How to properly form an LLC or Corporation

To form an entity, the first step is to make sure your name is available with the NC Secretary of State. This is a good time to hire a trademark lawyer as well, to make sure your product and service names don’t infringe a third party.

An LLC is properly formed when its Articles of Organization are accepted by the NC Secretary of State. It has very few formal requirements, and that is one reason some people prefer to operate an LLC, rather than a corporation. You will need a federal tax id number and state tax accounts to operate, but those are not formation requirements. It is not required, but highly recommended for an LLC to have an operating agreement.

A corporation has several additional required steps after the Articles of Incorporation are accepted by the Secretary of State and the EIN is obtained. The shareholders have to name directors. The directors have to have an organizational meeting where they name officers, issue shares and adopt bylaws. If you miss any of these steps, the corporation is not properly formed, and the owners face the possibility of personal liability. Additionally, a corporation is required to have annual meetings of both shareholders and directors. Failure to hold these can result in personal liability for the owners.