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How is a limited liability company formed?

From sole proprietorships to corporations, there is a business structure to fit every kind of business out there in New Jersey. One business structure that this post will focus on is the limited liability company (LLC.)

Each state has its own rules on forming an LLC, but there are some general principles they share. To form an LLC, first the members of the LLC need to choose a name for their LLC. The name cannot be the same as an already existing LLC in the member's state. The name must also include some sort of indication that it is an LLC. Finally, it cannot use language that is not permitted per the member's state.

Next, the members will have to file the "articles of organization." This is a document that contains information, such as the name and address of the LLC and the names of the LLC's members. Usually this document is filed with the Secretary of State, although this varies by state.

Also, while most states do not require one, it may be beneficial for the members of the LLC to create an operating agreement. This agreement can include information on how the LLC will structure its finances and how it will be organized.

After the LLC is registered, it must acquire certain licenses and permits. The licenses and permits that are necessary is dependent on the LLC's locality, industry and state. Finally, the LLC may need to hire employees and in some states announce its business, usually by submitting information about the LLC to a local newspaper for publishing.

In an LLC, members cannot be held personally liable for the actions of the LLC. In addition, in comparison to a corporation, there is less registration paperwork needed to run an LLC. Also, with an LLC, members can decide how they will share profits. All of these advantages make LLC's an attractive choice for business owners. However, those who need more information to determine whether an LLC is the right business formation for them may want to speak to an attorney.

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