When you’re in the process of setting up a new business, it can feel like there are a million things that need your attention. It’s equal parts exciting and stressful.
If setting up a limited liability company (LLC), one of the most important things you can do is to have all the right paperwork in place. Not only is this necessary for registering the business as an entity, but it can also help you with running things day-to-day.
1. Certificate of formation
To register your LLC in Texas, you’ll need to complete a certificate of formation and file it with the Texas Secretary of State. This officially establishes your LLC.
2. Operating agreement
An operating agreement is a legal document used by businesses to outline how they intend to carry out the internal operations of the business.
It deals with both how finances will be handled as well as describing how operations should run. It handles topics such as the percentage ownership of each member, how the dissolution of the company should take place and voting rights.
Benefits of an operating agreement include:
- It ensures compliance with rules and regulations while creating a legally binding document for all members of the LLC.
- It makes sure there’s a record, in writing, of how the business is to be managed and structured. It can help to avoid or mediate disputes between multiple members, as it should cover all important decisions.
- It reduces personal liability. The law recognizes the business as an LLC when there is an operating agreement in place. It helps to distinguish it from a partnership or sole proprietorship. In the event the business faces legal action, it can be necessary to avoid the personal and financial consequences that come with an expensive lawsuit.
To be in compliance with rules and regulations, creating an LLC involves a significant amount of documentation. You can ensure that you have all the required paperwork in order by seeking the assistance of a legal professional.