Monday, April 20, 2009

Forming an Illinois Limited Liability Company

A limited liability company is structurally much different than a corporation and the decision to chose one entity type over the other was discussed in my article "To incorporate or not to incorporate: Taxing Considerations, posted on February 14, 2009. The differences between the two types of entities revolves around the articles filed with the Secretary of State and the appropriate document that identifies the authorized powers that manage the company's affairs. For a corporation those documents would be the Articles of Incorporation and the company by-laws, for a limited liability company those documents would be the Articles of Organization and the Operating Agreement (or limited liability company agreement). Organizational forms can be found on our website by following the links highlighted above.

Today I am focused on forming a limited liability company and what to keep in mind when preparing your forms for filing. I will reiterate that before you begin preparing your form, be sure to check your company name availability. I have a link on my website that will take you directly to the name availability check on the Illinois Secretary of State website.

The following are things that belong in the Illinois Articles of Organization and are required to be included in your limited liability company filing:

1. Limited Liability Company Name: The company name must contain the terms "Limited Liability Company, LLC or L.L.C., and must be in the English alphabet, Arabic or Roman numerals or symbols capable of being readily reproduced by the office of the Illinois Secretary of State.

The name of the company cannot contain the following terms: "Corporation, Corp, Incorporated, Inc., Ltd., Co., or Limited Partnership or L.P., " The company name is the name the company will be doing business as in the State of Illinois or the company adopts an assumed name, and the name can not contain any word or phrase that indicates or implies that it is organized for any purpose other than those permitted by the Illinois Limited Liability Company Act. (Refer to the Illinois Limited Liability Company Act for additional requirements if your company is a bank, fiduciary or trust.)

The company name must be distinguishable from other companies that have filed articles of incorporation or articles of organization with the Illinois Secretary of State, including companies from other states that have been admitted to transact business in Illinois, any name that has filed for an exclusive right to that name (name reservation) with the Secretary of State, any assumed name that has been filed with the Secretary of State. The Secretary of State determines whether your company name is distinguishable or not. Sometimes the best thing to do is to call the Secretary of State to verify availability of the name you choose for your company. We have links to the Illinois Secretary of State Name Availability check on our website.

2. Address of Principal Place of Business where records of the company will be kept: The principal office may, but need not be a place of business in Illinois.

3. Articles of Organization are effective on: Choose the effective date of your Articles of Organization. This typically means the date your business is established in the eyes of the Secretary of State. Common effective dates are the date the entity is filed, however you do have the option of choosing a date in the future but not to exceed 60 days after the actual filing date.

4. Registered Agent Name and Registered Office Address: Each limited liability company and foreign limited liability company must continuously maintain a registered agent and registered office in the state of Illinois. This is where we are hopeful you will choose Illinois Registered Agent, Inc. for your agent representation. We are the least expensive and most reliable agent representation for Illinois on the Web!

5. Purpose(s) for which the Limited Liability Company is organized: The general purpose clause is now included in the Articles of Organization but can be broadened to include your company specifics. Typical general purpose clause language is as follows: "The purposes for which the limited liability company is the transaction of any or all lawful business for which limited liability companies may be organized under the Illinois Limited Liability Company Act.

6. Latest date, if any, upon which the company is to dissolve: Most entities leave this blank to indicate the duration of the company will be perpetual unless there is a specific event that is specified in the company's operating agreement then that date may be entered.

7. (Optional) Other provisions for the regulation of the internal affairs of the Company. This could be any other provision, not inconsistent with law, that the members elect to set out in the articles of organization for the regulation of the internal affairs of the limited liability company, including any provisions that are, under the Illinois Limited Liability Company Act, required or permitted to be set out in the operating agreement of the limited liability company.

8. The Limited Liability Company is either managed by the managers or has management vested in the members. This is quite the topic. I will go into this in more detail in another forum, but for the purposes of completing Articles of Organization you will need to know how this decision will affect the management of your company. In a nutshell, if the company is manager managed, the members have chosen a manager or managers to direct the operations of the company. This is typically reflected in the operating agreement. If the company is member managed, the member has a direct interest in the limited liability company and has equal rights in the management and conduct of the company's business and is specified in the operating agreement. Managers are designated, appointed, elected, removed or replaced by a vote or consent of a majority of the members, while members acquires a membership interest directly from the limited liability company.

This field requires the names and addresses of your managers or members - depending on which management method you choose.

9. Names and Addresses of Organizer(s). The name and address of your organizer (Organizer refers to the person filling out the Articles of Organization forms for you).

Illinois Registered Agent, Inc. is a registered business in Illinois. We provide the most reasonably priced ($75 domestic, $85 foreign) and reliable registered agent representation for Illinois that you will find on the Web. We hope you will visit our site and follow our blog for future postings.

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