As far as business entities go, none may top the advantages of an LLC, or Limited Liability Company. Owners of LLCs get the personal protection and lower taxes of corporations without the tedious paperwork and legal obligations. LLCs have much less requirements for formation as well. Corporations must issue stock, draft bylaws, file reports, and hold several meetings in order to start doing business. The journey of establishing an LLC, on the other hand, technically amounts to just one task: filing your articles of organization.
Many prefer to think of articles of organization as an application for state recognition. Your LLC does not officially exist until the state approves the document. But you can’t complete each section without the necessary information. And once you receive approval, you must also understand how to maintain your legal status year after year.
In this guide, we’ll explain how to complete and file your articles of organization along with how to remain organized and legally compliant.
What are Articles of Organization?
If you intend to form an LLC, you must file articles of organization to your home state’s business filing agency and pay the required fee. Usually just two to three pages in length, articles of organization include general information about your business such as its name, address, and business purpose.
What’s Included in the Articles of Organization
Each state has its own variation of the document with its own minor details. But regardless of your business’s location, you will need the following general information at the very least:
- Your LLC’s name
- Your LLC’s address
- Business purpose: The level of specificity for this section varies from state to state. You’ll probably just have to provide an overview of your products or services. Some states might ask for more detail, while others allow you to simply choose “for all legal purposes” as your description.
- Start date: It’s possible to have already begun selling your products or services even though you have not earned the status of an LLC. If so, contact your state’s business filing agency and explain the situation. Some businesses leave this section blank to denote that they will start doing business once the document is approved by the state.
- Name and address of the registered agent: This person or company must have an address in your business’s home state and be able to receive standard mail during normal business hours. We’ll delve further into the registered agent’s responsibilities later on.
- Name and signature of the organizer: This refers to the individual responsible for filing the actual document. You can choose to hire someone to file or leave it up to one of the business owners.
Depending on your state, you might have to include the names and addresses of each owner, or “member” (the technical term for owners of LLCs).
Some states also have separate articles of organization for professional LLCs (LLCs owned by licensed professionals like doctors, lawyers, accountants, etc.) If your state does not have this separate form, you must specify this categorization somewhere in your articles of organization.
What to Know Before Filing Your Articles of Organization
At first, the information mentioned above seems fairly simple to come up with. But at least two sections require considerable thought. And since filing marks the final step towards becoming official, you must check off every other requirement for legally selling your products and services before completing the document.
Here’s everything you need to know by the time you sit down and fill out your articles of organization:
Choose Your LLC’s Name
Most states have the same three requirements for the name of an LLC. First, the name must end with “LLC” or “Limited Liability Company.” The name also cannot include words associated with highly regulated industries, like “insurance.” And lastly, your LLC cannot have the same name as another LLC located in your home state.
To ascertain if your desired name does not already belong to another business, check your state’s online database of available business names. These days, however, you can probably find your answer by simply checking popular directories like Yelp or the Better Business Bureau.
Next, reserve your desired name by contacting your state’s business filing agency and paying the required fee. The length of the reservation (i.e. 30 to 60 days) may depend on the size of your payment. You can skip this step if you’ve already completed your articles of organization.
Choose Your Registered Agent
Your registered agent, or “resident agent” receives legal documents and other official mail on your LLC’s behalf. Business owners can get extremely busy, so much so that they misplace or forget to open important paperwork. The registered agent can handle these documents with little if any involvement from the business owner. You could even say that the registered agent exists primarily to prevent the business owner from claiming he or she was “too busy” to respond to legal notices.
If you reside in the same state as your business, you can name yourself (the business owner) as registered agent. But remember: appointing yourself would mean that in addition to your other day-to-day responsibilities, you would have to personally respond to virtually all important paperwork. If you don’t want this responsibility, you should give the job to your business attorney. You can change your registered agent as long as you inform the state of the new agent’s identity and home address.
Obtain the Required Licenses and Permits
Almost every type of business must obtain some sort of licenses and permits. Applying for the required documentation essentially represents your first step towards legitimacy.
At the very least, you’ll need local and state business operating licenses, which allow your business to legally operate in your city and state. Then you have your sales tax permits, which allow you to collect, report and pay sales taxes on your products or services. If you’re not sure which licenses and permits your business requires, contact your city’s business license department and visit your state’s government website.
How to File Your Articles of Organization
At this point, you should have your LLC’s name, registered agent, and all of your required licenses and permits. This means you’re finally ready to send your articles of organization to your state’s business filing agency.
Your state might have specific rules for filing. So, contact the aforementioned agency (or your secretary of state’s office) to make sure there’s nothing else you have to do.
Then, you can either file your documents online or via standard mail. For the former option, most states have systems that let you input information in an online form and file afterwards. You must also pay the required filing fee, which can range from $50 to $200, depending on your state.
If the state approves your document, you will receive a certificate of formation in addition to another copy of your articles of organization. The state will keep the original copy on file. It usually takes the state approximately one to two weeks to process articles of organization. For an additional fee, however, you can trim that time frame down to under one week.
Businesses located in New York and Arizona must take one extra step for legal recognition: publishing the establishment of their LLCs in local media. Most states require new corporations to do the same thing.
What to Do After Filing Your Articles of Organization
Aside from obtaining the required licenses and permits, the legal journey of establishing an LLC ends after receiving approval for your articles of organization. Maintaining your status as an LLC, however, involves at least one more task every year. And though you have no legal obligation to adhere to the best practices for running an LLC, it’s much harder to get your business off the ground without them.
Here’s everything you have to do after receiving approval for your articles of organization:
Draft Your Operating Agreement
This legal contract outlines the responsibilities of each owner along with the amount of money each owner has invested and the executive chain of command. You could even say that after their articles of organization, the operating agreement is an LLC’s most important document. For that reason, it’s recommended to draft the document with the help of your business lawyer and use tremendous detail when explaining the organization’s structure.
Apply for an EIN
If your LLC has employees, you need to apply for an employer identification number (EIN). This number allows the IRS to tax your business as an LLC. There’s no charge, and you can complete the application on the IRS website in just a few minutes.
Comply with Annual Obligations
Each state has its own laws for LLC reporting and tax filing. In most states, LLCs must file annual reports and pay an annual fee. The report states your LLC’s income, financial activities, and the names of the owners.
And despite their status as pass-through entities, some states do have an LLC tax on the business’s income. In most states, owners only pay taxes on their allocated shares of the business income, and at their personal income tax rate.
Be Prepared Before Filing Your Articles of Organization
As you can see, filling out and filing your articles of organization doesn’t take much time. What can take time, however, is figuring out exactly what kinds of licenses, permits and annual obligations are required by your city and state. Once that’s out of the way, you can get right into launching your business right after receiving approval.