Creating an LLC is an important step in the early days of your business, and, when done properly, can protect you and your business from disastrous financial consequences. If you have Googled “how to create an LLC,” you have no doubt been bombarded with ads selling cut-rate DIY kits promising to help you form your LLC without the help of an attorney. But choosing to save a few bucks on such a monumentally critical aspect of your business’ core legal structure can cost you big in the long run. Below we discuss why it is important to work with a knowledgeable attorney.
Determine Whether an LLC Is the Right Legal Entity for You
Forming a Limited Liability Company can provide your business with many benefits, most notably limited liability for debts and judgments while allowing for flexibility in how you operate the business. But there are numerous other issues you will want to think about in determining what the proper formation option is for your business, including taxation and ownership issues, partnership issues down the road, and the way your potential investors will be looking at your business structure in deciding whether to invest.
An LLC is only one of several formation choices; you might also consider forming a corporation, limited partnership, sole proprietorship, general partnership, or other form of limited liability entity. An attorney can walk you through all the benefits and drawbacks of each of these entities as they apply to your specific situation.
State Offices Cannot Provide You With Legal Advice
Many entrepreneurs that are building their businesses do not have the luxury of in-house counsel or unlimited funds for outside consulting, and so they take a DIY approach whenever they can, relying on internet research and online DIY services. This can be a great approach to getting some background so you can know if your lawyers knows her stuff, but not when it comes to forming an LLC by yourself. The state authorities you might interact with in forming your LLC can give you limited instructions on issues such as where to send your templates, but they are legally prohibited from giving you legal advice. Only a licensed attorney can legally give you legal advice on forming your LLC.
Numerous Legal Requirements To Create an Effective LLC
In starting your Limited Liability Company, you will have to meet numerous legal requirements in order for the LLC to be effective in the
eyes of the state. Failure to do so can create significant delay for your business and may open you up to huge liability in the meantime. These legal requirements include:
- A legally valid name for your LLC
- Drafting and filing legal documents such as Articles of Incorporation that meet state standards
- Filing fees
- Publication requirements (New York LLCs)
- Drafting a custom and appropriate LLC Operating Agreement
Your Operating Agreement Dictates All Your Rights in Your LLC
In New York, you must create an LLC Operating Agreement within 90 days of filing your Articles of Organization. Your Operating Agreement will establish the rights, obligations, and duties of the members of your LLC, and so will dictate how you and your fellow members will run the company and share in both profits and liabilities. Obviously, this will be hugely important for years to come, and so it is critical this be done comprehensively and fairly, anticipating all types of future issues. Without an attorney representing the interests of all the members in drafting the Operating Agreement, you run a high risk of future conflicts and financial risks for you and your business. In fact, we find one main reason partnership disputes don’t get settled properly is because the operating agreement is silent or ambiguous on crucial issues that partners face when running their business.
Legal Guidance in Creating Your LLC
At The Gouchev Law Firm in New York, we work with businesses of all sizes, including start-ups across New York City and New Jersey, in all aspects of business formation. Call us at (212) 537-9209 or schedule a free strategy session today to see what The Gouchev Law Firm can do for your business.