LLC Articles of Organization FAQ - United States

LLC Articles of Organization FAQ - United States LLC Articles of Organization FAQ - United States What is a Limited Liability CompanyWhat is a Limited Liability Company (LLC)?A limited liability company (LLC) is a business entity that enjoys the attractive features of both a partnership and a corporation. It is similar to a corporation in that the liability exposure of individual members is limited to what each member has invested in the business. In addition, an LLC can be structured to be taxed only at one level, similar to a partnership. Like a partnership, income passes through and is taxed against individual members as personal income. The exact tax implications of an LLC will vary between jurisdictions. You should consult a tax professional if you are uncertain how to proceed. An LLC can be managed by members or by a management team. What is an Operating Agreement?An Operating Agreement is an agreement between the Members (owners) of a Limited Liability Company. The Operating Agreement is a very important document that governs the operation of the LLC and protects you and the other members of your LLC by describing the rights and obligations of the Members to each other and to the LLC. It is similar in function to a Partnership Agreement. The LLC Operating Agreement is NOT the document you file when creating an LLC. The filing document for an LLC is called the Articles of Organization. What is the difference between a Partnership and an LLC?An LLC can be structured to be taxed in the same manner as a partnership however the owners or partners of a partnership are jointly and severally liable for the debts and obligations of the partnership. This means that if the other partners are unable to meet their obligations to the partnership then each partner could be potentially responsible for the full amount of the debts and obligations of the partnership. In contrast to a partnership, the liability of the owners or members of an LLC is limited to the amount of capital investment each member has contributed. How do I register a Limited Liability Company?How are Limited Liability Companies created?A limited liability company must be registered in the relevant jurisdiction. This is accomplished by preparing and filing a document called the Articles of Organization. The Articles of Organization must conform with the reporting requirements of the jurisdiction. All states have a blank copy of the Articles of Organization available for download on the state website. The operating agreement is a separate document and is an agreement between the owners of the LLC. The operating agreement outlines the terms under which the owners will interact as members of the LLC. The operating agreement does not have to be filed with the governing jurisdiction. How does a Limited Liability Company end?The parties can expressly agree that a LLC will end at a specified date, or upon completion of certain tasks. Absent an agreement to the contrary, members of an LLC can make a written submission to the other members to have themselves withdrawn from the LLC. An operating agreement should protect the LLC and the remaining members from the withdrawal of an essential member. If the voluntary withdrawal of a member offends a term of the operating agreement then the withdrawing Member may be liable for any damages suffered by the LLC or remaining members. Where do I file my Operating Agreement?You do not file your operating agreement. The operating agreement is simply an agreement between the owners of the LLC (the Members). To register an LLC you must prepare and file a document called the Articles of Organization. All states have a blank copy of the Articles of Organization available for download on the state website. ManagementHow is an LLC managed?An LLC can be managed by the Members (the owners) or by one or more managers hired for that purpose. Who are the Members of the LLC?The Members are the actual owners of the LLC. They will provide capital, assets or a primary service to the LLC and in exchange will receive an ownership interest in the company. DefinitionsWhat is a 'governing authority'?The Governing Authority refers to the persons or organizations that will be managing the day-to-day operations of the LLC. The governing authority could be the members(the owners of the LLC) or it could be hired managers. What is meant by Service of Process?Service of Process refers to the official delivery of any court pleadings or claims. Where a person is physically handed court papers, the recipient is said to have been served. A registered agent will receive legal and tax documents on behalf of the company and is also tasked with receiving any service of process on behalf of the company. What is meant by Capacity to enter contract?In general, Capacity to enter contract means that a party to a contract is of the age of majority and has the mental ability to understand the terms and obligations of a contract. What is meant by a Professional Limited Liability Company (PLLC)?A Professional Limited Liability Company (PLLC) means any LLC that performs a service that requires obtaining a license from the state. (e.g. architect, attorney, certified public accountant, dentist, physician, public accountant, or veterinarian). Usually the company is limited to performing one type of professional service, and services related to that service. The company may perform more than one professional service if the combination of services offered is authorized by the appropriate licensing authorities. Managers or Members of the company must be duly licensed to perform the professional service in that state. What is a Tax Matters Partner?The Tax Matters Partner (Member) prepares and submits all tax returns and reports as required by the taxation legislation. What is an Operating Agreement?An Operating Agreement is an agreement between the Members (owners) of a Limited Liability Company. The Operating Agreement governs the operation of the LLC and defines the rights and obligations of the Members to each other and to the LLC. It is similar in function to a Partnership Agreement. The LLC Operating Agreement is not the document you file when creating an LLC. The filing document for an LLC is called the Articles of Organization.