One of the fastest growing forms of business across the country is the limited liability company or LLC. An LLC is a business entity that combines some of the elements of a corporation (e.g., it must be registered with the state) with many of the benefits of smaller entities such as sole proprietorship (e.g., avoiding personal liability for company debts).
How is an LLC formed?
An LLC goes through several steps for formation to be accepted by a state. In Montana, these steps generally include:
- Choosing the LLC name: Select a name for your company that meets the state requirements.
- Appointing a registered agent: The registered agent will receive business mail and notices, including notice of a lawsuit, and forward it.
- Filing articles of organization: File the documents required for forming an LLC and a filing fee with the Montana Secretary of State.
- Preparing an operating agreement: Draft a document that outlines ownership, membership, duties, operational guidelines, and other specifics relating to the company.
- Getting an EIN from the federal government: An Employer Identification Number (EIN) identifies the LLC as a taxable entity and allows the IRS to monitor your company taxes.
Once the state has officially recognized the formation of the entity, the members of the LLC can start operating the business.
Choosing the right business structure is essential for a successful business
The informal business structure and the fact that LLCs are only taxed once (unlike corporations, which are subjected to double taxation), make LLCs a popular choice among new small business owners. However, you may also find that another business structure is best for your business. An expert specializing in business law can help you identify the best structure for your company and help make sure your business is formed in accordance with the law.