Reference

Business Formation Glossary

Every term you'll run into while forming an LLC, defined in plain English — no jargon explaining jargon.

A

Administrative dissolution

When a state shuts down an LLC for failing to meet ongoing requirements — most often unpaid fees or missed annual reports. The company loses its good standing and its liability protection can be at risk until reinstated. Related: Annual report , Good standing

Annual report

A short filing most states require from LLCs every year (or every two years) to keep contact and ownership information current. Usually comes with a fee. Missing it can lead to late penalties or the state administratively dissolving your LLC. Related: Administrative dissolution , Franchise tax

Articles of Organization

The document you file with the state to officially create an LLC. Some states call it a Certificate of Formation or Certificate of Organization. Once approved, your LLC legally exists. Related: Certificate of Formation , Filing fee

B

Business license

Permission from a state, county, or city to operate a business. Separate from forming an LLC — forming the entity creates the company; licenses authorize specific activities or locations. Requirements vary widely by industry and locality.

C

Certificate of Formation

Another name for the Articles of Organization, used in states like Texas and Delaware. Same document, different label. Related: Articles of Organization

D

DBA (doing business as)

A registered nickname for your business — a name it operates under that isn't its legal name. Also called a trade name, fictitious name, or assumed name. A DBA is not a separate legal entity and provides no liability protection by itself.

Distinguishable name

The standard most states apply when deciding whether your proposed LLC name is available: it must be distinguishable from names already on file. Small differences like punctuation or "LLC" vs "Inc." usually don't count as distinguishable. Related: Name reservation

E

EIN (Employer Identification Number)

A nine-digit federal tax ID for your business, issued by the IRS — like a Social Security number for the company. Needed to open a business bank account, hire employees, and file taxes. Always free directly from the IRS. Related: Responsible party

F

Filing fee

The one-time fee a state charges to process your Articles of Organization. Ranges from roughly $35 to $500 depending on the state. Related: Articles of Organization

Foreign LLC

An LLC doing business in a state other than the one where it was formed. "Foreign" here means out-of-state, not out-of-country. Doing business in another state usually requires registering there as a foreign LLC and paying that state's fees too.

Franchise tax

A tax some states charge for the privilege of doing business there — not related to franchising a brand. It can be a flat amount (like Delaware's) or based on revenue (like Texas's, which is often $0 for small businesses under the no-tax-due threshold). Related: Annual report

G

Good standing

The status of an LLC that has met its state requirements — filings current, fees paid. Banks, lenders, and other states often ask for a Certificate of Good Standing as proof. Related: Administrative dissolution

L

Liability protection

The core benefit of an LLC: members generally aren't personally responsible for the company's debts and obligations. Protection depends on keeping the LLC genuinely separate — separate finances, proper records — and can be lost ("piercing the veil") if the line blurs. Related: Piercing the corporate veil , Operating agreement

LLC (Limited Liability Company)

A business structure that combines liability protection (like a corporation) with simple, flexible taxation (like a sole proprietorship or partnership by default). Owned by members, created by filing with a state. Related: Member , Liability protection

M

Manager-managed

An LLC management structure where the members appoint one or more managers to run day-to-day operations. Managers may or may not be members. Common when some owners are passive investors. Related: Member-managed

Member

An owner of an LLC. LLCs can have one member (single-member) or many (multi-member). Members' ownership percentages and rights are typically documented in the operating agreement. Related: Operating agreement , Membership interest

Member-managed

An LLC management structure where the owners run the business themselves. The default in most states, and the most common choice for small LLCs. Related: Manager-managed

Membership interest

A member's ownership stake in an LLC — their share of profits, losses, and (usually) voting power. Often expressed as a percentage. Related: Member

N

Name reservation

An optional filing that holds a business name for you for a limited period (often 30–120 days) before you form the entity. Useful if you're not ready to file yet; not required in most cases. Related: Distinguishable name

O

Operating agreement

The internal document that sets out who owns the LLC, how profits are split, and how decisions get made. Rarely filed with the state, but important — even for single-member LLCs, it helps demonstrate the company is a genuinely separate entity. Related: Member , Liability protection

Organizer

The person or company that signs and submits the Articles of Organization. The organizer doesn't have to be a member — it's an administrative role that ends once the LLC is formed.

P

Pass-through taxation

The default way LLCs are taxed: the company itself pays no federal income tax; profits and losses "pass through" to the members' personal tax returns. An LLC can instead elect corporate taxation (including S-corp status) if that fits better. Related: S-corp election

Piercing the corporate veil

When a court sets aside an LLC's liability protection and holds owners personally responsible — typically because personal and business finances were mixed, the company was underfunded, or formalities were ignored. Related: Liability protection

Publication requirement

A rule in a few states (most notably New York) requiring new LLCs to announce their formation in newspapers for a set period. Costs vary a lot by county and can substantially exceed the filing fee itself.

R

Registered agent

The person or company designated to receive legal mail and official notices for your LLC. Must have a physical address in the state and be available during business hours. You can usually be your own, or pay a service (commonly $100–$150/year) for privacy and reliability. Related: Registered office , Service of process

Registered office

The physical street address (not a P.O. box) where the registered agent can be reached during business hours. It becomes part of the public record. Related: Registered agent

Responsible party

The person the IRS requires on an EIN application — someone who controls or owns the entity. For most small LLCs, that's a member with a controlling interest. Related: EIN (Employer Identification Number)

S

S-corp election

A tax status (not a business entity) that an eligible LLC can elect with the IRS. It can reduce self-employment taxes for some profitable businesses, but adds payroll and filing obligations. Whether it helps depends on specifics — a question for a CPA. Related: Pass-through taxation

Series LLC

A special LLC form offered by some states in which one "parent" LLC contains internally separated "series," each with its own assets and liabilities. Rules and recognition vary significantly between states.

Service of process

The formal delivery of legal documents — like a summons if the company is sued. Receiving these is the registered agent's core job; missing one can mean losing a lawsuit by default. Related: Registered agent

Single-member LLC

An LLC with one owner. By default the IRS treats it as a "disregarded entity" — its income is simply reported on the owner's personal return. It still provides liability protection if run as a genuinely separate entity. Related: Member , Operating agreement

Statement of Information

California's name for its periodic information filing (other states call it an annual report or periodic report) — a routine update of the company's addresses, management, and agent. Related: Annual report