The excitement of a new business venture can be intoxicating. But nothing will bring you down faster than the sea of red tape you must wade through to really get your business started. As a way to help, we've detailed the most common entity documents entrepreneurs need and what each one must contain. Hopefully, this will give you a head start on your next business venture. The paperwork you'll need to file in order to properly start your business will vary based on a number of factors. First, you have to take into consideration your location. Certain states and localities have specific requirements for establishing a business, so it is always best to check for local regulations. The second set of variables concerns the type of entity you've chosen to begin. The needs of a sole proprietorship or a partnership differ from those of an LLC or corporation and so on.
Entity Document DefinitionCertificate of Assumed Name If you are opening a sole proprietorship or an unincorporated partnership, the amount of paperwork you must complete is relatively light. One thing you will need to do, however, is fill out a Certificate of Assumed Name. In most states, these forms can be found in the county clerk's office, and registering them involves a nominal fee. This form aligns the assumed name (the name you have chosen for the business) with the name of the business owner, certifying that there exists no separation between the personal and the professional for tax and liability purposes. The form works the same way for unincorporated partners, but such partners should have a signed partnership agreement established prior to filing a Certificate of Assumed Name. Certificate of Partnership If two or more business owners wish to form a Limited Partnership, they will need to complete a Certificate of Partnership. Limited Partners have limited management input, but, in turn, they take on limited liability for legal claims. The details of a Limited Partnership are spelled out in the Articles of Partnership. Here, each party enters into an agreement concerning the purpose of the partnership's business, the level of contribution demanded of each partner, how the partnership's profits will be divided, how the partnership will be managed, and under what circumstances partnership rights can be transferred and sold. Certificates of Partnership are typically filed with the Secretary of State in the state in which the partnership will do business. Limited Liability Company (LLC): Certificate of Organization A Limited Liability Company (or LLC) is a company that can be owned by one or more people, known as members. As the name implies, the LLC limits the amount to which individuals are personally liable, protecting business owners from litigation. LLCs also offer some flexibility on taxation, making them a very popular choice. In order to form an LLC, business owners must file a Certificate of Organization with the Secretary of State. In some states, this document is also known as the Certificate of Formation. Each state's filing requirements may vary to some degree, but the overall process is similar. After filing the required paperwork, the state sends back the legal certificate, which states when the LLC was duly formed and recognizes it as a legal entity within the state. Commonly required information on the Certificate of Organization includes:
- LLC name. Most states require that your business name include the designation LLC or other similar wording.
- The effective date of the LLC.
- The name and address of the registered agent working on behalf of the LLC.
- The company's principal office address or the address of the registered agent.
- Whether the LLC is managed by members or managers.
- The name of the corporation.
- The name and address of the registered agent working on behalf of the organization.
- The type of corporate structure chosen by the organization, e.g., profit corporation, non-profit corporation, professional corporation
- Name and address of initial board of directors
- Number and types of authorized shares
- Duration of the corporation
- Name, signature and address of the incorporator, who is in charge of setting up the corporation.