Crucial Forms for Your LLC: Articles of Organization and Operating Agreements
by NicoleD, Former Moderator
- Created: June 2, 2010, 12:45 pm
A limited liability company is a hybrid-type of legal structure that provides the limited personal liability features of a corporation with the tax efficiencies and operational flexibility of a partnership. Each state has specific guidelines for forming an LLC, but they all adhere to the same general principles.
No matter where your LLC is located, two documents are crucial to its success; the articles of organization and operating agreement:
The Articles of Organization is a simple document that legitimizes your LLC and includes information like your busines-s name, address, the names of its members, and if necessary, the name and address of a registered agent who is authorized to accept legal documents on behalf o the business. The form is provided by and filed with your stat-s LLC office, typically the Secretary of State. There is usually an associated filing fee, but that varies with each state, and is usually tax-deductible. Choose a state to find out about specific filing requirements in the state where your business will be formed. Your LLC is legally formed once your articles of organization are approved by your state.
An Operating Agreement is one of the most important documents used by LLCs because it structures the business's financial and functional decisions. The purpose of an operating agreement is to govern the internal operations of the business in a way that suits the needs of its members (owners). Typically, an operating agreement includes a breakdown of member' ownership percentages along with each membe's responsibilities, powers, and duties; an explanation of how of profits/losses will be distributed; a description of how and when meetings will be held; and the procedures for buying out/transferring interest when members leave the LLC. Once the document is signed by the members, it acts as an official contract binding them to its terms. Unlike articles of organization, operating agreements are not required by every state, however it is widely suggested to create one, even if your state does not mandate it. Learn more about operating agreements on Business.gov.
Writing the Documents
A qualified small business attorney can help you draft your articles of organization and operating agreement. For guidance on how to find a small business attorney, read on at Business.gov.
Small business owners are not required to have a lawyer draft or approve of filing documentation. You can create your own documentation by doing some research and taking advantage of templates. Check with your state filing office or online for samples. For peace of mind, you can find an attorney to review your drafts if you choose to write the documents yourself.
For more information on setting how to legally establish an LLC, read Business.go's LLC Formation Guide. For even more tips, the article LLCs Explained' A 101 for Small Business Owners offers FAQs to help you ascertain whether becoming an LLC is right for you, and provides pointers on managing your business and legal obligations once you are established as an LLC entity.
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