Common LLC Terms

LLC stands for limited liability company. It is a type of business entity you can set up to protect your personal assets from business liabilities. In this article, we will go over some common LLC terms you should be familiar with before setting up an LLC.

Articles of Organization

Articles of Organization is a document filed with a state authority to form the LLC. In Arizona, this document is filed with the Arizona Corporation Commission.

Disregarded Entity

If you are a single member LLC, you can choose to classify yourself as a disregarded entity with the IRS. This means your LLC is not considered separate from you as the owner for tax purposes. This means you will report business income or losses directly on your Form 1040.

Federal Employer Identification Number

Your federal employer identification number (EIN) is a nine-digit number assigned to your LLC by the IRS.

Foreign LLC

A foreign LLC is an LLC that was incorporated in one state that is applying for the authority to conduct business in another state. In the secondary state that LLC would be known as a foreign LLC.

Manager

A manager is a person who the Articles of Organization vests with the authority to manage the day-to-day affairs of the LLCs. They may or may not also be a member of the LLC.

Manager-Managed

Manager-managed refers to how your LLC will be run. With this type of LLC, the members have voting control verses being involved in running the day-to-day affairs of the business. The listed manager will be the one who takes the presiding role in running the company.

Member

Member is the term for an owner of an LLC. They hold an interest in the LLC.

Member-Managed

Member-managed is the default LLC setup. With this setup the owners also run the day-to-day operations of the business.

Membership Interest

Membership interest is a member’s rights in the LLC. This includes the right to receive distributions of LLC assets.

Operating Agreement

An operating agreement sets out the LLCs operating procedures. This would include the structure, management, and decision-making processes for the LLC. Essentially, it lays out the rules for how the LLC is to be run.

Organizer

The organizer is the person who signs the Articles of Organization as the creator. They do not necessarily need to be a member of the LLC.

Statutory Agent

The statutory agent is the person who will receive the process of service. Basically, it is who you appoint to receive legal notifications. This person can be a member of the LLC.

Understanding Common LLC Terms

When creating an LLC, it is important to be familiar with common LLC terms. Doing so will help you be better prepared to properly run your business. If you need help setting up your LLC, contact a qualified preparer who can walk you through the process.

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