A limited liability company (LLC) is a common legal entity for small businesses as it gives the business owners liability protection. It shields the business owner from the liability arising from the firm’s business debts and claims. For instance, if the firm fails to pay the loan, the bank can only sue the company and reach only the organization’s assets. The bank cannot take the personal property due to default in paying the loan as it means anything owned under your name will not be considered in such instances. The formation of this type of business varies in every state, but the same general principles are followed.
Some of the documents required to form an LLC include:
- Articles of organization
The article of the organization is one of the mandatory requirements during the formation of this form of company. It entails basic information about the business, such as:
The business name
The business’s name is unique and should not conflict with the name of another corporate already registered in the state. The title should be original. After you have decided on the name, approve if it has met the state requirements. Most will allow paying a nominal fee to reserve the company name until the formation process is completed.
The location of the business
It entails the physical location of the business. The business plan should indicate the street’s name where the company will be located.
The business registered agent
This entity will accept the official papers and the authorized documents on behalf of the company as it entails the renewals notices from the state and other copies related to litigations. The agent should be positioned in the state where the company is registered and have a physical street address.
- Operating agreement
Some states may request the operating agreement. It outlines the company’s financial and functional decisions. The business plan can be of great help when creating the operating agreement. The agreement outline how the business decides to be taxed and how new members will be admitted to the company. After the members have signed the documents, it becomes a legally binding contract. The operating plan entails the following:
The document should outline the ratio on which profit and loss are shared among the members.
You will be required to illustrate the proportion in which the members will share both the profit and loss. In most instances, the ratio will be based on the percentage of ownership. For example, if you own 60% of the business, you will get 60% profits and losses.
The voting rights
The voting rights illustrate how the officials will make critical business decisions. The company can decide whether the findings will be based on the majority vote or an agreed conclusion.
Dissolution of the company
Circumstances that can lead to the dissolution of the company include bankruptcy, involvement in illegal activities, or an agreement from the members to dissolve the company.
Compliance with the local requirements is also mandatory before forming the company. The required local licenses and registration documents should be completed and submitted to the authority.
In conclusion, starting an LLC requires some vital documents. The above article shows some of the mandatory documents required in most states.