Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
Forming an LLC is an exciting time for entrepreneurs. Still, you may run into a few unfamiliar concepts as you walk through the LLC formation process. You’ll need to understand and complete several forms and legal documents, which can make even simple forms begin to feel overwhelming.
One of those essential forms is the articles of organization. Many new LLC owners find themselves asking, what are articles of organization? What do they do, and how do you file them?
Luckily, articles of organization aren’t all that complicated, despite their formal-sounding name. This simple document is relatively easy to understand.
What Are LLC Articles of Organization?
Articles of Organization are public documents that establish your LLC with the state it’s operating in. Sometimes called a certificate of formation or certificate of organization, this document outlines crucial business details like your company name and contact information.
Once your state approves them, your LLC is authorized to do business there, and they record your business information in the state’s official records.
Every state requires LLCs to file articles of organization, but the process of filing and them varies. Some states require more information than others, but generally, states require the following:
- LLC’s legal name and address
- Name and address of your registered agent
- Names of all LLC owners and members
- Name of LLC organizer
- Name of LLC manager (if applicable)
- Company purpose
- Effective state date
- Duration of formation
Some of the information above is straightforward, like your LLC’s legal name and address. However, other pieces are less obvious and deserve a bit of further explanation.
A registered agent is someone who agrees to accept official documents on the company’s behalf. These can include lawsuits, record requests, or anything of that nature.
Though you can be your own registered agent, most LLCs turn to a professional for this role. For recommendations, head over to our article on the best registered agent services.
The LLC organizer refers to the individual within your LLC who files the articles of organization. Sometimes this is the LLC owner, but it can also be a business lawyer or an online company that services LLC formations.
An LLC manager is someone the LLC hires to manage the company’s day-to-day operations. Some LLCs have owners and members that take on this role, in which case, you probably won’t need to list their names again here.
This part of your articles of organization is for a manager who isn’t an LLC owner or member but instead is someone hired from outside the LLC.
What you’ll need to include as a company purpose will vary significantly from state to state. Some states allow you to provide a general statement like “to engage in lawful activity.” Others will require something more specific, like retail activity or professional services.
Effective Start Date
The effective start date is usually when the state approves your LLC. However, in many jurisdictions, you can choose to delay your start date by up to ninety days.
Duration of Formation
LLCs can either be perpetual or indefinite. Perpetual means the LLC will operate for an unlimited amount of time. Indefinite signifies that the LLC will exist only until a specific date or particular event occurs. You’ll have to provide that date or event in your articles of operation.
What’s the Difference Between Articles of Organization and an Operating Agreement?
When starting an LLC, you’ll need both articles of organization and an operating agreement. Though they sound similar, these documents serve two very different purposes.
While your articles of organization establish your LLC with the state, your LLC’s operating agreement is a legal contract that you’ll refer to when issues arise within the company.
Your operating agreement lays out business operations in much greater depth than the articles of organization. It will include the rights and responsibilities of each owner, assets contributed per owner, voting rules, and buy-out procedures.
Though states typically require an operating agreement to start an LLC, most won’t need you to file the document anywhere. Instead, the operating agreement is an internal document that you can rely on if any company conflicts occur.
Who Needs To File Articles of Organization?
Articles of organization are specific to LLCs, so if you start a partnership, corporation, or sole proprietorship, you won’t need to worry about them.
Articles of organization are also specific to the state where the LLC is formed. Suppose you have an LLC in one state and are trying to operate in another. In that case, you won’t need to file new articles of organization, but you will need to foreign qualify. Foreign qualification requires similar information as your articles of organization provide, but it uses a different form.
How Are Articles of Organization Prepared and Filed?
Preparing and filing your articles of organization is typically a straightforward process. Most states provide a form, so all you have to do is fill in the blanks. Some states will require you to mail a paper form, but many allow you to file online, further streamlining the task.
