A Complete Guide to Setting Up a Limited Liability Company
Aside from complicated tax laws that govern how a limited liability company and a corporation can take deductions and/or declare income, the two chief differences between them are that a corporation must hold annual meetings, keep minutes of those meetings, and issue stock, while an LLC does not. Both company types insulate owners from personal responsibility for debts.
Although limited liability companies are rather new in the United States, they've been popular for much longer overseas. In Germany, for example, one will find many more titles of Gesellschaft mit beschr?nkter Haftung, or Gmbh, which means limited liability company, rather than Akteingesellschaft, which means "incorporated corporation." In any event, anyone who is forming an LLC with international aspirations should become aware of the laws of different countries.
Forming an LLC
Forming an LLC is not difficult. Of course, there is a lot of paperwork, but most of it is just time-consuming rather than demanding. To begin, a person forming an LLC must choose a unique name that ends with the term "LLC." Some states maintain a list of prohibited words, such as corporation, bank, etc., so business people should check with their state to make sure the business name qualifies.
After that, one must file the applicable forms with the state in question. If the company is going to be operating in multiple states, the business owner must file a form in each state. The filing fee for doing so varies by state, so it's a good idea to check with the applicable state agencies before beginning. Also, if there are going to be multiple owners or officers of the new limited liability company, they must choose one of their number to be the "agent of the LLC." This person would receive all legal and business-related communication should there ever be a lawsuit against the LLC.
The Operating Agreement
Although it's almost never required by law, it's almost obligatory to have an operating agreement. It outlines such potential sticking points as each member's:
Responsibilities in running the business
Percentage of ownership
Share of profit and/or loss
Wishes should he or she die, become disabled or incompetent or sell his or her share of the company
Even if no one leaves the company, the agreement should also detail procedures for bringing new members on board.
Announcing the Company
In some jurisdictions, new companies must publish news of their inception and founding in any local newspaper. Such publications are required over a period of several weeks before the business opens its doors. Eventually, the business must file with the local LLC filing office. Most newspapers will help with the process.
Permits and/or Licenses
Also before the doors open, the business must ensure it's allowed to operate in its area. Different classes of businesses have various requirements; some need an officially issued business license, while others need only a tax-identification certificate. Still others might only need a permit to sell their items. Some states require a combination. In all cases, it's best to contact the state licensing authorities to get all the information and requirements beforehand.