Setting Up Your IT/Media Enterprise as an LLC

Posted on | June 9, 2011 | No Comments

First off, I am neither an accountant nor an attorney so by all means obtain proper counsel for setting up your business.

That said, I’m often asked about setting up a company and wanted to point out some options and things to think about when starting up your business. In particular, you should look at the benefits of setting it up as a limited liability company (LLC).

The major options for creating a company are a sole proprietorship, partnership, and corporation, although an interesting legal option is the limited liability company. Although not recognized by the Federal government for tax purposes, this valid legal form combines some benefits of a corporation, particularly the limited liability, with the more manageable aspects of the partnership or sole ownership. Note, it is a company, not a corporation, and it can be used for non-profit status but presents a few challenges tax-wise.

You can go to one of the many online services to set up your LLC. For example LegalZoom will allow you to form your company over the Internet and charter it in most any state including Delaware, a popular “location” due to its history of corporate law. They will prepare and also file your paperwork with Delaware’s Division of Corporations.

This would include the Articles of Organization that lists the name of the company (must include LLC abbreviated or written out), mailing address, duration (perpetual or for a set amount of time) , state location (ie Delaware), organization and management structure, initial contributions, etc. They may also assist in conducting a name search, establishing a trademark, getting a tax ID, and even filing for a patent.

Once your articles of organization have been successfully filed, your LLC begins its existence as a legal business entity. One of the first things you need to do is to get a bank account. For that you will need your articles of organization that proves you have a business license, the tax identification number (or EIN number) and the authorized members of the LLC. You might want to talk to a banker first, they can get probably advise and get you a Tax ID for free (vs. $75 at LegalZoom)

Something you must think seriously about is an Operating Agreement. This is not required by the state but is one of the most important steps in maintaining your liability protection, preventing disagreements between the members, and raising additional capital. An operating agreement specifies members’ ownership percentages, the members’ draw or salary, bonus distributions, and any privileges or enhanced ownership rights given to any members. The management plan should also include the duties, rights, and responsibilities of non-members employees.

Anthony J. Pennings, PhD has been on the NYU faculty since 2001 teaching digital media, information systems management, and global communications. © ALL RIGHTS RESERVED

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