Certificate of Formation Sample and 101

What is the certificate of organization? A certificate of organization is a legal document that solidifies the presence of a limited liability company (LLC) within the State as a registered business entity. Including the LLC regulations, a certificate of formation sample may have information that outlines the jurisdiction of a company, as allowed by State authorities. When starting an LLC, it is not recommended to use a certificate of formation sample. Instead, you should seek the assistance of a professional company formation lawyer to avoid any legal troubles in the future, and possibly create tax and business advantages for your company.

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Contents of a Certificate of Formation Sample

Certificate of formation sample typically (depends on state requirements) include:

• Name of Company
• Principal Office – Address
• Purpose of Company – “Any Lawful Purpose”
• Type of Business
• Registered Agent – Initial Agent for Service of Process
• Member Info
• Term of Existence – Perpetual or otherwise
• Effective Date
• LLC Regulations

The Different Types of LLC’s

A certificate of formation sample (at the least) should outline the structure, regulations, and formalities of your company as a business entity—and declare the type of LLC your business will be, such as:

Regular Limited Liability Company

The Limited Liability Company LLC is a hybrid entity that is very flexible and, depending on how many owners (known as “Members”) and what such Members elect to do, may be taxed as a partnership or corporation, if it has multiple Members, or as a sole proprietorship, if it has only one member, while providing limited liability protection for all of its Members. For federal tax purposes, an LLC, like a partnership or sole proprietorship, is a pass-through entity; thus, its income and losses are taxed only at the member level. However, all members of an LLC, like the shareholders of an S corporation, have limited liability for the debts and claims against the LLC. No member will be burdened with personal liability.

Dual Class LLC

The Dual Class LLC is a special type of LLC that follows proposed IRS regulations which allow an LLC to be deemed analogous to a limited partnership for Federal Income Tax purposes. The Dual Class LLC is structured to admit both active, management-providing members (“General Members”) in addition to more passive, capital-contributing members (“Limited Members”). In doing so, the members/owners acting solely as limited partners are not subject to the Self Employment (“SE”) tax.

Investment Club LLC

The beauty of an Investment Club is that everyday people can combine their resources to make money in an effective, low cost way. An Investment Club is a group of people who pool their money to make investments. Each member actively participates in investment decisions. After the members study different investments, the group decides to buy or sell based on a majority vote of the members. Club meetings focus on investment education and each member actively participates in investment decisions. An Investment Club LLC can have as few as one Member to start with or as many as 100, but no more than 100 Members. The Members of the LLC become owners of the Company by putting capital (making a “Capital Contribution”) into the Company in exchange for Ownership Units.

Professional Service LLC

Individuals or other professional corporations or limited liability companies forming a business where individuals are rendering licensed, professional services to the public may form a professional limited liability company. The name of a professional limited-liability company often must contain the words “Professional Limited-Liability Company” or the abbreviations “Prof. L.L.C.,” “Prof. LLC,” “P.L.L.C.,” or “PLLC.” The name of a professional limited liability company must contain the last name of one or more of its current or former members.

Special Purpose LLC 401k

Why limit your 401(k) investments when you can have self-direction? This strategy involves forming a single-owner limited liability company (“LLC”) with a 401(k) Plan. Plan funds would be used either to purchase real estate or other assets directly or to create a holding company which in turn would purchase such assets. When you are the Operating Manager of the LLC’s 401(k) Plan, you have “checkbook control”. That means that every time you are going to invest in a new asset or property or form a holding company to invest in assets or property, you are not required to have the plan custodian approve the transaction.

Special Purpose LLC IRA

The strategy for using a Spiegel & Utrera, P.A. Special Purpose LLC for Self-Directed IRA Account involves forming an LLC with the self-directed IRA as an owner (or “member”) of the LLC. Funds are transferred to the LLC which, in turn, purchases and holds title to real estate. The creation of a self-directed IRA or IRA LLC enables you to choose what you would like to invest your money in. When you are the manager of an LLC, you have “checkbook control.” That means that every time you are going to invest in a new asset, property or form a holding company to invest in assets or property, you don’t have to have the custodian approve the transaction.

We recommend using a professional legal formation lawyer—but if you still want to use a template—the certificate of formation sample will depend on which type of LLC you want to form. There are many advantages in starting any type of LLC; like state and business-specific tax advantages, protection from creditors, immunity to personal liability, gaining anonymity and protecting your personal assets, easier access to capital, enhanced business credibility, and authority, and transferable ownership.