When preparing your articles of organization, it’s crucial to be legible and accurate. Illegible documents or paperwork errors can cause the state to reject your articles of organization, forcing you to start the process again.
Even if you fill in the forms perfectly, the state can reject your document. Usually, that’s because another company is already using the name you picked. Or, sometimes it’s because your payment for the filing fee didn’t go through.
Assuming you fill out the form clearly and accurately and that no one else is already using your business name, the secretary of state or the state’s company registrar will review and approve your articles of organization. Once they do, your LLC is authorized as a business in that state.
Some states are faster at approving articles of organization than others. The fastest states might process your form in as little as a week, but other states may take a month or longer. You can pay for faster processing in some places if you desire it. Even then, keep in mind that many states experience unforeseen processing delays during busy seasons.
Though preparing and filing this form is a relatively easy task, many busy entrepreneurs outsource it. Many rely on a business lawyer or online LLC service to file their articles of organization for them. Given how busy most entrepreneurs are, that makes perfect sense. When starting a business, the last thing you need is another form to fill out!
How Much Does It Cost To File Your Articles of Organization?
The cost to file your articles of organization will vary from state to state. Most states charge filing fees in the $50 to $200 range, like California, which charges a $70 filing fee.
There are outliers, though. In Illinois, for example, the filing fee can be as high as $500, depending on the filing option you choose.
On top of initial filing fees, some states also charge an annual or biennial filing fee. Usually, these regular fees come along with a reporting requirement. For example, New York requires LLCs to submit a biennial report along with a $9 fee.
What To Do After You’ve Filed Your Articles of Organization
After you file your articles of organization, there are several steps you can take while you wait for the state to approve your LLC.
Create an Operating Agreement
First, you’ll probably want to create an operating agreement. As mentioned above, this is an internal, legally binding document that gives more details into your LLC’s operations. An operating agreement typically defines LLC member roles and responsibilities. It will also provide guidelines on buy-outs and voting procedures.
Apply For EIN
You may also need to apply for an employee identification number (EIN). Not every LLC will need an EIN, but you will if you plan to have employees. You’ll also need an EIN if your LLC has more than one member. You can apply for an EIN online through the IRS website.
As an LLC owner, it’s a good idea to take this time to separate your business finances. You’ll want to open a business account at the bank of your choice. You may also want to apply for a business credit card.
Once your business is operating, make sure you pay yourself a salary from the business account. Also, ensure all your business receipts are separate from your personal items. Legally, it’s crucial to define your business and personal finances clearly. Otherwise, a lawsuit brought against your company could expose your personal assets.
Articles of organization alone don’t permit you to operate in a given locality. Typically, you’ll need a business license as well. Licensing requirements vary by city, county, and state.
If you’re using a business lawyer, they’ll be able to advise you in this area. If you’re not, you’ll need to do this research yourself, and you should know these rules can get a little complicated.
Often, you’ll need an operating license, sometimes from both your city and state. You may also need to attain zoning or planning permits in your local jurisdiction. On top of that, depending on your industry, you may need health department permits, fire department permits, sign permits, and environmental licenses.
Learn About Fees and Reporting Requirements
Finally, while waiting for approval, it’s wise to familiarize yourself with annual fees and reporting requirements. That way, there won’t be any surprises down the line, and you can ensure your LLC stays in good standing with the government.
The Last Word
Articles of organization are the official documents that register your LLC with the state. Though they sometimes go by a different name, like a certificate of formation, every state requires them before you can do business there.
These documents are usually straightforward to fill out and file, but every extra task adds stress as a new LLC owner. So, many LLCs choose to hire a business lawyer or online service to file their articles of organization on their behalf. If you decide using a lawyer or online service is best for your LLC, you should check out this list of the best LLC service companies.
Regardless of whether you prepare and file your articles of organization or use a third party to do so, it’s crucial to understand that filing articles of organization is only one of the essential steps to forming an LLC. You’ll need several other licenses, permits, and forms before you begin your operation.
Filed under: Advice Columns