Limited Liability Companies (LLCs) are attractive because they can offer small business owners personal liability protection and pass-through tax advantages. They also require fewer formalities and less paperwork than other business entities (specifically, corporations).
It can be a great choice if a sole proprietorship or partnership business type isn’t right for your business, but a corporation doesn’t fit, either.
Still, when you set up an LLC, ensuring that your legal documents are in order is essential. It’s not as simple as choosing a business name.
Read on to learn about the LLC formation documents you need to know about before you start setting up your business. Understanding what you need to do ahead of time will make the process much smoother. Let’s get started!
Essential LLC Formation Documents
There are several documents that go hand in hand with forming an LLC:
- Articles of Organization. This is the document required to formally register your LLC with the state. It includes basic information about your LLC, such as its name, address, and the names of its members. Filing this document makes your LLC a legal entity under state law.
- Operating Agreement. Although not always legally required, this document outlines the LLC's operational procedures and management policies. It helps prevent misunderstandings and conflicts within the LLC.
- Employer Identification Number (EIN). Issued by the IRS, it's like a Social Security number for your business. It's necessary for tax filing and reporting purposes. It also allows you to open a business bank account, hire employees, and handle payroll.
- Business Licenses and Permits. Depending on your LLC, various licenses and permits may be required to operate legally. These could include local business licenses, professional licenses, or health permits. Ensuring you have the proper licenses and permits verifies your LLC’s compliance with local, state, and federal regulations.
- Registered Agent. Every LLC must have a registered agent—a person or company that agrees to receive legal documents on behalf of your LLC.
- Organizational Meeting Minutes. A written record of what was discussed and decided during a meeting. They usually include the date and time of the meeting, who attended, the main topics discussed, decisions made, and any actions needed.
- Certificate of Good Standing.A document that certifies your LLC is registered with the state, can legally operate the business in that state, and is up to date on all compliance requirements.
Read on as we go into greater detail about each important piece of the LLC puzzle. We’ll also share a few other important documents your business may need.
Articles of Organization
Articles of Organization are an essential part of the LLC business formation process in every state. This document is sometimes called the Certificate of Formation, Certificate of Organization, or Articles of Incorporation.
Simply put, it’s the document you send to your Secretary of State with your business information. Once you file and pay the fee, they will process and approve your request.
You can file it online in most states or send it by mail.
In the Articles of Organization, you must provide details about your LLC. You will be asked for:
- Your LLC's name and business address
- The registered agent's name and address
Some states request:
- The names of all forming members and managers
- Whether your LLC is manager-managed or member-managed
- The business purpose and its planned duration
Once you file, it will get reviewed, processed, and approved. At this point, your business is officially an LLC!
Operating Agreement
Although an operating agreement is not required in every state, we think it should be! It’s a key tool for helping your LLC run smoothly.
A well-drafted operating agreement can prevent disagreements among members and set clear rules about how the LLC is run. It can even help protect personal assets, as it establishes separation between the members and the business.
We recommend creating an operating agreement even if you own a single-member LLC, and your state doesn’t require it.
This agreement includes details about the LLC's management structure, which explains:
- Who makes decisions, and how
- Each member's responsibilities and role
- Operational procedures, which cover the day-to-day operations of the business
- How profits will be shared
- What happens when members join or leave the LLC
- How the LLC will handle claims against the company and its managers
Note: the only five states that require an operating agreement are California, Delaware, Maine, Missouri, and New York.
The document does not need to be notarized, and you can find a template to create one for your LLC right here.
Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a 9-digit unique number given to you by the Internal Revenue Service (IRS) for tax purposes.
You will need an EIN whether you’re a single member LLC, if your LLC has multiple members, or even if your LLC hires employees. EINs are required across all business structures as of January 1, 2024. And they are required by most banks in order to open a business bank account.
The good news? Getting an EIN is a very straightforward process–and it's free! And LLC Attorney can help!
Business Licenses and Permits
When you start an LLC, you may need different business licenses and permits, depending on:
- The industry your business falls under
- What state your LLC operates from
These licenses and permits are essential -- they let you legally operate your business in your city or state!
To find out which licenses and permits you need, start by checking with your local city or county government office. Then check with your state government.
Remember: Different states have different requirements. This is especially important for businesses that handle food or are in construction/environmental services.
Be sure to get all your required licenses and permits before you start doing business to avoid legal problems and comply with state laws.
Registered Agent
All LLCs must have a registered agent, who is the primary point of contact for the business.
A registered agent receives and handles official documents on the LLC's behalf. For example, if someone sues your business, the registered agent receives that notice.
There are requirements that your registered must meet. They must:
- Be 18 or older
- Be reachable at a physical address in the state during business hours
When you choose your LLC's agent, you can appoint yourself or a trusted employee or hire a professional registered agent service. To document your registered agent, you’ll need to indicate who they are on your LLC’s Articles of Organization.
