Tip Sheet: Articles of Organization (LLC)
Taking an idea from conceptualization to inception and finally to market is filled with many challenges. Legal documents in particular are hard for entrepreneurs to understand, so many gloss over them. However, they carry immense importance, as bad or wrong documents can cost a lot of money.
A Limited Liability Company (LLC) is a type of corporate form that blends elements of a Partnership and a Corporation. The LLC is a relatively new type of entity, but is found in nearly every state today and has become quite popular for entrepreneurs and other smaller businesses.
The primary characteristics of an LLC are “limited liability” and “pass through taxation” (this means that the entity itself is not taxed, as is the case with a corporation, but the tax burden is passed through to the members).
Articles of Organization is the document that delineates how the LLC is run. It determines whether the LLC is member managed or director managed, the degree of transferability of the stock, and a number of other governance issues. The document below is a sample (and representative of the) Articles of Organization that covers most of the important features found in any similar document.