How to Form an LLC

Written by Brenda Stokes for Gaebler Ventures

Having a Limited Liability Company (LLC) means being able to limit your personal liabilities and is worth the time, effort, and the money to establish this business structure. But what is the procedure?

The procedure to form a Limited Liability Company, or LLC, may seem rather extensive, but it is worth the time, effort, and money to make it happen.

How to Form an LLC

An LLC is not a corporation, nor is it a partnership. However, many of the advantages are the same. Such advantages include not being personally liable for the losses of the business.

What an LLC does is keep you from having to use your personal assets to satisfy the debts of the business. You and all "members" within the LLC are protected. And speaking of members, you can have as many as you like, unlike a corporation that limits how many members you can have. However, members must approve if you will be transferring interests in the company to another party.

How to form an LLC

As difficult as forming an LLC may seem, it is not impossible. Here is how you can form an LLC:

  • Choose a name that adhere's to the state's LLC rules. The rules state that that you cannot have a name that is identical to another LLC's name. The name must also end with "LLC" because this tells the public that they are dealing with a Limited Liability Company and not a corporation. Words such as corporation, city, insurance, or bank cannot be included in the name. You will have to consult with the state's LLC office to make sure the name you want is not taken.
  • File the paperwork required by your state. The paperwork is frequently called "articles of organization." You will also need to pay a filing fee that can cost up to $800. The fee depends on your individual state's rules.
  • You then create what is called an "LLC operating agreement." This outlines the rights and responsibilities of the LLC members.
  • Only a few states require that you publish a notice of intent.
  • You will need to acquire all of the licenses and permits that your business requires.

Articles of Organization

The Articles of Organization requires that you have filing fees, required information, and a registered agent within your business who can act on the LLCs behalf. The fees are usually not more than $800, which is what California charges, while most states charge just $100.

As far as the document preparation, they can usually be completed in just a few minutes. You fill in blanks and check boxes. Of course you'll provide basic business information. You will need to establish an agent within your business who can speak on behalf of the business. Being that there can be so many members, only one person needs to do the talking.

Once you have all of your paperwork complete, you are able to carry on with your business. You can then not worry that your personal assets would be affected if something negative were to happen to the business financially. Through a partnership or sole proprietorship, any debts must be satisfied and your personal assets could be affected in order to satisfy that debt. An LLC protects you from this.

Brenda is a graduate of California State University and a professional writer covering a variety of business topics. To learn more about Brenda, check out her website at The Digital Inkwell.

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