The process typically begins with a sit-down between the attorney and the persons who are considering forming the entity, which can range from one person up to an unlimited number depending on the size and complexity of the task to be undertaken. After that meeting, the attorney decides who his client will be – the entity in formation; the proposed owners or only some of them; both spouses in a married couple or only one? Appropriate representation and retainer agreements are then signed. At this point, the attorney may have sufficient information to proceed, or he may need to assemble further documents and information or negotiate terms with other legal counsel. Once the attorney is able to proceed with actual formation the initial step is to prepare and file articles of organization with the Secretary of State’s office. These are comparable to articles of incorporation and create the entity in the eyes of the law. The other primary document is the operating agreement, which determines how the LLC is to be managed, what voting and management rights members have, what rights they have to receive income distributions and whether they are considered employees; and perhaps other matters as appropriate including buy out terms. Other issues dealt with are well drafted operating agreements and withdrawals of individual members, dissolution of the LLC, assignment of interests and other issues that may come up during the life of the business.
An operating agreement can also handle situations in which a spouse, children or other family members are going to be employed by the business and on what terms. It can detail how much discretion individual managers have to make decisions in a multi-member LLC. In short, an operating agreement can and should anticipate and set the terms relating to material events that may occur in the operation of a business.
An annual statement of information has to be filed with the Secretary of State, which includes the names of the current managers, the business address of the LLC, and the name of the statutory agent for service of process. This document ensures that the Secretary of State’s records are current, and provides the public with accurate current information regarding who owns and manages the LLC in the event they need to contact them for some reason, or if a lawsuit is filed or other type of legal action commenced against the entity.
How Many People Are Required To Start A Limited Liability Company?
The owner(s) of an LLC are called its “members.” A single individual can start a limited liability company. In that case it becomes a “sole member” LLC, for which one person is the owner and the manager, and performs all company operations. However, the number of persons who can own an LLC is unlimited, although most LLCs typically range from 1-10 members.
How Long Does The Formation Process Typically Take?
How long the formation process takes depends entirely on the needs of the client. They can be organized in as little as 24 hours through an expedited filing with the Secretary of State’s office, but the normal LLC process takes anywhere from 2-4 weeks after the regular filing of the Articles of Organization because it takes time for the Secretary of State’s Offices to process an “unexpedited” document (are not filed on an expedited basis). It can also take some time to negotiate and finalize the terms of formation among the owners, depending on the number of owners and the relative complexity of its financing.
An operating agreement isn’t an option; it’s a statutory requirement for an LLC, although the statute doesn’t spell out how lengthy, exhaustive or complex the agreement has to be. However, there must be written agreement among the co-owners to operate the LLC and the operating agreement has to contain certain basic provisions.
For more information on Steps To Forming An LLC, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (916) 635-0302 today.