Organizational Meeting Minutes
Organizational meeting minutes are a detailed written record of the initial meeting held by the founders or initial members of a new corporation or LLC.
The organizational meeting establishes the initial structure of the corporation or LLC. This includes discussing the involvement of members and the operating agreement, as well as approving initial business actions.
Properly documenting the organizational meeting helps ensure compliance with state laws and regulations. This can be important for maintaining the business’s good standing and protecting its legal status.
These minutes serve as the official record of decisions made during the organizational meeting, providing a clear history and reference for future business activities. They provide a legal record of the business’s establishment, which can be needed in legal disputes or audits.
It helps ensure clarity and transparency within the business, which can be important for government compliance. They’re also a reference point for future decisions.
Maintaining detailed minutes (for all meetings, not just this initial one!) helps keep you compliant with state regulations and is a well-known business best practice.
Certificate of Good Standing
A certificate of good standing is issued by a state government agency, typically your Secretary of State’s office. This document verifies that your LLC is legally registered with the state and is in compliance with all state requirements.
The certificate includes elements such as the business name, formation date, confirmation of status, and indication that the business filed all reports and paid all required fees and taxes.
How to Obtain a Certificate of Good Standing
Submit a request to the agency that handles business registrations in your state (usually the Secretary of State) and pay the fee, which varies by state.
You can apply by mail or online in most cases. The processing time can range from a few hours to several days, depending on the state and whether you request expedited service.
Additional Considerations
Beyond just the basics that all LLCs should have, there are a few other pieces of documentation your specific business might need:
Local Zoning Permits
When you start an LLC with a physical location, like a store, restaurant, or office, it’s essential to check local zoning requirements.
Zoning laws decide what kinds of businesses can operate in different areas of your town or city. For example, some areas allow residences only, while others allow businesses.
To avoid legal issues, check these laws before you set up your business. If you don’t, you might have to move or face penalties, which can be costly and stressful.
You can find out the zoning rules by checking with your local city or county government office. They can tell you if your business is allowed at your chosen location.
Intellectual Property Protections
Protecting your LLC's intellectual property (IP) should rank very high on your list of priorities. Your LLC's IP is your identity in the market. If it's stolen, it can harm your business reputation and finances.
IP includes anything your business creates, like names, logos, inventions, and written works.
When you protect these with trademarks, copyrights and patents, no one else can use them without your permission. To protect your intellectual property, file through the appropriate government agencies.
Beneficial Ownership Information Report
Starting January 2024, LLCs need to submit a Beneficial Ownership Information Report when they're created.
Put simply, it's submitting identifying information about the owners of a company to the government.
The goal is:
- Making business ownership more transparent
- Preventing financial crimes like money laundering and fraud
When you file this report, you'll need to provide information such as member names, addresses, and the percentage of the business they own.
To file this report for free, use the Financial Crimes Enforcement Network (FinCEN) BOI E-Filing website.
This information is available only to law enforcement– it is not shared online or publicly.
Maintaining Compliance Post-Formation
The work doesn't stop after you form an LLC. There are important steps to ensure your business complies with legal rules, known as maintaining compliance.
One key requirement is filing annual reports. These reports give updated information about your LLC, such as addresses and the names of people involved. They keep your state government informed about your business's status.
Another part of staying compliant involves tax filings. Depending on how your LLC is set up for taxes, you might:
- Need to file a tax return for the business as well as a personal income tax return
- Make estimated tax payments throughout the year.
Note: changing your business structure can affect your tax status. For example, if you change your LLC from a partnership to S-Corp, your obligations can change.
You should also have annual meeting minutes, as well as meeting minutes any time a change is made to the business (like changing the company name or filing a DBA).
If you don't keep up with your obligations, you might face penalties or even be shut down by the state. Mark your calendar with important dates and consider working with a professional to stay on top of them.
FAQS
To form an LLC, you need to prepare and file the Articles of Organization with your state, create an Operating Agreement (recommended but not required in all states), obtain an Employer Identification Number (EIN) from the IRS, and secure any necessary business licenses and permits. You also need to appoint a Registered Agent who is available during business hours to handle legal and tax documents.
While not legally required in all states, an operating agreement is crucial for outlining the LLC’s management structure, operational procedures, and the distribution of profits. It helps prevent conflicts by setting clear rules for the business. States like California, Delaware, Maine, Missouri, and New York require an operating agreement.
Post-formation, an LLC must maintain compliance by filing annual reports with updated business information and complying with tax filings, which may include personal and business tax returns and estimated tax payments. Failure to adhere to these requirements can result in penalties or dissolution.
You should also keep annual meeting minutes, and meeting minutes whenever a material change is made to the business.
Starting January 2024, new LLCs must file a Beneficial Ownership Information Report, which includes details about the owners’ identities. This report aims to enhance transparency and prevent financial crimes. You can file it for free using the Financial Crimes Enforcement Network (FinCEN) BOI E-Filing website. You can also hire someone to do this for you. Other service providers charge for this, but it’s free at LLC Attorney.
