Establishing your business as an LLC is a big move. As with any big move, there are certain documents and paperwork that are unavoidable.
For instance, the articles of organization is a requirement by all states for an LLC to conduct business legally. This legal document is known as the birth certificate of your business; therefore, it’s critical to get the information correct.
What do you include in articles of organization? What’s the difference between articles of incorporation and articles of organization?
Keep reading for answers to these questions and more.
What are Articles of Organization?
Of all the steps you must go through to legally establish your business as an LLC, creating and filing your articles of organization to the state is a big one.
Articles of organization is a document that must be filed and approved by the state in order for you to legally create a new entity. It’s important to know how your state refers to this document because it often goes by a different title. Each state may also require different information when filling out the paperwork.
Regardless of the label and filing requirements, the result is the same. An articles of organization outlines the details of your company and shows that your LLC is officially formed and established as a separate legal entity from its members.
What is the Purpose of the Articles of Organization
The purpose of articles of organization is to legally separate the business from its members.
An approved articles of organization is required for all LLCs before it can legally operate and proceed further in the business. For example, you must have an approved articles of organization before you can obtain an Employer Identification Number (EIN). You must also have the approved document before opening a business bank account or credit cards and applying for any business permits or licenses.
Information that needs to be included in Articles of Organization
Each state varies on the information needed in the articles of organization. If you want to view the specific information required for your state, most states have these documents on their state agency website. However, they all generally include:
Company Name – your company name cannot be registered by another business in the same state. Additionally, the name must end in “LLC,” “L.L.C,” or “Limited Liability Company.”
Statement of Purpose – You must state the overall purpose of your business so that the door is left open for future business opportunities.
Duration – Many LLCs are formed with a specific end date in mind. However, most business owners will elect a perpetual duration.
Place of business – This means listing the main location of your business.
If you have a storefront, list the physical address. If you work from home, you can select your home as the headquarters.
Registered Agent – The name and address of the registered agent is required by all states. This is the person who will accept legal documents on your behalf. The registered agent can be an attorney, an LLC member, or an outside individual.
Management – Will your LLC be member-managed or manager-managed? Most LLCs are member-managed because all members share responsibility for running the business.
These items are just a few things most articles of organization require before filing with the state. These documents can be as simple or as complex as you want; it all depends on the intention and duration of the LLC.
What is the Difference between Articles of Organization and Articles of Incorporation?
Legally owning and operating a business means choosing an entity such as an LLC or corporation. LLCs and corporations happen to be the two most popular types of entities formed.
If you choose to form an LLC, it’s required by all states to file articles of organization. If you choose to form a corporation, then you must file articles of incorporation. Each state may require different information for both sets of articles, but there are a few main differences between the two.
Articles of Organization
Required by law, the LLC must provide the company name, the address and name of its registered agent, a physical address (which may be the same as that of the agent), and the duration of formation. Additional information such as contact information for members and the purpose of the company may be required.
Articles of Incorporation
Articles of incorporation require the corporation's name, number of shares it’s authorized to issue, the address and name of its initial registered agent, and the name and address of the shareholders incorporating. Also often required is the purpose of the business (why it’s being formed) and whether or not it’s intended for profit.
The simple way of remembering this information is to know that articles of organization are specific to LLCs, while articles of incorporation are specific to corporations.
How to File Articles of Organization
Before submitting your articles of organization, know that there is a fee associated with this act. These fees vary based on state and the way in which you file the forms. For example, if you file by paper, there may be a service charge of $10. Typically, the fee to file articles of organization is around $100.
When you’re ready to file your articles of organization, here are the steps you need to follow:
Step 1: Find Correct Online Forms
Where can you find the articles of organization? On the state’s agency website. Once you locate the correct forms, create an account and file online, or download and mail them to the address listed.
Step 2: Write information into the articles of organization
There are four main articles that you will need information for in order to complete the filing process:
- Entity Name and Type
- Registered Agent Name and Address
- Governing Authority Type
- Business Purpose
Step 3: File the articles of organization
To register your LLC in any state, you’ll need to file the articles of organization with the Secretary of State either by:
- Complete the forms online.
- Submit in person or by mail.
- Once you’ve filed your articles of organization, you can then move on to other business duties like:
- Create an Operating Agreement
- Get an EIN
- Open a Business Bank Account
- Get Licenses and Permits
Reasons Articles of Organization may be rejected
It’s important to know that just because you create and submit the articles of organization, that does not mean the state will automatically approve your LLC.
Here are a few common reasons why you may get rejected when filing:
- Fees not included
- Legal formalities not met
- The proposed name of the LLC is like another business within the state
- The proposed name of the LLC does not meet state requirements
- Information is illegible or incomplete
How a Lawyer Can Help Submit Articles of Organization
When done properly, an LLC protects you and your business from devastating financial burdens. If you’ve Google searched “how to form an LLC,” you’ve undoubtedly seen the Ads for DIY kits that are “easy” and “affordable” with “no lawyer required.”
Is choosing to save a few dollars on such a critical aspect of your business’ legal structure worth the cost in the long run?
As mentioned earlier, each state has different requirements for forming an LLC and for the articles of organization. How familiar are you with these requirements for your state? Most entrepreneurs are focused on building their businesses, not researching the legal details of documents and forms.
This is only one reason it’s important to work with an experienced and knowledgeable lawyer. Lawyers can assure that you meet all legal requirements, but they can also help determine whether an LLC is the right entity for you, or if you should consider another outlet.
When forming an LLC and filing articles of organization, there are several small details that are often overlooked. These mistakes can result in non-approvals and further delay your conducting business. The best way to ensure your business runs smoothly (and legally) is to work with a business lawyer.