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Ready to launch your new business but not sure if you need Articles of Organization or an operating agreement (or maybe even both)? If you're planning to form an LLC, Articles of Organization are required. Operating agreements, however, are typically optional depending on your state, but your business can benefit greatly from having one. Here, we'll look at the differences and similarities between the two so you can understand which you need and how to get them.
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Articles of Organization are the documents you'll file if you choose to form a limited liability company (LLC). While you're not required to file a legal business entity in order to run your business, a legal structure will provide you with many benefits, including liability protection. The documents you must file to form your business depend on the entity type you choose. C Corps and S Corps must file Articles of Incorporation, while LLCs must file Articles of Organization.
This documentation is required in all states before you can make your LLC official, though you might find them referred to by other names such as these:
While the documents may have different names, the purpose and the information required are the same across all states.
Your Articles of Organization are needed to start your LLC, but depending on your industry or profession, you might find that certain business licenses or permits are also required at the local, state, or federal level. In addition, you'll need some way to document your business to the IRS for tax filing purposes. Your Social Security number will work in some cases, but the best practice is to file for an EIN or Employer Identification Number.
And finally, you may also be required to file one additional document — an operating agreement.
An operating agreement is a roadmap or blueprint that details how you'll run your business. It is not a legal requirement in most states, but if you're in one of the five states that do require it, you'll need to have it ready to file along with your Articles of Organization.
Operating agreements are required in the following states:
Even if you don't live (or aren't forming your business) in one of these states, drafting an operating agreement will help you make important decisions about your business — plus, it'll help you secure funding and form relationships with new business partners.
As we've established, Articles of Organization and operating agreements are not the same things, but they each offer something valuable and necessary to LLC business owners. Here's how they differ:
We know these documents aren't the same thing, but they do have a few similarities:
Ready to register your LLC and file your Articles of Organization? Here are the steps you need to take:
Banks will often need to see your Articles of Organization, which is why it's important to keep them handy. Articles of Organization are proof that you're maintaining a legal business entity, and they show banks you're legitimate. Most of the time, banks will require Articles of Organization before you can open a business bank account or business credit card, which is crucial for separating your personal and business finances.
Whether you're in one of the states where an operating agreement is required or creating one as a best practice, you'll need to understand exactly how to lay it out.
You can certainly make your own operating agreement, but you must include all required information, especially if you're in a state where operating agreements are required. If you're worried about errors, opt for a lawyer-approved operating agreement template. A template will streamline the application process and ensure you have a comprehensive, accurate operating agreement for your business.
Even if you're the only employee in your business, you'll need an operating agreement if you live in one of the five states that require it (California, Delaware, Maine, Missouri, and New York). Otherwise, it's not a requirement. Operating agreements are most useful to business partnerships. However, they're still useful for single-member LLCs, too. They can help you determine your goals, and they can act as a roadmap for handling your business operations. Even if other partners aren't involved, you can still benefit from a thorough operating agreement.
If you're starting an LLC, you're going to be filing Articles of Organization no matter what. And whether you live in a state that requires an operating agreement or not, you'll still benefit from having an agreement that's well-planned and well-executed. If you're feeling overwhelmed or have a complicated business structure, a business formation service can help.
Bizee can file your Articles of Organization and form your LLC for $0 + the state fee, and we can help you create your operating agreement through our legal contract library. Our library is included with our Gold and Platinum packages, or you can add premium access to the library and get dozens of binding, lawyer-approved contract templates on demand.
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