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Starting an LLC

After working for a couple of years as a 1099 consultant, I finally decided to start an LLC with a couple of peers. I actually wasn't sure is I should do a full corporation or not, but my accountant talked me into an LLC. An LLC is like a small corporation with the limited personal liability and the ability to have the company survive the death of the founders, but it doesn't suffer from the same tax consequences and hefty setup.

After a few forms, Opus 41 LLC was born, and I thought I would pass on the wisdom as a series of steps that you'll need to go through to do the same thing.

Step 1. Articles of Organization (Oregon Form 151)

Each state has an Articles of Organization form that you'll need to fill out. I found the Oregon version of Form 151 online, and it has a $50 processing fee. This actually creates the LLC with the State of Oregon. Each "partner" (called organizer) must sign the document. Mail the form to:

State of Oregon
Corporation Division
255 Capitol Street NE, Suite 151
Salem, Oregon 97310-1327

Step 2. Federal Employer Identification Number (SS-4)

The next step is to register the LLC with the Feds, and Form SS-4 is also online and should be submitted after Form 151 has been approved. The response of this comes with a Federal EIN and it is this number that you use to open a bank account.

The form is not only online, but can be filled out submitted online. However, the values my accountant told me to fill out result in an error. I would just mail the suckah in, but the form doesn't have the address and the web page says to mail the form to the address listed on the form. I guess they are really trying to encourage me to use the online form.

Step 3. Create an Operating Agreement

This is a legal document (not really a form) that clarifies things like, if an LLC member dies, what happens to the money in the bank account, etc. While you can get a lawyer to draw this up, there are a number of online services that have you fill out a form, and then it creates the agreement.

I ended up choosing Med Law Plus which did a nice job and had a free trial for me to play with before buying and was only $15. Cheap compared to the equivalent legal fees.

Step 4. Open a Bank Account —

When you open a bank account, tell them it is for an LLC business, and they'll want both the Federal EIN number as well as the *Operating Agreement*. Now you are in business.

Annually: Form 1065 —

Every year the corporation has to submit a form to the state declaring income and holdings. Oregon's Form 1065 is also strangely available online. The LLC will also have to fill out a K1 for each partner/contractor that the LLC pays money to. At this point, I'm going to hand the issue over to my accountant to do that (and I'll split that fee with each of the partners).

Who is a Partner? —

An LLC is basically a partnership with limited liability (like a standard corporation). It is made up of 1 or more partners, but doesn't preclude the company from hiring contractors. So the question is, who is a partner and who is just a contractor? This is stated in the Operating Agreement, but could be anyone you want.

Hopefully that will save you all the time and energy that it took me to set this up.

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