If you’re starting a business, you may be considering forming a limited liability company (LLC) and have heard that you need to file articles of organization. The articles of organization is a legal document you need to file with your state to form your LLC and become a legal entity. Depending on your state, it may be called a Certificate of Organization or a Certificate of Formation. It will specify details about your company and establish your LLC as a registered business entity in your state.
The document is similar to the articles of incorporation you would file to form a corporation instead of an LLC.
An LLC is a business entity that offers liability protection for owners, as well as pass-through taxation, much like a sole proprietorship.
How to File Articles of Organization
You can find your state’s articles of organization form on your secretary of state’s website, and in most states, you can file it online. The form and the filing fees vary by state, but all the documents generally require the following information.
- Company Name. You first need to search your secretary of state’s website to make sure the name you’ve chosen is not already taken. You also need to check your state’s business name regulations. For an LLC you must use LLC, limited liability company, or limited liability in your name. You also generally cannot use terms like “bank” or “insurance” in your name if that is not your business, nor can you use a name that can be confused with a government entity name. You should also check the US Patent and Trademark Office to make sure the name hasn’t been trademarked.
- Business Address. You need to use a physical address, not a P.O. box.
- Company’s Purpose. Some states require more detail than others in this section. In some states you can just say “to engage in lawful activity”, while in others you have to specify your specific type of business and what you will do in the course of business.
- Registered Agent Name. A registered agent is the person or company that sends and receives legal documents on behalf of your LLC. The registered agent can be a member of the LLC, or you can choose a third party such as an attorney, or a company that offers registered agent services. Most states require you to have a registered agent. The agent must be a resident of the state where you do business, or a corporation authorized to do business in your state.
- Member Names. The names of all the members of the LLC must be stated. The members are the business owners of the LLC.
- Manager Name or Names. There are two types of management structures:
- A Member-Managed LLC is managed by the members of the LLC. This is usually chosen by smaller LLCs with few members who will be involved in various management roles.
- A Manager-Managed LLC is managed by people who are not members of the LLC and are employees of the business. This structure is often used when an LLC is larger and has multiple members.
- LLC Start Date. In most states, you can choose a date that is within 90 days of the date that your LLC is approved, but generally, the start date will be the actual date that the LLC is approved by your state.
- Duration of the LLC. Generally, an LLC will go on forever unless you dissolve it. This is called a perpetual LLC. You can elect to have an indefinite LLC that will be dissolved on a specific date, or when a certain event occurs.
Once your LLC is approved, you are officially a registered business entity in your state. Your LLC may not be approved for some common reasons including:
- The LLC name is already taken
- You made errors or omissions in the document
- You failed to pay the required fee
Every state has its own rules and procedures for creating an LLC and articles of organization. To find out the requirements for drafting and filing Articles of Organization (also referred to as a Certificate of Organization or a Certificate of Formation) in your state, choose your state from the list below.
What Else Do I Need to Do?
There are some other important steps to take before you start doing business.
- Draft an Operating Agreement. An operating agreement is not usually required but is highly recommended. The operating agreement should clearly define the following:
- The percentage of each member’s interests in the LLC
- How profits and losses will be allocated to each member
- Each member’s rights and responsibilities
- The management structure and management roles of members
- The voting rights of each member
- Rules for meetings and voting
- What happens when a member sells their interest, becomes disabled, or dies
It’s a good idea to have an attorney’s help when creating your operating agreement so that you can be sure you’re covering all bases to protect all members and avoid future issues.
- Apply for Business Licenses. It’s important to make sure you’re in compliance with all laws at the local, state, and federal levels. It’s likely, depending on your location and type of business, that you’ll need business licenses and permits. Do some research to determine which licenses you need. At the very least you’ll need a sales tax permit to sell products and collect sales tax.
- Obtain an EIN. EIN stands for Employer Identification Number and is like a social security number for your business, allowing the IRS to identify your business easily. It is also known as a Federal Tax Identification Number (FTIN), or sometimes for corporations a Tax Identification Number (TIN). An EIN is required if your LLC has more than one member, if you plan to hire employees, or if you choose to have your LLC taxed as a corporation. The application is free and can be found on the IRS website. The application is form SS-4, and it can be mailed to the IRS or submitted electronically, and once your information on the application has been validated, the EIN is assigned immediately.
- File Annual Reports. Your state may require you to file annual reports for your LLC, which will involve a fee. Check with your state for requirements.
What If I Do Business in Other States?
If you plan to do business in other states, you will need to file articles of organization in those states to register as a foreign limited liability company. In your home state, you are a domestic limited liability company.
A foreign LLC is simply an LLC doing business in a state other than the one in which it’s registered. For example, if your LLC is registered in Alabama but you also do business in Georgia, you’ll need to register a foreign LLC in Georgia.
If you have an LLC in your home state but do business in other states, you need to register as a foreign LLC in all of the states where you do business. Each state has different rules defining what doing business in their state means. Check with the secretary of state in any states where you may be doing business to see if you qualify. Generally, you are doing business in another state if:
- You have a physical presence of any kind in that state
- You have employees in that state
- You regularly meet with clients, managers, or investors in that state
- You are licensed to do business in that state
You also may be considered a foreign business if your business has a bank account or property in that state.
However, if you are an online business in one state and happen to make a lot of sales in other states, you’re probably not considered a foreign business and thus not required to register a foreign LLC.
Starting a business is exciting, but it can also seem like a daunting process. Setting up your limited liability company by filing your articles of organization is the first step on your journey, and it’s not difficult to do. If you’re not sure if an LLC is the right business entity choice for you, it’s recommended that you consult with an attorney and tax advisor for guidance. To learn more about the benefits of forming a limited liability company, you can read this article by Step By Step Business.