Starting an LLC
After working for a couple of years as a 1099 consultant, I finally decided
to start an LLC with a couple of peers. I actually wasn't sure is I should
do a full corporation or not, but my accountant talked me into an LLC. An
LLC is like a small corporation with the limited personal liability and the
ability to have the company survive the death of the founders, but it
doesn't suffer from the same tax consequences and hefty setup.
After a few forms, Opus 41 LLC was born, and I
thought I would pass on the wisdom as a series of steps that you'll need to
go through to do the same thing.
Step 1. Articles of Organization (Oregon Form 151)
Each state has an Articles of Organization form that you'll need to fill
out. I found the Oregon version of Form 151 online, and it has a $50
processing fee. This actually creates the LLC with the State of Oregon.
Each "partner" (called organizer) must sign the document. Mail the form to:
State of Oregon
255 Capitol Street NE, Suite 151
Salem, Oregon 97310-1327
Step 2. Federal Employer Identification Number (SS-4)
The next step is to register the LLC with the Feds, and Form SS-4 is
also online and should be submitted after Form 151 has been approved. The
response of this comes with a Federal EIN and it is this number that you
use to open a bank account.
The form is not only online, but can be filled out submitted online.
However, the values my accountant told me to fill out result in an error. I
would just mail the suckah in, but the form doesn't have the address and
the web page says to mail the form to the address listed on the form. I
guess they are really trying to encourage me to use the online form.
Step 3. Create an Operating Agreement
This is a legal document (not really a form) that clarifies things like, if
an LLC member dies, what happens to the money in the bank account, etc.
While you can get a lawyer to draw this up, there are a number of online
services that have you fill out a form, and then it creates the agreement.
I ended up choosing Med Law Plus which did a nice job and had a free
trial for me to play with before buying and was only $15. Cheap compared to
the equivalent legal fees.
Step 4. Open a Bank Account
When you open a bank account, tell them it is for an LLC business, and
they'll want both the Federal EIN number as well as the *Operating
Agreement*. Now you are in business.
Annually: Form 1065
Every year the corporation has to submit a form to the state declaring
income and holdings. Oregon's Form 1065 is also strangely available
online. The LLC will also have to fill out a K1 for each partner/contractor
that the LLC pays money to. At this point, I'm going to hand the issue over
to my accountant to do that (and I'll split that fee with each of the
Who is a Partner?
An LLC is basically a partnership with limited liability (like a standard
corporation). It is made up of 1 or more partners, but doesn't preclude the
company from hiring contractors. So the question is, who is a partner and
who is just a contractor? This is stated in the Operating Agreement, but
could be anyone you want.
Hopefully that will save you all the time and energy that it took me to set
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