If you’re an entrepreneur looking to create your first company in the United States, one of the business entity options that’s likely the most appealing is the limited liability company (LLC) structure.
LLCs are a useful option for a couple of reasons. One, they provide owners with pass-through taxation. This means that owners can pass through business earnings to their personal tax returns, thus avoiding double taxation at the corporate rate.
Second, LLCs provide owners with liability protection. By filing an LLC, creditors cannot use an owner’s personal assets — such as bank account funds, a car, or a home — to satisfy the debts and obligations of the company.
To form an LLC, you’ll need to file Articles of Organization with your local secretary of state’s office. LLCs exist at the state level — not the federal level.
Below, you’ll find a complete guide to filing articles of organization. Not only will we describe what articles of organization are, but we’ll also review how to go about filing them.
What Are Articles of Organization?
According to Investopedia, articles of organization are part of a “formal legal document” used to create LLCs. LLC articles of organization are “used to establish the rights, powers, duties, liabilities, and other obligations between each member of an LLC and between the members and the LLC.”
You should also note that articles of organization are different than articles of incorporation. Although they contain similar basic information, the documents vary depending on the type of business entity you wish to register. Articles of organization are the legal filing document for LLCs, while articles of incorporation are the documents required when forming a corporation.
Where Should You File Articles of Organization?
The safe answer to this question is: anywhere where your business operates. If your company is conducting business in a state, you’ll need to file articles of organization in that area.
Some entrepreneurs choose to first file in the state in which their principal office is located. In many cases, your principal office could be your home or somewhere close by.
Another possible option is to file in Delaware. Delaware is home to more than one million business entities, including two-thirds of Fortune 500 companies. Do these businesses physically exist in Delaware? Not necessarily. But, Delaware is an attractive option for a few reasons.
First and foremost, Delaware has a court system designed explicitly for business entities. The court systems allow owners to settle disputes quickly.
Second, filing in Delaware could help minimize your tax burden. If the company exists in Delaware but does business elsewhere, the company will not have to pay state income tax in Delaware. Additionally, Delaware does not tax on:
- Royalty Payments
If you choose to open your LLC in Delaware, you’ll still need to register in the state in which you conduct business. Because Delaware is the first state in which you filed, you’ll be considered a “Domestic LLC” there. Other state governments will then recognize you as a “Foreign LLC.”
How to File Articles of Organization
If you’re ready to move forward and file articles of organization, you’ll want to make sure that you do so diligently. Otherwise, you’ll cost yourself valuable time and money by having to correct errors. Here’s a breakdown of how to go about filing articles of organization.
Visit Your Local Secretary of State’s Office
The first thing you need to do is visit the website of the secretary of state where you want to form your new LLC. There, you’ll likely find an online portal that will allow you to submit your business filings online. We highly recommend filing online if possible. Although response times vary from state to state, filing online tends to take a couple of business days, while submitting by mail can take weeks.
Once on the secretary of state’s website, you can begin filing the proper paperwork. Although the formatting may vary from state to state, the basic information that you’ll need to provide is consistent:
The first thing you’ll need to provide is your business name. When choosing the name of the LLC, you’ll need to include an “indicator” of some sort. This indicator represents the type of business entity you prefer. In this case, you’ll want to choose indicators such as:
- Limited Liability Company
Before you pick a name at random, you should check with your local secretary of state’s office to see if your intended name is already in use. Many secretary of state offices provide a search tool to see if your intended LLC’s name is taken.
Also, keep in mind that you will always be able to operate under a different name. For instance, imagine a restaurant owner — we’ll call him Bill — who operates three different restaurants. Instead of registering each restaurant as a separate LLC, he can file “Doing Business As” forms to indicate a name change. So, the restaurants “Steve’s Seafood Shack” and “Melted Cheeseburgers” could both fall under the jurisdiction of “Bill’s Restaurants LLC.”
Principal Office Address
The next thing you’ll need to provide is your principal office address, which is the street address for your small business. This location does not have to be anything fancy — it could be your home if need be. However, you need to make sure that the address of the LLC is legitimate and that you have access to it.
Registered Agent Information
The registered agent is one of the most critical aspects of LLC ownership. The registered agent is the point of contact for the business. This person is responsible for accepting all legal correspondence on the company’s behalf. Not only do you need to provide the name of the registered agent, but you also need to provide a mailing address as well.
The LLC’s registered agent must be present at this mailing address during regular business hours. Therefore, the registered agent address cannot be a P.O. box. It’s also possible for the registered address to be different from the principal office address.
Some states allow one of the LLC members to serve as the registered agent, while others require you have to have a third-party do so. Regardless, the registered agent should be someone who you can trust. This is especially the case if you register somewhere where you’re not present. For instance, if you form your LLC in Delaware, you’ll still need to have a registered agent there to serve on behalf of your company.
Information About LLC Members
The next thing you’ll need to provide is information about LLC members. This section typically requires you to list the name and title of all founding members. You’ll likely also need to list contact information as well, including email addresses, phone numbers, or both. If you’re forming a single-member LLC, all you’ll need to do is provide your personal information.
The last piece of information you’ll need to provide is the effective date of the company. This is the date in which your company will start and stop operations. Typically, business owners will indicate that there is no defined lifespan for the company.
After marking the effective date, you can review the document for accuracy. Verify that the information you included is correct. If any information is incorrect, the secretary of state’s office will reject your filing. Upon verification, you can sign and submit your articles of organization.
When submitting your paperwork, you’re also going to need to include a filing fee. Filing fees can vary drastically from state to state. We recommend researching filing fees beforehand so that the final cost does not blindside you. You’ll also need to include filing fees in every state where you submit articles of organization, including those where you register as a Foreign LLC.
Create Your Business Today
Even if you’re a freelancer with a side hustle, it could be in your best interest to register as a limited liability company. Doing so could protect you in case anything were to go wrong with one of your projects.