DIY: Step by Step LLC Formation


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DIY LLC FormationWe live in a DIY society, where everyone has some sort of do-it-yourself project going on somewhere. We find that when it comes to setting up your business, this still holds true. A lot of people we work with are setting up their own business structures with limited setback. Especially if you’re on your own or have a very small company, this can have little to no risk.

We, of course, do not recommend doing this yourself, but if you’re going to anyway, here are the steps you’d have to go through to get a properly set up LLC in North Carolina. (Keep in mind there is a complex analysis around choosing between an LLC, Corporation or other type of legal entity. Choosing the wrong type may have unintended liability or tax consequences.)

 

Step 1: What is in a name?

A rose by any other name would smell as sweet, right? When you’re picking your name, you may want to consult family, friends and branding experts to discuss what name or names would best fit your business idea. There are two general types of names: descriptive and creative. ‘Google’ is a good example of creative, and ‘R. W. Bobholz Law, PLLC’ is a good example of descriptive. As their names suggest, a descriptive name gives the audience a sense of what the company does whereas a creative name does not.

 

Step 2: Search for your name.

Once you’ve decided on a name, you’re going to have to search the Secretary of State database to make sure the name isn’t taken. Additionally, you should search the uspto.gov trademark database to ensure that you’re not violating someone’s trademark by using this name. Lastly, if you plan on having a website or any web presence, you should make sure that your domain name is available, preferrably in a .com top level domain.

 

SoS Search: http://www.secretary.state.nc.us/corporations/csearch.aspx

Screenshot 2014-05-08 at 11.54.45 AM

 

 

 

 

 

 

 

USPTO Trademark Search:

http://tmsearch.uspto.gov/bin/gate.exe?f=tess&state=4808:dnp1nt.1.1

Screenshot 2014-05-08 at 11.55.04 AM

 

GoDaddy Domain Search: http://www.godaddy.com/

 

Step 3: Download the Articles of Organization

In order to create a legal entity, you must file Articles of Organization with the Secretary of State’s office here in North Carolina. This is an easy process that starts with downloading the empty Articles of Organization here. http://www.secretary.state.nc.us/corporations/forms.aspx?PItemId=5429715&Type=LimitedLiability%20Company

 

Step 4: Fill in the Articles

State of North Carolina

Department of the Secretary of State

Limited Liability Company

ARTICLES OF ORGANIZATION

 

Pursuant to §57D-2-20 of the General Statutes of North Carolina, the undersigned does hereby submit these Articles of Organization for the purpose of forming a limited liability company.

 

  1. The name of the limited liability company is:

(See Item 1of the Instructions for appropriate entity designation)

  1. The name and address of each person executing these articles of organization is as follows:

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

 

(State whether each person is executing these articles of organization in the capacity of a member, organizer or both. Note: This document must be signed by all persons listed.

  1. The name of the initial registered agent is: ________________________________________
  1. The street address and county of the initial registered agent office of the limited liability company is:Number and Street      ____________________________________City___________________  State: NC  Zip Code:                     County:_______________

 

  1. The mailing address, if different from the street address, of the initial registered agent office is:

 

Number and Street ______________________________________

 

City___________________  State: NC  Zip Code:                     County:

 

  1. Principal office information: (Select either a or b.)

 

____ The limited liability company has a principal office.

 

The principal office telephone number:_____________________________

 

The street address and county of the principal office of the limited liability company is:

 

Number and Street: _______________________________________

 

City: ___________________  State:                   Zip Code:                     County:

 

The mailing address, if different from the street address, of the principal office of the company is:

Number and Street: ____________________________________________

 

City: ___________________  State:                  Zip Code:                     County:

 

The limited liability company does not have a principal office.

  1. Any other provisions which the limited liability company elects to include (e.g., the purpose of the entity) are attached.
  2. (Optional): Please provide a business e-mail address: __________________________________

The Secretary of State’s Office will e-mail the business automatically at the address provided above at no cost when a document is filed.  The e-mail provided will not be viewable on the website.  For more information on why this service is offered, please see the instructions for this document.

 

  1. These articles will be effective upon filing, unless a future date is specified:

This is the            day of _______________, 20      .

Signature

Type or Print Name and Title

You’ll notice the spots for Name of the Company, Name and Address of the Person Executing the Articles (aka “Organizer”), Registered Agent, and office location. North Carolina makes forming an LLC very simple.

Name: Your name must be unique, not in violation of someone’s trademark, not contain certain reserved words like engineer, lawyer, architect, etc without board approval, and must contain some variation or abbreviation of “limited liability company.”

Organizer: Here, you will need a natural person or company that is actually filling out the form. This will likely be you, another member of your company or your attorney. You will also need the address. If this person is a natural person (not a company), you should sign as a natural person in the bottom. If this is a company, you’ll sign as a company by putting the company name on top, your signature in the middle and printing your name below the signature. This signature area must match the section that requires the Organizer’s information, and they will get rejected if you list a natural person as Organizer and sign as a company or vice versa.

Registered Agent: Your registered agent is responsible for receiving important documents from the state or potential claimants on behalf of your company. This can be you, but whoever it is must be a resident or company physically located in this state and have an address that is not a PO Box.

Office: Your company is not required to have an office; however, if it does have a principal office in this state, it must be recorded here. If you do not have an office, check the line that says this company does not have a principal office.

