An LLC, or a Limited Liability Company, is a type of legal entity that can be formed to operate a business and hold its own assets. It is often considered to be a middle ground between a corporation and a sole proprietorship as the LLC exhibits advantages from both – it is a business structure that is easy to get in with the added benefits of a registered business. There are many people involved in forming an LLC and one integral component in the formation of the LLC is the organizer.
The organizer of an LLC is an individual or an entity that is primarily tasked with the responsibilities surrounding the formation of the LLC. These responsibilities typically involve submitting accurate documents to the state, ensuring the filing fees are paid, and serving as the point of contact between the LLC and the state during the formation period.
What is an LLC Organizer?
An LLC organizer an individual or a company – that essentially takes responsibility for the formation of the LLC. Named on the LLC formation documents as the initiating party, the organizer is tasked with filing the Articles of Organization on behalf of the LLC. It is the organizer’s responsibility to make sure that the documents filed are compliant with state law.
The role of the organizer is a prerequisite for LLC formation as an LLC requires at least one organizer to be formed. After submitting the Articles of Organization, they can remain as the contact person of the state until the Articles of Organization are approved. Until approval, the organizer is the point of contact for the state for any issues that may arise with the documents.
During LLC formation, the organizer is essential. However, an individual or entity that solely operates as an organizer does not get listed in the Operating Agreement of the LLC. The Operating Agreement describes the internal affairs, management structure, responsibilities of members, voting structure, and profit division of the LLC. There is no reason for the organizer to be named in the Operating Agreement as the sole existence of the organizer is for the formation of the LLC alone.
The filing documents are the opposite of the Operating Agreement in the sense that the filing documents are more concerned with the organizer and are not interested in who the members of the LLC are. The filing documents can require the organizer’s information (e.g., name, address, contact information, etc.).
While the responsibilities of the organizer have been outlined to be highly limited to the technical formation of the LLC in terms of submitting the necessary documents and overseeing the formation process, some states allow organizers to have expanded duties such as the participation in the drafting of the Operating Agreement and even acting as the registered agent.
FundsNet recommends using an Organizer for your LLC. They also note that the LLC organizer is commonly mistaken with other roles served in the LLC such as the member or the registered agent. However, a registered agent service can be used to meet the role as organizer.
For one, members are the owners of the LLC and are directly in charge of the operation of the business. While it is common for the LLC to appoint a member as the organizer, membership is not a prerequisite to become the organizer.
Second, while the organizer is primarily responsible for the technical formation of the LLC, the organizer is also the contact person for the state during the formation period. As soon as the LLC is approved and formed, the responsibilities of the organizer are terminated and the duty of becoming the official point of contact between the business entity and the state is carried over to the registered agent.
Who Can Be an LLC Organizer?
Aside from the legal requirement of being at least 18 years of age, there are no other restrictions of who can serve the role as an LLC organizer. While the individuals who own the LLC are called members, these individuals do not have to serve as the organizer. The organizer can be a member, a friend, a family member, an attorney, an accountant, a document filing company – really anyone that has been given the proper authorization.
Although anyone of legal age can technically be the LLC organizer, it should be noted that the person to be appointed should be able to submit accurate LLC documents, ensure that the filing fees are paid, and have an understanding of the document and state requirements.
While it is common for individuals to appoint themselves as the LLC organizer, especially for single-member LLCs, many people opt to transfer the burden to professionals. Understandably, it would be cheaper to serve as your own organizer. Other people leave the role of the organizer to their personal attorney or accountant, but this route can tend to garner exorbitant prices.
It is also advisable to consider trusting an LLC formation service – professional individuals or entities that specifically cater to LLC formation. This is a highly economic choice, especially for people who might not be too familiar with the processes involved in forming an LLC. This is also ideal for people whose time is highly valuable and better suited used elsewhere.
What are the Liabilities of an LLC Organizer?
Due to the limited responsibilities of the organizer to the formation of the LLC, no liabilities are typically attached to the position of being an LLC organizer. With the nature of the position of being an organizer, the organizer has no other responsibilities and duties to the LLC once the LLC has been approved and formed.
Of course, this only holds true for individuals that solely operate as organizers and have no further associations with the LLC. This is not the case for members, registered agents, or any other individuals associated with the LLC that was appointed to be the LLC organizer during the LLC formation.
However, the liabilities of an organizer can expand along with the responsibilities of said organizer. A 2010 decision by an appeals court ruled that the organizer must disclose whether they benefit from the profits of the LLC, especially if they take a fiduciary role and solicit other members.