LLC 101: What Is a Certificate of Formation?

Forming an LLC (limited liability company) has many benefits, such as personal liability protection, pass-through taxation, and enhanced credibility. While the benefits are worth the effort, you need a few documents to form your LLC and get started. One of those required documents is a Certificate of Formation. 

Understanding how this document works can prepare business owners for the LLC formation process. This guide will explore what information you need to provide in a Certificate of Formation, why it is important, how to obtain this document, and the associated costs.

Understanding Certificate of Formation

A Certificate of Formation includes basic details about your LLC’s purpose, its members, and the company’s vertical. The state you want to form your LLC in must review and approve the Certificate of Formation before your LLC gets formalized. Some states refer to the Certificate of Formation as Articles of Organization. 

You need this document to legally form an LLC and get your request approved by the state. Only with this document and a few other critical LLC documents can you get personal liability protection and other perks.

What Information is Typically Included in a Certificate of Formation?

Your Certificate of Formation must contain key details about your LLC to increase the likelihood of getting your request approved. Here’s what you typically need to include in a Certificate of Formation:

• Your company’s purpose: Briefly explain who your company aims to serve and why you want to create it. You also have to include your company’s official business name.
• Your company’s physical address: This address must fulfill the requirements of setting up an LLC. The physical address must match the state in which you want to set up your LLC. You cannot have a California address for your company if you want to set up your LLC in Nevada.
• Information about the members: Include each LLC member’s name and contact information. If you are the only member, you only have to provide your name and contact information. 
• Your registered agent’s name and address: Every LLC needs a registered agent. It is possible to be your own registered agent. 
• Effective date: This date indicates when your business entity will start its operations. 

You will also have to provide your signature on the Certificate of Formation. There may be additional requirements depending on the jurisdiction. 

Why Is a Certificate of Formation Important for Business Owners?

Each state requires a Certificate of Formation during the LLC formation process. You will need this document to get personal liability protection for any business-related legal disputes. Forming your LLC can also increase your company’s perceived credibility and lead to more business. Potential partners may take your company seriously and decide to work with you.

What’s the Difference Between a Certificate of Formation and Other Business Documents?

A Certificate of Formation is an important document for the LLC formation process, but you will need additional legal documents to complete the process. 

One of those documents is the Operating Agreement. This document lays out the rules that your business and its members need to follow. While a Certificate of Formation provides a snapshot of your LLC, the Operating Agreement indicates what will happen within your LLC once it is established. Operating Agreements contain information about the distribution of profits and losses, voting rights among members, each member’s role and privileges, buyout rules, meeting schedule, and other details. These documents can be of 5-20 pages and are lengthier than Certificate of Formation documents.

Articles of Incorporation are similar to the Certificate of Formation, but Articles of Incorporation apply to business owners who want to form corporations. LLCs are unincorporated and do not require Articles of Incorporation. 

How to Obtain a Certificate of Formation?

You will have to visit your Secretary of State’s website to find out the requirements that apply to your state. Thereafter, you can gather the necessary documents and submit a Certificate of Formation application. You will hear from the government within a few weeks regarding the status of your LLC formation application.

This process can get complicated if you are doing it on your own, but doola can help. You can use doola’s LLC Formation Services to avoid complexities. If you want to do it yourself, be sure to take note of all the requirements from your Secretary of State’s website.

How Much Does It Cost to File a Certificate of Formation?

Each state has different rules and costs to file a Certificate of Formation. The total cost can vary from $50 to $500.

How Long Does It Take to Get a Certificate of Formation Approved?

The processing time for a Certificate of Formation varies for each state. However, you may want to follow up with your state if you have not received a decision within a few weeks. Keeping a copy of your application can speed up the process if you need to follow up with your state.

Get Help with Your Certificate of Formation

Every business owner who wants to launch an LLC must complete a Certificate of Formation. While this document can take some time to craft, it’s an important part of the LLC formation process. The entire process consists of many steps, but you don’t have to navigate it alone. Business owners can use doola’s business formation services to speed up the process. doola helps business owners start, grow, and manage their LLCs so they can reach more customers.

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