An important step in starting a new business is selecting a legal structure that effectively meets the needs of its owners. Limited Liability Companies (LLCs) are a popular choice in today’s business environment, as these legal entities can protect the personal assets of its owners from the business debts of the LLC while allowing significant flexibility in management, operations, and taxation. In general, LLC owners (more commonly referred to as “members”) establish governing principles, authorities, and duties of each party through the creation of an Operating Agreement. This document can be tailored to the unique facts and circumstances of the business in order to achieve desired relationships between LLC members.
In Louisiana, limited liability companies are generally created by completing the following steps:
- Drafting Legal Documents – To obtain a state charter, the LLC must file its Articles of Organization and Initial Report with the Louisiana Secretary of State. An Operating Agreement is a very important governing document between the LLCs owners, but it is not required to legally create the entity.
- Registration Requirements with State & Federal Governments – upon preparation of the legal documents identified above, the LLC must file these documents with the Louisiana Secretary of State in order to receive its charter. Next, the entity must register with the Internal Revenue Service (IRS) at which point it will be issued a tax identification number. If the LLC plans to have employees, it must also apply for tax identification numbers with the Louisiana Department of Revenue (LDR) and the Louisiana Workforce Commission (LWC).
- Best Practice: Opening a Bank Account – while this step is not required to create an LLC, opening a separate bank account in the business name is strongly recommended. The LLC must complete registration with the Louisiana Secretary of State and the IRS before most banks will issue an account. From an accounting and tax perspective, maintaining the LLC’s finances separate and apart from those of its members is essential. Opening a bank account in the name of the entity lays the foundation for accomplishing this objective.
–Converting Your Sole Proprietorship to an LLC in 8 Simple Steps by Nellie Akalp
–Forming a Louisiana limited liability company by Stephen L. Nelson, CPA
Important Note: Always seek legal advice from your attorney when preparing any of the aforementioned legal documents in connection to creating a limited liability company.