The limited liability company (LLC) is a popular entity structure among small business owners that provides governance and taxation flexibility and shields personal assets from business liabilities. To enjoy the benefits and legal protections of an LLC, however, owners must register their company with the state by filing articles of organization (sometimes called a certification of organization or certificate of formation).
Along with its operating agreement, an LLC’s articles of organization are a formation document that establishes the company as a distinct legal entity, separate from its owners. This distinction is crucial because it underlies an LLC’s limited liability protection. Articles of organization also contain basic information about the business, such as its name, location, purpose, and management structure.
Required Information for Articles of Organization
Articles of organization act like a business charter. They officially form the LLC with the state and serve as the company’s legal and structural backbone. Because LLCs are statutory entities, they are legally formed only when articles of organization have been filed and approved.
While articles of organization are only a couple of pages long, they contain essential information about the business. Each state’s law outlines the information required in the articles of organization, which typically includes the following:
- the LLC’s name and business address
- business purpose of the LLC
- whether the LLC is to be member-managed or manager-managed
- names and addresses of owners/members (if member-managed) or managers (if manager-managed)
- name and address of the LLC’s registered agent
- name and signature of the person filing the articles (i.e., the organizer, who may or may not be an LLC owner; the organizer could also be a third party, such as an attorney)
- effective start date (if different than the filing date)
States may have a form for filing LLC articles of organization. In those states that do not, an attorney should be consulted to draw up the articles in accordance with state law. Even if a filing form is used, consulting with an attorney is prudent to ensure that the articles of organization are properly drafted.
How to File Articles of Organization
Articles of organization are filed with the appropriate state government agency. This is often the secretary of state, but it may be a different agency, such as the division of corporations or another business filing agency. States usually provide an online filing option through a government website. They typically charge a filing fee ranging from $50 to $200.
After articles of organization are filed, the state agency will review them. If they are approved, the state issues an official document verifying that the company meets LLC statutory requirements and is authorized to conduct business there. This document may be called a certificate of existence, certificate of good standing, or certificate of authorization. It is commonly needed to open a business bank account, apply for a business loan, contract with other businesses, and register an LLC in a different state. The state may also require the LLC to publish a notice in a local newspaper announcing its formation.
The state could reject the articles of organization filing for reasons such as incomplete paperwork, failure to pay the filing fee, an invalid registration address, or failure to comply with the state’s statutory filing rules. Check state law or get in touch with an attorney before filing to ensure that the document meets all requirements.
Articles of organization can be revised once the state has accepted them. This might be necessary if information in the articles changes, such as the business address or registered agent address, the management structure (e.g., from member-managed to manager-managed), or the name of the LLC. The amendment is filed with the same agency that the original articles were filed with. Expect to pay an additional processing fee for the amended articles.
Additional Steps for Forming an LLC
According to the U.S. Small Business Administration (SBA), articles of organization are one of two foundation documents for LLCs. The other is the LLC operating agreement, which defines the structure of the company’s finances, functions, and decision-making processes, as well as each member’s duties, powers, and obligations.
Not all state LLC laws require an operating agreement, but it is highly recommended. Without an operating agreement, the company lacks a roadmap for how to handle issues such as transfer of interests, voting rights, distribution of profits and losses, the retirement or death of a member, whether and how members may sell ownership shares, member conflicts, and succession planning. In the absence of an operating agreement and bylaws, the LLC would be forced to follow default state operating laws.
The SBA also notes that, while registering an LLC with the county or city government is not usually necessary, LLCs may need to file for licenses and permits from local governments to operate legally. Forming an LLC can also include the following other steps:
- applying for an employer identification number (EIN) for federal tax purposes
- registering with the state tax agency
- opening business bank and credit card accounts to separate business and personal finances, which helps to maintain the LLC’s liability shield
- setting up a merchant account for payment processing
- publishing a public notice of formation
- registering as a foreign LLC in states outside the state of organization where the company intends to conduct business
- determining how the business will be taxed (e.g., as a sole proprietorship, partnership, or corporation)
- filing an annual report and paying an annual tax or fee
- purchasing insurance to protect the business and its owners
- filing a report disclosing certain information, including the beneficial owners of the LLC, with the federal government under a new law called the Corporate Transparency Act (effective January 1, 2024; if the LLC is formed before January 1, 2024, the initial report is due by January 1, 2025)
- obtaining tax and legal guidance
This last step is crucial to your business’s success. Without professional legal advice, you could end up making a mistake that jeopardizes your LLC before it even gets started. As your LLC matures, you may need legal help regarding contracts, employees, intellectual property, conduct policies, bylaws, taxation, banking, growth, litigation, and other issues.
Articles of organization are just the beginning of your business journey. Wherever the road ahead takes you, our attorneys are here to help you navigate it. Small businesses are the heart of our local economy, and we want to make sure you are supported at every step. To speak with a lawyer, call or email us to schedule an appointment with one of business attorneys like David Koukol.
