As a business attorney, I have had many clients in my office who are ready to start a business. They have a wonderful business plan, they have the capital and they are ready to begin. But yet, they ask, “how do I form an LLC?” The article below has been drafted by a Denver business attorney at The McGuire Law Firm to help shed some light on the above question.
In forming a limited liability company (LLC), there are steps that must be taken and steps that probably should be taken. First you need to file the appropriate documents with the Colorado Secretary of State if you are forming the limited liability company in Colorado. You can go on the Colorado Secretary of State website to file the Articles of Organization. The Articles of Organization will ask general questions regarding the name of the LLC, the address, the members, whether the LLC will be manger managed or member managed etc. You will complete these articles and pay the filing fee and the LLC will be formed with the state of Colorado. If you plan to have a trade name, you can apply for your trade name with the Colorado Secretary of State as well.
As a multi-member LLC you will also need to obtain your taxpayer identification number, also referred to as an Employer Identification Number (EIN). You can obtain your EIN through the Internal Revenue Service and the EIN will be the number used to identify your business/entity. Form SS-4 is completed with the IRS to apply for your EIN and usually you can obtain the EIN online at the same time you apply. As a single member LLC, you are considered a disregarded entity for tax purposes. Thus, as a single member LLC you would file a Schedule C with your 1040 Individual Income Tax Return (like a sole proprietorship) as opposed to the 1065 U.S. Partnership Income Tax Return that a multi-member LLC would be required to file.
Now that you have your Articles of Organization and EIN, you can go to the bank and most banks will allow you to open a business checking account. You will want to open a business bank account to separate personal expenses and business expenses. Co-mingling of personal and business funds is a no-no and is likely to create accounting issues and potential tax problems.
Although, you do not necessarily need a partnership agreement or operating agreement, it is highly recommended that you have an agreement in place. This agreement should spell out how the business will operate, voting issues, how income, gain, deductions and losses will be allocated, how & when the LLC will dissolve or liquidate and other pertinent issues. Further, the operating agreement can state what each member contributed in cash and property as their initial capital contributions and discuss other special allocation issues if needed. It is recommended that you have this agreement in place from the beginning and thus the agreement can be referred to as opposed to a he said she said argument in the future.
If you have any questions regarding your business or forming a business, speak with a Denver business attorney at The McGuire Law Firm. A business attorney can assist you with the formation of your business, structure of your business, business contracts and other business transactions such as the sale or transfer of your business interests or assets.
Schedule a free consultation with a Denver business attorney- contact The McGuire Law Firm!