Formation Of A Limited Liability company

Forming a Limited Liability Company (LLC) involves several key steps. Here\’s a general outline of the process:

  1. Choose a Name: Select a unique and distinguishable name for your LLC that complies with the regulations of the state where you plan to establish the company. The name should typically include \”LLC\” or \”Limited Liability Company\” as part of the legal name.
  2. Registered Agent: Designate a registered agent who will receive official correspondence and legal documents on behalf of the LLC. The registered agent must have a physical address in the state of formation.
  3. Articles of Organization: Prepare and file the Articles of Organization with the appropriate state agency. This document typically includes the LLC\’s name, registered agent information, business purpose, management structure, and other required details. There may be a filing fee associated with submitting the Articles of Organization.
  4. Operating Agreement: Although not always legally required, it\’s highly recommended to create an Operating Agreement. This document outlines the internal operations, ownership structure, management responsibilities, and decision-making processes of the LLC. The Operating Agreement helps protect the limited liability status of the company and clarifies the rights and obligations of the members.
  5. Obtain Permits and Licenses: Depending on the nature of your business, you may need to obtain specific permits, licenses, or certifications at the federal, state, or local level. Research the requirements applicable to your industry and comply with any necessary regulations.
  6. Employer Identification Number (EIN): Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is necessary for tax purposes, hiring employees, opening bank accounts, and other financial transactions.
  7. State Taxes and Compliance: Familiarize yourself with the tax obligations and compliance requirements for LLCs in your state. This includes understanding sales tax, income tax, employment tax, and any ongoing reporting or filing requirements.
  8. Business Bank Account: Open a separate bank account for your LLC to keep personal and business finances separate. This will help maintain limited liability company protection and ensure accurate bookkeeping.
  9. Obtain Business Insurance: Consider obtaining appropriate business insurance coverage to protect your LLC from unforeseen events or liabilities. The types and amounts of insurance may vary depending on your industry and specific risks.
  10. Ongoing Compliance: Stay informed about the ongoing compliance obligations for your LLC, which may include filing annual reports, paying franchise taxes, maintaining records, and renewing licenses or permits.

It\’s essential to consult with an attorney or a qualified professional experienced in business formation to ensure compliance with all legal requirements and to address any specific considerations related to your unique situation. The process and regulations may vary depending on the state and country where you plan to form your LLC.


The steps involved in the formation of a limited liability company (be it private or public limited company) as follows:

Step 1: The promoter(s) devise a scheme of capitalization, bearing in mind the cost of formation, assets to be bought and working capital

Step 2: The promoter(s) are required to secure the services of a solicitor to prepare certain documents to be filled with the registrar of companies. The documents are:

  • Memorandum of Association
  • Article of Association
  • Statement of Nominal Capital

Step 3: The documents are stamped and lodged with the registrar of companies.

Memorandum of Association in company formation

Definition: Memorandum of Association is a document forming the constitution of a company and defining its objectives and powers with regard to its dealing with the outside world. It is the document containing the rules and regulations which govern the external relationship of a company with outsiders. Once registered, the memorandum becomes a public document.

A Memorandum of Association contains the following information:

  • The name of the company, which must end with the word “Limited” or “Plc”
  • The registered office of the company.
  • The objectives of the company.
  • The amount of authorized capital and the various shares into which it is divided.
  • A declaration that the liability of the members are limited.
  • The names of the founders of the company.
  • Status of the company, that is, private or public.
  • The restriction, if any, on the power of the company.
Articles of Association Definition

: Articles of Association is a document in which the regulations which govern the internal management of the company’s affairs, and the duties, rights and powers of the shareholders are stated. It complements the memorandum of association. However, where there is the conflict between the two documents, the memorandum prevails.

The contents of an Article of Association include:
  •  The method of issuing capital.
  •  The method of holding meetings.
  •  Definition of powers and duties of directors.
  • The right of shareholders.
  •  How directors are to be elected.
  •  How auditors are to be remunerated
  • Method of sharing dividends.
  •  Transfer and forfeiture.
  •  Method of auditing the account of business.

Prospectus document of company formation

Definition: A prospectus is a document issued by public limited companies only inviting\’ the public to subscribe for shares of the co A copy of such a prospectus, signed by the directors or proposed directors in writing, be filed with the registrar of companies Company Act defines it as: “Any notice, circular advertisement which invite the public subscription or purchase of shares company.”

Content of a prospectus

The content of a prospectus includes:

  •  Particulars of the company’s past hi
  •  Information about the present position future prospects of the company.
  •  The amount of capital offered subscription.
  •  Particulars of directors and other officials
  •  Promoter’s remuneration.
  • The date of opening the lists.
  •  The nature of capital offered subscription.
  •  The amount payable on application allotment on each share.
  •  The number of founders’ shares.

Step 4: After going through the documents registrar of companies then issues a certificate of incorporation to the company giving the company the power to commence business.

Step 5: A private limited company can commence business after receiving the certificate of incorporation, but a public liability company cannot commence until it receives the certificate of trading.

Certificate of incorporation in company formation

Certificate of incorporation, which confers on the company to commence business issued by the registrar of companies, the company has put on a veil of incorporation. The certificate is given out as evidence that all the requirements of the Act in respect of registration have been complied with by the company and is therefore duly registered under the Act. It contains the named company, registration number and signature of the registrar.

The Company Act contains the effects of incorporation as:

  • Right of the company to own properties which are separated from shareholders.
  • Tight of perpetual existence,
  • Right, to sue and be sued.
  • Tight to transfer shares.
  • Tight to borrow.

Certificate of trading

A certificate of trading is the document which the public limited company to commence business activities. It is issued to a  public liability company to enable it to commence operation after the company has been given the certificate of incorporation.

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If it is a private limited company, it is at liberty to commence business immediately without the certificate of trading.

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