Many entrepreneurs give preference to a limited liability company when launching their business and for a good reason. This relatively new type of legal entity is a great model well adaptable to different activities, operations, and projections. It’s easy to establish and manage, and its flexibility is hard to underestimate. That’s not to mention the limited liability protection, which is the main ace down the LLC’s sleeve.
If you’ve chosen an LLC to start your business too and stand on the verge of the formation process, chances are great you’ve already heard the term “the Articles of Organization”. It’s the main LLC’s document legally establishing the company as an independent business entity. The instrument is a must-have for officially registering an LLC. So, it should be diligently and correctly executed and cover all the necessary info to be approved. Want to learn more about it before delving into LLC creation? If so, keep on reading our overview below.
Understanding the Articles of Organization
This document has many names. Along with the Articles of Organization, you’ll come across a Certificate of Organization and Certificate of Formation. Yet, the point stands the same. The document evidences the act of LLC formation, which means your company is registered once the Articles of Organization are approved. Since LLCs are state-regulated entities, the Articles of Organization are to be filed with the state and approved by the state regulator. Normally, it’s the Secretary of State. Though it’s a major document required to make your company existent at a legal level, it’s not the only one you need to lawfully run your business.
Thus, in most states, certain types of operations and activities are regulated by licenses and special permits. That permissive paperwork might be needed both at a federal or state and at a local level. Hence, before you get your business up steam, take time to consider the licensing requirements of the jurisdiction you are going to operate in. In most cases, the Articles of Organization are not enough to conduct business, especially if it belongs to the healthcare or food industry or is connected with some sort of public service.
The Articles of Organization not only “give legal birth” to your business but also establish formal relationships between the company owners as business partners and between the LLC and its members as separate entities. The document legalizes the LLC status of a separate business entity with its rights and liabilities and sets up business-related rights and obligations for the company members too. It’s the Articles of Organization that ensure a so-called “corporate veil” at a legal level by clearly identifying the type of the legal entity you establish. Besides, this doc outlines the direction for future business development by stating the purpose of your LLC.
Despite its importance, the Articles of Organization are quite a simple document to make. More than that, you won’t have to write it on your own and rack your head about the document’s form. By form, it’s a standard document, and there is a whole number of ready-made templates available that you can customize to your needs. You can find downloadable and fillable templates on free legal resources or official websites of state and regulatory authorities of your jurisdiction. The document form might slightly vary by form but it covers pretty much the same information in each case and we’ll talk about it below.
Requirements to File the LLC Articles of Organization
Being a state-specific document, the Articles of Organization are regulated by state laws. With that, requirements to this document normally appear slightly different in various states. We say slightly since, on the other hand, the document is a standard one and tends to cover basic LLC data, irrespective of the formation state. Hence, while you should certainly check the exact requirements toward the Articles of Organization valid in your jurisdiction, common information to be included is as follows:
- Governing Law: LLCs are regulated by state laws, and it’s necessary to make a reference to the law of the jurisdiction under which your LLC is formed. Usually, it’s the number of the state statute;
- LLC Name: It’s the name your company will be registered with the state. It should be distinguishable from other company names already existing in the same state. For marketing purposes, you can choose to operate under a DBA name to let your affiliates in other states share the same brand name. Or you can run your business under the registered name and trademark it to make it unique throughout the country;
- LLC Address: Note that an LLC cannot be registered under a P.O. box. A valid postal address with a street and building number is required;
- LLC Registered Agent Records: No LLC can operate without a registered agent that ensures smooth and consistent formal communication between your company and the state. Entitled to handle legal correspondence on your LLC’s behalf, a registered agent should have a physical address, with no P.O. boxes here as well. You can serve as your own registered agent or appoint an individual or a legal entity for that role. An optimal choice here is hiring a professional service that will best cope with this job and make sure everything is done right. Mind that some states also require you to provide a registered agent statement confirming that an entity you’ve selected accepts the assigned function;
- LLC Members’, Managers’, and Directors’ Data: The Articles of Organization should list the names and addresses of its members who are the company owners. Besides, if your LLC will be a manager-managed entity, the names and addresses of executive and managing directors are also to be included;
- LLC Organizer’s Data: Normally, it’s one of the business owners or some third party that handles LLC filing formalities. This person is called an LLC organizer. The organizer’s address and contact data are also to be specified in the Articles of Organization;
- LLC Purpose: The Articles of Organization should contain a statement describing the reason why you form an LLC and what it will do. In most cases, it’s a general statement not to limit the LLC activities. And this is where amazing LLC flexibility comes from allowing this type of business entity to be engaged in multiple activities and operations. A more specific description of the company purpose is required for professional LLCs offering service within a certain industry or professional area;
- Effective Date: Basically, the date when the Articles of Organization are approved by the state is considered the date your LLC starts its work. However, you can choose some future date after approval, on which your LLC becomes effective;
- LLC Duration: By default, LLCs are meant to exist perpetually. Yet, you can define the term of existence for your company by specifying the dissolution day if you deem it necessary or form an LLC for some specific purpose;
- Signature: It’s enough to have an organizer’s signature to enforce the document. Signatures of all the owners of a multi-member LLC are not required.
Filing the Articles of Organization
Each US state charges a fee to file the Articles of Organization and get the document approved. Entrepreneurs pay this filing fee once when setting up their business. It’s a flat rate valid in a specific jurisdiction, yet filing fees differ by state. Hence, LLC formation costs are not the same nationwide. Thus, the LLC fees fall within the range from $40 to over $500. The cheapest states to launch an LLC are Kentucky, Iowa, Colorado, New Mexico, and Michigan. Meanwhile, Massachusetts, Nevada, Tennessee, and Texas are among the most expensive ones. The average filing cost, though, is about $100 to $200.
Can My LLC Be Rejected?
To start conducting business under your LLC, you need to get state approval for your Articles of Organization. Unless you have the Secretary of State’s seal on the document evidencing the state approval, your LLC is not considered legally registered and you can’t use it for business activities. Most often LLCs are rejected due to non-unique business names. However, there is a whole bunch of other reasons for that:
- Mistakes and errors in the text of the document;
- A filing fee is not paid or the payment confirmation is not attached;
- Statutory requirements are not met, i.e the provided company info is either incomplete or contains some wrong data and unnecessary details;
- The LLC name is unique yet fails to match the statutory naming guidelines.
Besides, when filing a professional LLC, you need to file the Articles of Organization along with the statement from the State Licensing Board or a copy of valid professional licenses. And in some states, an Operating Agreement is a compulsory prerequisite for filing LLC formation documents.