Preparing Your LLC’s Articles of Organization
Preparing the articles of organization for your limited liability company (LLC) can easily end up being overwhelming — especially if the state rejects your articles a number of times. But keep your chin up. If you stay organized and get helpful assistance, you should be able to get your articles submitted within a couple of days and be certain that they will be filed without incident.
After you submit everything correctly, you can sit back and wait for your approved articles (sometimes referred to as your corporate charter) to arrive in the mail.
Meeting your state’s requirements
The articles of organization are made up of provisions, which is just a fancy term for the sections of your document that address particular topics.
Each state has different requirements. To find out specifically what your state requires, check out the fill-in-the-blank articles of organization that your state provides. This document tells you all the information your state requires and assists you in the planning process.
Provisions that your articles must have
In most states, your articles of organization must include the following provisions:
Powers and purpose of the company
Registered agent and office
Member-managed or manager-managed
Names and addresses of managers and/or members
Organizer: In most states, only an organizer (sometimes referred to as an authorized signer or authorized party) is required to sign the articles of organization. This practice is becoming more and more popular as formation companies do most of the LLC filings. The organizer has no true legal responsibility or further obligation to the LLC, so you can designate anybody, really. This arrangement is great if you’re looking for extra privacy!
The antiquated duration provision
When LLCs first came about, the IRS placed a few restrictions on them in order to make them eligible for partnership taxation. One of these restrictions was that LLCs can’t live forever. The states complied by giving LLCs a limited life span of 30, sometimes 50, years. Though this restriction is long gone, a couple of states have been slow to adapt and still require a duration to be declared in the articles of organization.
Extra provisions you may want to include
You’re allowed to include whatever extra provisions you want in your articles of organization; however, keep in mind that your articles are public record. Also, in order to amend them, you must go through a costly filing process.
When it comes to customizing your LLC, you get into a lot more specifics in the operating agreement than you do in the articles of organization. If you don’t see an important provision discussed in this chapter, it’s probably because I believe that including it in the operating agreement instead is a better idea because the operating agreement isn’t on public record and is easy to amend.
An extra provision that you likely will want to include and never amend is the indemnification of managers and members. When you are indemnified, you can’t be held personally responsible for the acts of the company or even for your acts on behalf of the company.
This provision is normally provided in state law, but it’s always good to publicly state in your articles of organization that each member is permitted the maximum indemnification available.
Provisions for professional LLCs
In most states, if you are a licensed professional, you must have a special provision in your articles of organization designating you as a professional LLC (or PLLC for short). A PLLC’s formation is the same, but the articles are slightly different and the filing fee may be slightly higher, depending on the state.
Putting it all together
After you figure out what provisions you’re going to include in your articles of organization, you need to wrap up everything into a professional-looking document. One option is just to amend the state’s generic form with your extra provisions, but do you really want to walk into a bank, ask for a million-dollar business loan, and then hand over articles that look like a patchwork quilt of legalese? Not likely.
If your state allows it (most states do), retype the articles into your own document so that it looks more professional. A lot of people who can make important decisions affecting your LLC will be looking at these articles — bankers determining your eligibility for a business loan, investors looking to buy in, and so on. You want to demonstrate that you take pride in your company documents.
Different states require different formats, so contact your secretary of state’s office to make sure that it doesn’t have any special requirements as to how the articles of organization are laid out. However, most states have the basics in common.
Articles of organization are pretty simple, and for the most part, you can draft them yourself. However, your time may be better spent doing other important tasks, so if you don’t feel like researching laws and typing out provisions, consider hiring a formation company. These companies are generally well versed in creating articles of organization (after all, they do it every day!) and charge a heck of a lot less than attorneys.
Choosing who signs
So you put all this work into forming your articles of organization, and now you need to sign it, right? Probably not. Believe it or not, in most states, a manager or member doesn’t even need to sign the articles before filing them.
Most states assume that when an LLC is organized, it hasn’t had its first member meeting. At that meeting, managers are traditionally elected. If the LLC doesn’t have any managers, they can’t sign the articles.
Most states also assume that you’re forming your LLC through an attorney or a formation company, and to make it easy for everyone, states allow someone at the law firm or formation company to sign the articles instead of the client. That is why most states allow an organizer to sign and file the articles of organization.
The organizer doesn’t have to be associated with your company and isn’t a manager or member (unless you want her to be). She is simply the person who creates the LLC. After the LLC is formed and the managers and members are assigned, the organizer fades away — she has no future position of power in the company.
Although most states allow an organizer to sign the articles of organization, some states require a manager and/or member to sign. Also, some states require the articles to be notarized. A quick way to determine who must sign the articles of organization in your state is to look at the filing form for your state.
Getting the necessary signature sounds fairly simple, but there’s a catch. In most states, the LLC’s registered agent is required to sign the articles of organization before it can be filed. The agent normally signs an acceptance of appointment document that is appended to the articles. This can be a bit of a headache for most people, especially if you live in a different state than the one in which you’re filing.