Forming the LLC or Corporation
The limited liability company (LLC) and corporation are creations of law, and as such, a number of legal requirements must be satisfied to formally establish your business entity.
First and foremost are the articles of organization, which lay out the specific formal structure of the business. This "blueprint" of the company is filed with the state in which your business will be formed.
Next is the foreign registration certificate, another state-mandated requirement if you plan on doing business in a state other than the one in which your business is formed.
Of course, with each of these filings comes a state fee. These fees vary by state and by company size/structure.
In addition, to seal the state's jurisdiction over your business and operations, you will need to name an agent for service of process. In essence, this is the company's point person in dealing with that state's legal matters. You will need to name a resident for each state in which you do business. There are several businesses that, for a fee, will act as your agent in every state.
And while only required by law in a corporation, an operating agreement among the business's owners is highly recommended for all business forms. It clearly spells out the division of ownership, labor and profits, and often heads off disputes among the owners.
Taken together, all of these filings and requirements make up the legal, formal structure of your new business entity. Anything not addressed in these documents will be covered by a set of default statutory laws instituted by the state.
So before drafting articles of organization or an operating agreement, the small business owner should always read the state statute that will govern the entity. State statutes can differ significantly. Remember that the statute for the state in which the entity will be formed will govern the entity's internal affairs.
Professional guidance is always recommended. Unfortunately, many small business owners seek legal guidance only after they have created an entity through the filing of articles of organization, perhaps at a point where they are considering an operating agreement. However, certain provisions must be created in the articles of organization, as opposed to the operating agreement (e.g., waiver of a board of directors in a statutory close corporation). Thus, legal guidance should be sought before the articles of organization are drafted, unless the small business owner has read the applicable state statute and is absolutely sure that he has incorporated any desirable provisions into the articles.
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