Forming a Limited Liability Company

A Limited Liability Company (LLC) is often the top choice for new business owners.  Why? It offers a lot of flexibility in terms of structure and doesn't have the strict record keeping requirements as a corporation. However, for a business with multiple members, it's wise to keep formal records of meetings and votes, even if not formally required by law.

A limited liability company has the following benefits:

• members have limited liability for debts and contracts of the business (assuming they are doing the right things);
• flexibility in management;
• can be owned by another LLC;
• in Pennsylvania, no annual filing requirements for the entity (unless it's a professional LLC);
• can elect to be taxed as s-corporation

How do you form an LLC?  There is paperwork to be filed at the state level, usually a certificate of organization or certificate of formation.

What else do you need for an LLC? Most banks won't open a business bank account without an Operating Agreement, even if there's just one member.  For multi-member LLCs, an Operating Agreement is a MUST.  Failing to have one in place means your entity is subject to the state's default rules in the event of a dispute or other internal disagreement related to the business.  That can be a nasty result for multi-member LLCs.

What is a registered agent? A registered agent is someone appointed to accept service of a lawsuit in the event the LLC is sued. It is not the same thing as the business address.

Can I form an LLC with a PO Box?  In Pennsylvania, you cannot open an LLC with a post office box, it must be a physical street address.  However, something like a UPS store or Mailbox Plus or otherwise will sell you a "box" but it will have an actual street address.  You might also consider a virtual office.

Beware of online services that claim to form your LLC for no charge. If you read the hidden print, there are often back end ways these companies make their money, either by charging a registered agent fee, a fee for an operating agreement, or an annual compliance fee.  Remember, few things in life are truly free.

If you'd like the help of a business attorney to form a Pennsylvania or New Jersey LLC, or help deciding which business entity is best for your business, reach out to our center city or main line business law office.