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Essential Knowledge for LLC Formation: Words Every Entrepreneur Should Know.
If you are considering forming an LLC, you may find a lot of words and phrases being tossed around that you aren’t familiar with. Check out this short list of the most common items discussed when creating an LLC!
Articles of Organization:
The legal document filed with the state to formally establish an LLC, outlining key details such as the company's name, purpose, structure, and member information.
Operating Agreement:
A written document specifying the internal workings of the LLC, including management structure, member roles, and operational procedures.
Registered Agent:
An individual or company designated to receive legal documents and official communications on behalf of the LLC. This person or entity must have a physical address within the state of formation.
Limited Liability:
The legal concept that protects the personal assets of LLC members from the debts and liabilities of the business. Members are typically not personally responsible for business debts.
EIN (Employer Identification Number):
A unique nine-digit number is assigned by the IRS to identify the LLC for tax purposes, similar to a social security number for an individual.
Member:
An individual or entity that owns an interest in the LLC. Members may be actively involved in the management or have a more passive role, depending on the terms outlined in the Operating Agreement.
Dissolution:
The formal termination of an LLC, either voluntarily by its members or involuntarily due to legal or financial reasons.
Capital Contribution:
The initial investment made by LLC members into the business, often in the form of cash, property, or services.
Conversion:
The process of changing the legal structure of a business, such as converting from a sole proprietorship or partnership to an LLC.
Compliance:
Adherence to legal and regulatory requirements, including filing annual reports, paying taxes, and maintaining proper documentation, to ensure the continued good standing of the LLC.
Now you're armed with the essential knowledge and vocabulary needed when you are ready to form your LLC for your business, you'll be armed with the essential information needed to have the conversation! Curious about what it takes to form an LLC, check out our LLC Formation Page here!