Registering Your Partnership or LLC
Partnership (in business) are an agreement where the parties agree on a mutual cooperation to fulfill their mutual interests. Partnerships happen between individuals, schools, businesses, governments, etc. Hence a written agreement is must to make sure all the partners walk on the same path to avoid and prevent misunderstandings. Areas of responsibility, power, profit and loss percentage, succession, goals, etc should be mentioned in the agreement written between partners. Once agreement is made, the partnership runs as per the rules made and this is made sure by law. In future, if a conflict arises between partners, they should abide the rules written by them in the agreement. Hence it needs to be very well documented. Though partnership tends to amplify the mutual interests, in some cases it is highly problematic. Depending on the type of partnership the laws change.
The General Partnership
The basic form of partnership is general partnership. All the partners manage the business and they are personally liable for all the debts. There are two other forms of partnership which have been recently developed. One is limited partnership, LP, where the limited partners relinquish their ability to handle the business in exchange for only limited liability for the partnership’s debts. The third kind of partnership is limited liability partnership, LLP, where all the partners available have some degree of liability. Other than the above mentioned types of partnership, there is Silent partnership, where the partner shares all the profits and losses of the business without getting involved in its management. The silent partner’s association with the business is not known to the public. They just provide capital and share profits as well as losses.
LLC Partnership Agreement
A Limited Liability Company is a business organization or entity which provides important benefits of corporate ownership to owners by avoiding all the pitfalls of corporate form. LLC is a flexible form of business entity which has a blend of partnership and corporate structure. Limited Liability Company is not a corporation. In the vast majority of United States jurisdictions, it is a legal company which provides limited liability to the owners of entity. In United States, businesses which provide services like medical or legal services are not allowed to form LLC. Instead they can form Professional Limited Liability Company, PLLC, which is very similar to LLC.
Characteristics of the LLC
A limited liability company is a hybrid form of business which has characteristics of both partnership (based on number of owners) and a corporation. It is a kind of unincorporated association but not corporation. The vital characteristic LLC share with corporation is limited liability and with partnership it shares the property of pass through income taxation. It is better than a corporation and well structured to suit for companies with single owner.
Setting Up An LLC Business Entity
In recent years, Limited Liability Company has become extremely popular with regard to its legal structure. For small scale businesses wishing to incorporate, LLC is considered best. The requirements differ slightly from state to state. But setting up a LLC entity is a simple process which can be done in an hour or two, based on the complexity of structure of organization.
- From your State’s Secretary of Staff Office, obtain a State’s LLC Articles of Organization form. Also find out if the state you are living in requires you to post a notice in the newspaper. There might be rules regarding business names. Research that too.
- Choose a name which is in accordance to the rules of your state. Words such as Insurance, Corporation, City, and Incorporated are generally prohibited. The legal name should end with a designator LLC. The name should not be same as already registered LLC.
- Fill the LLC articles of organization form. This is quite simple. There are only few things which you need to notify which include name of business, its purpose, office address, the name and details of registered agent for receiving legal documents if any and finally the names of members of business. At this point, you need not mention about distribution of ownership. You just have to mention the names of LLC’s members.
- You intention of forming an LLC should be notified to public through newspaper. Every state does not need this to be done. If your state does not have this rule, then don’t waste your money publishing it in newspaper. This should be done before filling the form.
- Fill the form with extreme care and submit it to Secretary of State along with fee. Depending on the state, fee ranges from $40 to $900. Few states have corporate tax which is different from filling fee. However, both need to be paid together.
- After all the legal fillings are done, LLC Operating Agreement has to be done. If you are the only owner of LLC, you don’t need one. If there is more than one owner, it is better to structure an agreement of terms and conditions.
- Design a LLC operating agreement which has financial as well as management rights along with responsibilities of members of LLC, like who need to contribute what if additional capital is needed, how are profits and losses distributed, what is the procedure if a member wants to leave the team, etc. Even if LLC members are members of your family, it is always much better to get an agreement made instead of just having a casual oral discussion. Down the lane, LLC operating agreement is must to balance both business and personal relationship.
Cancellation Of LLC
To register dissolution or cancellation of domestic or foreign LLC, one of the members need to fill the Limited Liability Company of Cancellation, which is Secretary of State Form LLC-4/7 and submit the form to Secretary of State. Filling fee is not required for this form.
To register any changes in a domestic LLC, a Certificate of Amendment to the Articles of Incorporation, which is Secretary of State Form LLC-2, should be filled. It has a filling fee of $30. For a foreign LLC, Secretary of State Form LLC-6 should be filled.