The 5 Key Steps to Forming a Limited Liability Company
A limited liabilitycompany, or LLC, offers an appealing way to start and operate your own business
while keeping personal liability at bay. However, many people are unsure of how
to form an LLC and whether it’s the right choice for them. To help you decide
whether an LLC is the best legal structure for your business, this guide will
cover the steps involved in forming one and what to do after you’ve filed your
paperwork.
Step 1 - Choose Your Name
The first step in
forming your LLC is choosing a name for your company. This name should be
reflective of what your business does and be easy for customers to remember.
You’ll also want to make sure that the name you choose isn’t already being used
by another business. One way to check this is by visiting the Better Business
Bureau’s website, which has a database of registered businesses available for
review.
Step 2 – File
Articles of Organization: Once you’ve chosen your name, it’s time to register
with your state government as an LLC. There are different types of entities you
can form–S-corporation, C-corporation, partnership, or sole proprietorship–but
for this post, we’re focusing on the limited liability company.
Step 2 - Appoint Directors
To form a limited
liability company, you’ll need to appoint directors. This step is important
because the directors will be responsible for the management of the company.
They’ll also be in charge of ensuring that the company complies with all
applicable laws and regulations. When deciding who should serve as your
director, consider choosing people who have relevant experience or expertise.
You can always add new members later on if necessary.
Next, file your
articles of organization with the secretary of state’s office. If you want to
make changes at any point after forming your LLC, such as adding more members
or changing the company name, you’ll need to file an amendment certificate
according to a specific procedure. Finally, decide whether or not you want to
register for federal tax purposes.
Step 3 - Issue Shares
Once you have
registered your company with the state, the next step is to issue shares. This
is done by creating a stock certificate, which will list the names of the
shareholders and the number of shares they own. The shareholders will then sign
the certificate, which will be kept on file with the company. Issuing shares is
a key step in the formation of a limited liability company because it
determines who owns what percentage of the company. If there are three owners,
for example, each one would receive 33% ownership. If there are five owners,
each one would receive 20%. The formation of a limited liability company
formation can get more complicated if there are unequal percentages among the
shareholders or if different classes of shares exist (e.g., Class A, Class B).
Formation of
limited liability company formation typically happens before any financial
contributions to the company take place or any investments have been made.
However, this can vary from situation to situation based on how much money has
been raised from outside investors or the amount that an individual shareholder
has contributed towards capitalization.
Step 4 - Draft An LLC Operating Agreement
An LLC Operating
Agreement is a contract between the members of the LLC that outlines how the
business will be run. This agreement should include:
(1) The names of
the members and their roles in the LLC
(2) How decisions
will be made
(3) How profits and
losses will be distributed
(4) What happens if
a member leaves the LLC
(5) Any other rules
that the members agree upon.
The articles of
organization filed with the Secretary of State are not required to include an
operating agreement, but you should always have one drafted for your company.
The LLC Operating Agreement does not need to be filed with the Secretary of
State and can be kept private among the members. A person who wants to see it
must file a written request which must state the reason why they want to access
it. Members can’t share confidential information about the LLC without
permission from all members unless it’s public information or required by law.
Once these steps are completed, congratulations! You’re ready to register your
new LLC!
Step 5 - Obtain An EIN Number And Federal Tax ID Number
You will need an
EIN to open a business bank account and apply for business licenses. You can
obtain an EIN by filing Form SS-4 with the IRS. The form is available on the
IRS website or by calling the IRS. Once you have obtained your EIN, you will
need to obtain a federal tax ID number. This can be done by filing Form W-9
with the IRS. Again, this form is available on the IRS website or by calling
the IRS at (361) 748-0711. Remember that all correspondence from banks, credit
card companies, and other businesses will use these numbers so it’s important
to keep them up to date as your company grows.
Contact Us:
Address - 710 Buffalo St. Ste. 802 Corpus Christi, Texas 78401
Email - info@foreseeableresourcegroup.com
Phone - (361) 748-0711
Website - Foreseeable Resource Group, LLC
Blog - The 5 Key Steps to Forming a Limited Liability Company
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