A key benefit of limited liability companies is that the owners (or “members”) receive limited liability; that is, they can usually not be held personally liable for the debts of the LLC. In addition, if the LLC is sued, the owners’ personal assets are not subject to collection.
However, there are some instances when — as lawyers say — the veil of limited liability is pierced and the LLC members can be personally liable for the debts of the LLC.
You can form an LLC yourself even if you have no formal legal or business training. A limited liability company is the easiest type of business entity to create and requires only five steps:
- Choose a business name that complies with state law
- File your Articles of Organization and pay the applicable filing fee
- Draft an operating agreement
- Publish notice of your intent to form a limited liability company
- Gather any required licenses or permits needed by your business area
You are permitted to form an LLC in any U.S. state regardless of where you reside or where you intend to do business. Though some states offer more advantages to LLC owners, there are two negatives to creating an LLC in other states: you must register as a foreign LLC in each state you intend to conduct business, and you must designate a registered agent in the state in which you started your LLC.
There are two states commonly touted as the best for LLC formation: Delaware and Nevada.
To change your registered agent — the individual you elect to receive service of process on behalf of the LLC — or registered office if your registered agent moves, you must submit a form to the Secretary of State in the state in which your LLC was formed. You typically cannot make this type of change on your annual report and should submit the form immediately when the change occurs. If the state has the name of an incorrect registered agent or the wrong address, important communication may not make it to you.
Owners of home-based LLCs may feel tentative about providing their home addresses as the primary address of their LLCs. As a protection mechanism, some home business owners operate with a post office box, or PO box, as the primary address. There is no restriction preventing an LLC owner from using a PO box as the LLC’s business address.
Rent the PO box before you form your LLC. On your Articles of Organization form, write the PO box on the line requesting the LLC’s primary address or business address.
Your registered agent or resident agent must have a street address in the state, however. A PO box is not an acceptable form of communication for the LLC’s agent.