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Elements of an LLC

elements of an LLC - company formation documents - operating agreement

Limited Liability Companies (LLCs) are one of most popular entity types - and for good reason. Business owners form LLCs to limit personal liability, enjoy tax benefits, increase legitimacy, and more. Plus, Delaware has fixed annual state franchise taxes regardless of business size or number of members. You can learn more about why Delaware might be right for your business here. 

But LLC terminology can be confusing, so let's take a look at the elements of an LLC to clarify what you need to know about this type of entity. 

Formation Document

The formation document is essentially the birth certificate of the LLC. It is generally a one page document stating the name and purpose of an LLC. This document is submitted to the state and when the LLC is created, a state seal is added (electronically) to the document. This document is how you prove the existence of your company

The company formation document often causes confusion amongst business owners because, depending on where your entity was formed and what type of entity it is, this document may be called several different things. This document might be called:

  • Certificate of Formation
  • Articles of Organization
  • Certificate of Organization
  • Articles of Formation
  • Company formation documents

In the State of Delaware, this document is called the Articles of Formation (for LLCs).

So for instance, if you are seeking financing for your LLC and your bank's loan officer asks you for your Certificate of Incorporation, you would provide them with the Articles of Formation. These terms are interchangeable because they are referencing the same document.

When you form an LLC with us, you will receive your LLC formation document - the Articles of Formation, directly from us. If you purchase an E-Kit (all digital package), you’ll receive this document via email. If you order a physical corporate kit, it will be included in the package you receive from us via UPS.

Despite the importance of the document, it's common for businesses to misplace it. If this happens to you, you can order a copy of your Delaware Articles of Formation here. We do not have to be your registered agent to pull a copy for you. 

Operating Agreement

The operating agreement is the document that lays out how your LLC will run. This document sets forth the roles and responsibilities of members and managers.

The operating agreement is an internal document with the LLC. Most states do not require a copy of the operating agreement to be filed with the secretary of state. 

If you form your LLC with The Incorporators, we provide you with an operating agreement which can be edited and utilized as you see fit.

Members

The term "members", in reference to an LLC, essentially means owners. Individuals who own a stake in a corporation are called shareholders; in an LLC they are called members.

LLCs can have one member or many members. An LLC member may be an individual, another LLC, corporation, or foreign entity.

The duties of members are set forth in the operating agreement. Members generally do not manage the day to day activities of an LLC; however some members may also be managers.

Current membership of an LLC is tracked on a membership ledger. Member certificates and a membership ledger are included in all of our formation packages.

Manager

The manager of the LLC is the individual or group of individuals who runs the day to day operations of the LLC. A manager may be a member of the LLC but does not have to be. Conversely, a member may be a manager of the LLC but does not have to be.

When forming your LLC you will be asked to name a manager. If you name someone who is also a member, your LLC is considered a member-managed LLC. This is common practice, as many LLC’s are small businesses and are owned and run by an individual or small group of people.

Meeting Minutes

LLC’s are not legally required to have annual meetings, however many include an annual meeting requirement in their operating agreement. If an annual meeting is required per your LLC operating agreement, meeting minutes should be recorded and saved with your corporate documents.

The Incorporators includes sample meeting minutes with every LLC package.

Company Seal (Electronic or Stamp)

You are not required to have a company seal for your LLC, though many LLC’s choose to. A company seal on a document indicates that the document is official. It can be used on any document and is commonly used for:

  • Membership or stock certificates
  • Legal documents
  • Meeting minutes
  • Deeds
  • Sales agreements
  • Vendor contracts
  • Employment agreements

A company seal may be digital, a physical stamp, or embosser (seal is raised). Our upgraded packages include a digital or physical seal (depending on package, see product description).

You can also purchase a company seal individually in our shop. We offer an embossed seal, a round self-inking stamp, a digital seal in png format to be added to your digital documents, and a 3-D gold digital seal

Employer Identification Number (EIN)

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is the official number given to your LLC by the IRS. It is used to identify your business entity and is a necessary step in the process of setting up your LLC.

To put it simply, it’s like the social security number of your company.

Applying for an EIN is a simple process and can be done online in minutes. Once you set up your LLC and have your formation document, you apply for an EIN here. You can also fill out a Form SS-4 (included in your formation package from The Incorporators or found here) and submit it via fax or mail.  

LLC Fictitious Name Filing / Doing Business As (DBA)

Not all LLC’s will have a DBA but some will. This means that the company chooses to publicly go by one name, while its formation document reflects a different name.

This is fairly common practice - here’s a quick example:

An owner of a Dunkin Donuts franchise files their company formation documents as “Dunkin of Delaware, LLC”. Their company is run as an individual business under the name of the franchise - Dunkin Donuts. Dunkin Donuts is already an existing company and the franchise owner would not file their company formation documents as “Dunkin Donuts”. They choose an alternative name - in this case “Dunkin of Delaware, LLC” and file a DBA as “Dunkin Donuts”.

In Delaware DBA's are filed at the county level, in the county where the business operates. We can assist you with filing a fictitious name in Delaware

Questions?

We hope this guide has helped clarify the terminology you need to know to effectively start or manage your LLC. If you have any questions, feel free to contact us or give us a call at 800-223-3928.