core competencies and avoid dealing with paperwork that could cause serious issues for their company.

The registered agent can be you, a member or manager of the LLC, a friend or relative, or a professional service provider. However, it is often advisable to choose a registered agent that has experienced staff, understands the requirements and rules for business entities, and can ensure that important legal documents are delivered on time.

Taxes

Taxes are mandatory payments that businesses, individuals, and corporations must make to governments to help fund public goods and services — from schools and national defense to roads and infrastructure. Understanding what taxes you’ll owe and what options exist for reducing them can help you better manage your business finances.

The main type of tax an LLC pays is the income tax. Each member is responsible for paying income tax on their share of the business profits, whether they receive that money as a salary or as a distribution.

Many owners of LLCs elect to be taxed as a corporation (if the LLC qualifies). While it can be confusing and time-consuming, the benefits can be significant. Check with a CPA or tax professional to learn more about electing corporate tax status for your LLC.

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