Nearly all small businesses should form entities to limit their exposure to civil liability in the form of lawsuits. In forming an entity, certain documents have to be filed with the state in question.
To the surprise of some, state law instead of federal law governs business entities. When form an entity, you should look to the Secretary of State for your jurisdiction to find out the filing requirements. Some states provide clear and concise information. Other states seem to enjoy making the process difficult and complex. Regardless, all of them have a web site for the Secretary of State.
In most states, forming a corporation requires the filing of articles of incorporation. Articles of incorporation requirements differ by state, but typically require a statement of the name of the corporation, the number of authorized shares, the name and address of a registered agent and the name of the incorporator. The incorporator is typically the person signing the articles of incorporation. Once created, the articles are filed with the Secretary of State, which eventually will approve and return them to you. In most states, there is no need to file bylaws, organization minutes or shareholder information.
Limited Liability Companies
Limited liability companies are simple structures and are the creation of creative politicians in Wyoming. In 1977, Wyoming passed the first state laws authorizing the creation of these business entities. Mirrored after corporations, the filing process is similar to corporations, but with little tweaks here and there.
Whereas corporations have articles of incorporation, limited liability companies have Articles of Organization. These Articles of Organization require pretty much the same information as articles of incorporation. The primary difference, however, is most states require you to use a pre-printed form for the articles. Make sure you check with your state to determine if this is a requirement.
Do It Yourself?
If you are a sole proprietor seeking a business entity, you can handle it if you understand the concepts. If you don’t understand the process, get a professional involved.
If there are two or more people in the business, an attorney should be used for liability purposes. These liability purposes arise when one “owner" takes charge of the filing. When disputes later arise, the take charge owner is inevitably accused of organizing the filing in such a way at to create an advantage.
Yes, it happens all the time.
Richard A. Chapo is a San Diego business lawyer with http://www.sandiegobusinesslawfirm.com - providing legal services and legal advice to businesses in San Diego, California.