How To Establish A Limited Liability Company

By Author: Keith Seitz
Total Articles: 12
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Generally, the statutes contain similar basic procedures and elements that are required to establish the LLC.

While an LLC is very flexible in nature and has broad possibilities in its structure, operation, management, as well as other areas, each state has certain mandatory provisions and default provisions. Mandatory provisions are those rules that must be complied with and default provisions are rules that take effect if the LLC's Certificate of Formation or Operating Agreement do not address.

Since all fifty states and the District of Columbia have LLC statutes, most businesses can be organized as an LLC in any of those jurisdictions, but laws governing LLCs can vary by location. In deciding where one should form an LLC, one should consider factors such as the formation cost, state tax laws and business laws, and whether it will be necessary for the LLC to qualify/register to conduct business in one or more other states. Forming an LLC in a state different from where the LLC will operate is permissible since every state will recognize a foreign LLC (an LLC formed in another state) and will allow the LLC to ...
... conduct business within the state. However, each state will typically require the foreign LLC to register (generally by filing an application for certification of authority), maintain a registered agent, and pay certain fees.
Organizing in a state different from where the LLC will operate could lead to additional problems and costs. Typically, additional organizational and registration costs and fees will apply. For example, if an LLC operates a business in the state of Colorado but was organized in the state of Delaware, the LLC will incur dual costs (formation costs in Delaware and the cost of qualifying the LLC to do business in Colorado).

Each state has different requirements regarding qualification. The State of New York, for example, requires LLCs to publish a notice in two local newspapers specifying the details of the limited liability company within 120 days after filing. That notice must run for six consecutive weeks.

Generally, LLCs must file separate tax returns for each state in which they do business based on the income generated in each state, regardless of where the LLC was formed. Note: tax rates, required tax forms, and the amount of income that must be reported may vary by state.

Several states will impose other types of taxes on the LLC such as annual fees, filing fees, franchise fees, and other fees.

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