Once you fill out all of the information, you’ll need print this form off and sign is as the organizer. If the organizer is a company, it must be signed as the company, and if the organizer is a natural person, it must be signed as a natural person. You will then scan this signed document in as a pdf and save to your computer in an area easy to remember.

 

Step 5: Sign up for an online account on North Carolina’s Secretary of State page

You can mail in, hand deliver or submit your Articles of Organization online through the online system. Hand delivery is the only way to get 4 hour return service; however, absent the need for extremely rapid turnaround, the best option, in my opinion, is online system. It costs $2, and allows you to make changes to the Articles in case there are mistakes without having to wait for the returned mail. It is also very fast. If there isn’t a backlog, you will typically receive a response within a few days. (No promise though, as the Secretary of State can take weeks to reply to your submission, if need be.)

Screenshot 2014-05-08 at 1.17.41 PM

To sign up, first visit here: http://www.secretary.state.nc.us/corporations/

 

 

 

 

The form is simple:

Screenshot 2014-05-08 at 1.18.42 PM

Once you fill out the form and submit, you’re automatically logged into your account.

 

 

 

 

Step 6: Upload a Creation FilingScreenshot 2014-05-08 at 1.28.00 PM

From here, you will go to “Upload a Creation Filing” on the left menu bar. This will bring you to another form to be filled out. This form requires you to include the new company’s name, type and document type. There should be only one option for document type.

After inputting all of these fields, you must also upload the saved pdf by choosing the file and then clicking upload.

The next screen will show a list of the filings you have in process. You should only have one selection. Click on the radio button next to it, ensure the information in the following fields are correct and then click “Pay & Submit”

 

Step 7: Pay

On the payment page, you just need to fill out the payment information and click through the page. Once payment is received and processed, you will receive notification on the next page. You must then wait until the Secretary of State’s office follows up with you regarding any changes that must be made or if the articles are accepted.

 

Step 8: Make and Submit any Changes

If the articles are rejected, they will be rejected with a reason attached. You will then be able to make the necessary changes and resubmit the articles. This is the major advantage to using the online version because you can email back and forth with the individual assigned to your filing until you have the Articles of Organization correct, at no additional charge.

 

Step 9: EIN

The next step is to obtain an EIN, the process of which can be found in our blog titled DIY: EIN Application.

 

Step 10: Operating Agreement

The final step of getting your LLC formed and running is to create an operating agreement. Operating agreements are the rules for how the company is to run as well as how the members work together and expectations in working with the company. Operating agreements can range from a couple of pages to massive volumes.

If there is no operating agreement crafted and signed, your company must abide by the default rules created by the state. These may not be what you want, and they may change from time to time without you knowing.

In your operating agreement, you should at least make sure you define who has what percent of the company, control, profits and losses. You will also want to address what happens if a member wants to leave, what to do if a member wants another one removed, what to do in case of deadlock and how to handle disputes. The operating agreement is meant to provide clear expectations by all the owners of the company, and therefore, you should take into account any situation in which there may be conflict to settle those disputes before they come up.

A properly crafted operating agreement will enable persons who hate each other to work well in a company they jointly own or allow the owners to get out of the business while leaving everyone as happy as possible with the outcome. It’s a hard task to accomplish, but the best anyone can do is take care of the most likely scenarios.

 

For more information on what to include in an operating agreement, see our blog “What’s In An Operating Agreement” http://bobholzlaw.com/2013/12/31/whats-in-an-operating-agreement/

 

For more information, contact us at richard@lawplusplus.com or by calling (919)912-9640.

Name:


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Your Company or Legal Situation:


No attorney-client relationship until engagement letter is signed by us and you.

About the Firm: Law Plus Plus focuses on making the legal system easier for businesses and business owners. The firm offers many flat rate prices, reasonable retainer packages, and easy to understand policies and procedures. Law++ has a history of strong pro bono services, benevolent networking and creating everlasting relationships with the goal of building a stronger community. The firm offers formations, contract drafting and reviewing, mergers and acquisitions, estate planning documents and more, all of which is focused around protecting the business and the business owner’s legacy.

Disclaimer: The Information found in our blog is for educational purposes only, and is not meant as legal advice. If you need legal advice, please contact an attorney. Nothing in this blog is intended to create an attorney-client relationship.





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No attorney-client relationship until engagement letter is signed by us and you.

About the Firm: Law++ was established to provide legal services to individuals and businesses in Raleigh, Durham, Chapel Hill, Apex, Cary and surrounding communities with the goal of making the legal system easier to use and more personable. The attorneys at Law++ strive to provide exceptional personal service while embodying trust, accountability, and efficiency. The firm practices primarily in the areas of business law, corporate law, contract law, nonprofit law, business litigation, and mergers & acquisitions. The firm values include integrity, efficiency and quality workmanship.

Disclaimer: The Information found in our blog is for educational purposes only, and is not meant as legal advice. If you need legal advice, please contact an attorney. Nothing in this blog is intended to create an attorney-client relationship.
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Richard Bobholz

Richard Bobholz

Managing Attorney at Law++
Richard Bobholz works primarily with small businesses to handle their formations, contracts, employment and more complicated areas of corporate law. Richard manages the small business law and mergers & acquisitions sections of the firm. Richard invented the EasyFee and was the driving force behind the 30 Companies in 30 Days pro bono project. Throughout his work, Richard demonstrates his quality workmanship, integrity and honesty, and efficient work ethic. Richard moved to Durham, NC in 2012 and opened this firm shortly thereafter with the goal of changing the legal system for the better.