A Limited Liability Company or “LLC” is a company that is owned by members, rather than shareholders.  The members of an LLC can be individuals, corporations, other LLCs and foreign entities, or a combination of those. LLCs are a very popular choice for those who wish to operate a small business because LLCs allow pass-through taxation of a partnership or sole proprietorship and the limited liability of a corporation.  Similar to a corporation, creditors of the LLC may collect any debts from the LLC, but the members’ assets are protected (unless the members have pierced the entity veil – generally due to the failure of the members to properly respect the separate legal nature of their LLC).  

The following are key steps and decisions that must be made when forming an LLC:

Choose the Place of Existence for the LLC

Most people form an LLC in the state in which they plan to do business.  If the LLC intends to conduct business in more than one state, the LLC must register as a foreign LLC in the other states in which it will conduct business.

Decide on a Name for Your LLC

You must choose a name for your LLC that is not already in use in your state (regardless of the type of entity).  In other words, if you want the name ABC, LLC and there is already an entity called ABC, Inc., you would not be able to use that name. To determine whether a name is already in use, you must search the records of the state you intend to form.  If you are not ready to form your LLC, you can reserve your name until you are ready to start.  

We recommend conducting a trademark search of your name (if you intend to sell goods and services under that name) before you officially register the name to avoid any intellectual property infringement. This is important as you do not want to spend time and money on branding only to have to change the name due to infringement.   

Appoint a Registered Agent

You are required to have a registered agent in the state where you form your LLC.  A registered agent receives important legal notices and tax documents for your LLC. A registered agent must be available to receive service or process of a summons and complaint or garnishment that might be filed against the LLC; therefore, the registered agent should be a person who is present at the registered office daily.  The registered address where the registered agent is present must be a physical address (and not a P.O. Box) located in the state where the LLC is formed.

Preparation of an Operating Agreement

We recommend that the LLC have a written operating agreement which is an agreement between the members and the LLC outlining how the LLC will be operated.  Most banks will require a copy of the operating agreement to open a bank account in the name of the LLC.  Importantly, the operating agreement is evidence of the LLC’s separate existence (and can help avoid piercing the veil) from its members.  The operating agreement reflects important things such as how the LLC will be managed, voting rights of the members, how and when distributions will be made, and how member ownership may be sold or transferred.  Particularly if the proposed LLC will have more than one owner, such a document is highly recommended.

Formation with the Secretary of State

Forming an LLC is done by filing specific documents with the state where you wish to form the LLC.  It usually takes a few weeks to receive notice of approval; although for a fee, registration may be rushed.   NOTE: LLCs must file an annual registration and pay a fee. Failure to do so will result in the administrative dissolution of the entity.

Obtaining an EIN

After your LLC is formed, to engage in most financial transactions you would apply for an employer identification number (EIN). That tax number is used for bank accounts and tax filings.  Your bank will require the EIN to open a bank account for the LLC.

Open a Bank Account

Members are STRONGLY advised to take care to keep an LLC’s finances separate from the personal finances of the members. Most banks will want evidence of the LLC’s existence – usually in the form of copies of the Certificate of Organization, the EIN, and the operating agreement.  Each bank is different, so you may want to call to find out exactly what your bank needs.

If you are interested in forming an LLC in Georgia, call the Chapar Firm, LLC at 770-483-4115 for assistance.  We can help you decide on a name, search the name for availability, draft a suitable operating agreement and obtain an EIN for the LLC.  We can also search the trademark office to determine whether your name is trademarked.