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Minnesota LLC Formation III: Articles of Organization

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In the first two parts of the series, I have mentioned more than once that the Articles of Organization is the key document for LLC formation.

LLC is formed by filing the Articles of Organization with the Office of the Minnesota Secretary of State. The Articles become effective on filing and payment of the $160 (current as of the year 2010) filing fee. Once the Articles are filed and the fee is paid, it is presumed that all conditions precedent have been complied with and the LLC has been organized. The Office of the Secretary of State would then issue a Certificate of Organization to the LLC.

Office of the Minnesota Secretary of State offers a standard fill-in Articles of Organization form which sets out the required elements that must be included in the Articles. What is important to understand is that the Articles may include other elements in addition to what is included in the standard form. I will discuss here the required as well as some of the most important additional provisions that may be included in the Articles by a Minnesota business lawyer.

Required Provisions

Pursuant to Minn. Stat. §322B.115 Subd. 1, the following provisions must be included in the Articles of Organization:

a). Name of the LLC (see specific name requirements in the second part of this series);

b). Address of the Registered Office of the LLC. Note that Minnesota Secretary of State will only accept a Minnesota address. The address should include: street address (or rural route and rural route box number), city, state, and zip code. P.O. Box will not be accepted;

c). Name of the LLC’s Registered Agent (if any);

d). Name and address of each organizer; and

e). A statement of the period of existence for the limited liability company if the LLC is not to have perpetual existence.

Optional Provisions

Minn. Stat. §322B.115 contains a lengthy list of additional provisions that can be modified by and included in the Articles of Organization. Note, that all of these provisions may also be modified by the Member Control Agreement, but only some of the additional powers and rights may be modified in the Bylaws.

The most common provisions included by Minnesota business lawyers in the Articles of Organization are: provision for approval of the transfer of governance rights, denial of cumulative voting, denial of preemptive rights, written action without a meeting, limitations on the liability of governors, and a general statement of purposes and powers. Often, a provision stating that the LLC shall have perpetual existence is included in the Articles. It is not necessary, though, to list in the Articles the powers already granted to an LLC by the Minnesota Limited Liability Company Act

It is also important to point out that the Articles of Organization may contain these additional provisions as long as they are not inconsistent with law.

Conclusion

Sherayzen Law Office can help you determine which additional provisions need to be included in the Articles of Organization, draft the Articles and properly file them with the Minnesota Secretary of State.

Minnesota LLC Formation II: LLC Organization Process

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In the previous article, I already discussed some of the essential documents that are necessary for formation of a Limited Liability Company (“LLC”) in Minnesota. In this article, I would like to explore the basic mechanics of LLC formation.

Who can form an LLC?

One or more natural persons at least 18 years of age may act as organizer(s) and form an LLC. Note that an organizer does not have to become a member, but an LLC must have one or more members.

How LLC is formed?

LLC is formed by filing the Articles of Organization with the Office of the Minnesota Secretary of State. The Articles become effective on filing and payment of the $160 (current as of the year 2010) filing fee. Once the Articles are filed and the fee is paid, it is presumed that all conditions precedent have been complied with and the LLC has been organized. The Office of the Secretary of State would then issue a Certificate of Organization to the LLC.

LLC Name Requirements

The name of an LLC must be in the English language or in any other language expressed in English letters (or characters) and contain the words “limited liability company” or the abbreviation “LLC”. The name itself must be distinguishable from names of other business entities (such as LLCs, partnerships, corporations, et cetera) as determined by the Minnesota Secretary of State. Notice that the name of the LLC cannot contain the words “corporation” or “incorporated”.

Post-Filing Role of Organizers

Where the initial Articles of Organization do not name a board of governors, the organizers may elect the first board of governor or may act as governors until the governors are elected. Often, these issues would be addressed in the Bylaws or Member Control Agreement.

After the Articles of Organization are filed, the most immediate task of the organizers is to complete the organization of the LLC. The following actions are often taken: adoption of Bylaws and/or Member Control Agreement, amendment of the Articles, election of governors, authorization of certain transactions (for example, execution of commercial lease agreements), establishment of the fiscal year, and making of appropriate tax elections.

Contributions to the LLC

Pursuant to the Minnesota Limited Liability Company Act, any form of contribution to the LLC (money, real estate ownership transfer, rendering services, et cetera) is only valid if authorized by the board of governors or otherwise pursuant to a Member Control Agreement. Contributions to the LLC must be reflected in required records. A Minnesota business attorney must be consulted on this important issue.

Amendment of the Articles of Organization

It is important to know that an LLC may amend its Articles of Organization at any time to include or modify any provision that is required or permitted to appear in the Articles or to add any provision not required to be included in the Articles.

The mechanics of the Amendment depend on whether any contribution to the LLC has already been made. If no contribution to the LLC is reflected in its required records, the Articles may be amended by either the organizers or the board of governors. On the other hand, where a contribution has been already registered in the required records, any amendment to the Articles has be to approved by the members of the LLC.

Once an amendment has been adopted, Amended Articles of Organization have to be prepared and filed with the Minnesota Secretary of State. Remember that, in addition to the LLC’s name and the exact text of the amendment, the Amended Articles have to contain a statement that the Amendment has been adopted pursuant to the relevant provision of the Minnesota Limited Liability Company Act.

Conclusion

Despite the deceptive simplicity of the process, forming an LLC may generate its own significant legal problems. Therefore, I strongly advise anyone who wishes to form an LLC to consult a Minnesota business lawyer.

Sherayzen Law Office can help you draft and properly file the Articles of Organization with the Minnesota Secretary of State, guide you through the post-filing organization process (including making contributions to the LLC), and prepare the necessary organization documents, such as Bylaws and Member Control Agreement.

Call NOW to discuss your case with an experienced business lawyer!