LLC formation questions: who can answer what

LLC formation questions divide cleanly into three piles, and the pile a question lands in tells you what kind of answer is possible. Some are answered by a record. Some are answered by a professional looking at your facts. Some have no answer at all and are really a request for reassurance.

Sorting them is most of the work. What follows is the sort, with the honest answer to each type, including the ones where the honest answer is that a page cannot tell you.

What to take away

Record questions

These have definite answers that can change by state and over time. The questions below show which official record or office to check; verify current requirements with the authority that sets them.

The state business filing division—often called the Secretary of State, though the name varies—is the starting point for state records. The IRS directory of state government sites can help you reach the official state website. For state forms, fees and deadlines, use the office that sets them; for federal tax questions, use the IRS. Nothing on a general page, including this one, is a substitute, and an answer that was right last year in a neighboring state is not an answer.

A record question answered: publication in New York

Here is what a record answer looks like when the office that sets the rule gives it. Section 206 of the New York State Limited Liability Company Law requires that within 120 days after the effectiveness of the initial articles of organization, an LLC must publish in two newspapers a copy of the articles of organization or a notice related to its formation. The LLC then files a Certificate of Publication, with the newspapers' affidavits of publication attached, with the New York Department of State, Division of Corporations.

An LLC that misses those 120 days has its authority to carry on, conduct or transact business suspended until it files the certificate. That is a complete record answer: a statute, a deadline, a form and an office, all stated by the New York Department of State. The same question asked about another state may have a different answer, or no requirement at all.

Judgment questions

These depend on facts nobody but you and your advisers can see.

Those are judgment questions because their answers depend on your goals, risks and financial facts, not just a state filing record.

Whether an LLC fits depends on your ownership, exposure, finances and plans; an adviser can apply those facts to your situation. The entity-type comparison lays out the kinds of options to consider, but it cannot decide which one is right for you.

Questions with no answer

The third looks answerable and is not, because "like mine" is doing work you cannot inspect. Two businesses that look identical from outside can differ on ownership, exposure and tax position, which is exactly what decides the answer.

The questions that come up most

Does forming an LLC protect my personal assets?

An LLC creates a separation, but whether it holds in a dispute depends on conduct, maintenance and what you have personally signed. A personal guarantee remains yours, as does your own conduct. The LLC formation examples illustrate these failure modes.

Do I need an operating agreement if I am the only member?

Whether an operating agreement is required depends on the state where the LLC is formed, and many states do not require one. Banks, lenders and buyers often want to see one anyway, and it is the document that says what happens if you are unavailable. Writing it costs an afternoon and answers questions your family would otherwise have to guess at.

Do I need a federal identifier?

An EIN, or Employer Identification Number, is the federal identifier issued by the IRS. Whether your situation requires one depends on your circumstances; the IRS issues it at no charge, and nobody else issues it. The IRS names Form SS-4 “Application for Employer Identification Number (EIN).” For the application process and boundary cases, see the EIN application guide.

Can I form the LLC myself?

The filing itself is designed to be done by the person forming the business, and every state office publishes its own instructions. The SBA's general description of registering a business sets out the shape of it. What you may still want a professional for is the decision before the filing and the agreement after it.

What happens if I do nothing?

You continue as whatever you already are, usually a sole proprietor if you are working alone, with the default rules that come with it. That is a real option and sometimes the right one. What it is not is a decision you have made, and the difference shows up when something goes wrong.

Does the state check any of this?

The office checks that the form is complete and the name is available under its rules. It does not check whether the structure suits you, whether the agreement is sensible, or whether you understood what you filed.

Does every LLC need a registered agent?

State law requires an LLC to designate a registered agent for service of process. Who qualifies and whether an owner can serve depend on state law, so check the Secretary of State or equivalent office's instructions and the state's LLC statute.

Does every LLC have to publish a formation notice?

No. Publication requirements vary by state; New York, described above, is one state that requires it. Check the applicable LLC statute and the business filing office's official instructions before assuming a notice is or is not required.

How to ask better

Bring the state, number of owners, and nature of work to any question you ask. These three facts change the answer more than anything else. A question without them draws answers from people imagining a different business.

Where an answer will need updating, note who told you and when. For a change that may affect a state record, check the filing office's current amendment instructions and keep the filing confirmation; track the changes after formation.

Common questions

Why will nobody give me a straight answer about my state's fees?

Because they change, and a wrong figure is worse than none. The office publishes the current one and it takes a minute to find.

Is it worth paying someone to answer these?

For the judgment questions, yes, and the fee usually buys less time than people expect because most of the meeting is fact gathering you can do first. For the record questions, no. You are paying someone to read a page you can read.

Can I change my mind later?

Generally yes, in more than one direction, and each route out has its own cost and its own tax consequences. Ask what the exit looks like before you choose the entrance, and ask it of the accountant as well as the lawyer.

What should I not ask a filing service?

Anything in the judgment pile. A service that answers those is giving advice it is usually not licensed to give, and its own terms will normally say so.