LLC Formation: What mistakes should I look out for?

Becky

I can't comment on the legal or accounting side of the issue, but I can comment on the business strategy side, so here goes...

1) Make sure you create an operating agreement that fits your short term and long term objectives. An LLC comes "alive" with it's operating agreement. The Operating Agreement is the equivalent of corporate bylaws in a corporation. It should spell out things like how decisions are made, who makes the decisions, how equity is bought/sold etc. There are tons of boiler plate operating agreements that are available out there but make sure to go through it section by section to customize it for your vision.

2) Issuing the initial membership interest - If you have any intent to bring in a partner down the road, make sure to leave some membership interest in the company treasury for that. A typical funding event down the road could use up 10-40% of the company so allocate for that now. A lot of entrepreneurs issue 100% of the membership interest to themselves and then find themselves in a sticky situation later.

3) One of the decisions you will have to make when you file the LLC paperwork is whether you will be a member managed or manager managed LLC. I typically recommend our clients do a manager managed LLC. You can ask an attny or accountant to give you more info about that.

Hope that starts you off in the right direction. Don't hesitate to ask for more detail if you'd like.

Joe...