Thinking of starting a limited liability company? This checklist gives you several issues to think about as you launch your new entity.
The limited liability company entity form resembles in many aspects a partnership – both in the way it is likely going to be taxed and in the nature of the documents required to document the relationship of the owners. A limited liability company exists when a state accepts the articles of organization filed on behalf of the entity and issues a certificate of organization.
State governments require certain minimum information to file for the creation of a limited liability company and the entity form enables considerable confidentiality. At a minimum, the articles of organization filed in the Commonwealth of Virginia must contain a proper name for the entity, information about the entity’s registered office and registered agent, and information about the location of the principal office of the entity.
If you are forming a limited liability company, here are some items to consider:
- Decide upon a name. Keep in mind that the state law provisions exist to prevent confusion on names, so you need to check for other similarly named entities. A limited liability company in Virginia must include one of the following words: “limited company,” “limited liability company,” or one of the following abbreviations: “L.C.,” “LC,” “L.L.C.,” or “LLC.” Other statutory provisions might also govern the selection of a name, such as if a limited liability company is organized by members of certain professions.
- Select the state of organization.
- Determine where the principal place of business for the limited liability company will be located.
- Review optional provisions for the initial filing (or leave to the operating agreement), such as:
- Management structure
- Limitation of liability
- Contributions of a member
- Sharing of profits and losses
- Sharing of distributions
- Determine who will be the “organizer” (who does not need to be a member) and file the appropriate form with the state office.
- Following the issuance of the Certificate of Organization, organize the limited liability company by holding the organizational meeting of the Board of Directors.
- Draft the Operating Agreement (which involves considerable thought to the relationship of the owners financially, governing and sharing distributions.
- Determine member ownership ledger.
- Determine whether the limited liability company will have corporate tax status.
- Determine if the limited liability company will need to qualify to do business in other states.
Several significant issues remain following this initial step. Consider whether the limited liability company needs any particular local business licenses. Filing the Articles of Organization and obtaining a charter to exist are only the beginning.
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