Forming an LLC
Creating a Limited Liability Company (LLC) is a much easier process than creating a corporation and usually requires less preparation and paperwork. LLCs are under the authority of the state law. So the process of forming an LLC will depend on the state in which it is being filed. The majority of states require filing articles of organization with the Secretary of State, and some states will allow them to be filled out online. Just a few states require an additional step of filing a public notice, which is often in local newspapers. Once all of these steps are taken, the LLC is considered officially formed.
Once an LLC is formed, it’s good to set out the members’ roles and responsibilities. The members of the LLC are individuals with an ownership interest. Typically most LLCs will use an operating agreement to define these roles. If no operating agreement is created, an LLC is overseen by the state statutes’ default rules.
An operating agreement sets forth the responsibilities and the rights of all its members, and it can also define the business relationship and deal with capital structure issues along with the allocation of profits and losses, provisions for the buyout of a member, provisions in case of a member’s death, and other critical business considerations.