Entity Formation FAQ
When forming a new entity, you may have questions about the process, requirements, or terminology you may encounter along the way. Below are the answers to some frequently asked questions about entity formations:
What is the difference between member-managed and manager-managed LLC?
Can I use the registered agent’s address as the principal address on my formation filing?
Who can sign my formation documents?
Does the state assess penalties for doing business prior to registration?
Are there states that require publishing of new formations?
Should I qualify to do business in another state?
What is the difference between authorized, issued, and outstanding shares of stock?
What is the difference between an Operating Agreement and Bylaws?
How do I determine what entity type I should choose?
What is the difference between member-managed and manager-managed LLC?
- Member-managed means that all members equally manage the organization.
- Manager-managed means that all members appoint a manager, who may or may not be a member, to manage the organization.
Can I use the registered agent’s address as the principal address on my formation filing?
Yes, you can use the registered agent's address as the principal address on a formation filing.
It is important to note that a PO Box cannot be used as a principal address in most states.
Who can sign my formation documents?
Formation documents can be signed by any authorized representative.
Does the state assess penalties for doing business prior to registration?
Yes, in some states penalties are assessed for doing business prior to registration. Those states include:
- Alabama
- Connecticut
- District of Columbia
- Florida - No penalty charged if the date business commenced is within the same calendar year
- Georgia
- Illinois
- Kansas
- Maryland
- Tennessee
- Texas - There is an online calculator to determine penalties
- Wisconsin
Are there states that require publishing of new formations?
Yes, some states require publishing of new formations. Those states include:
- Arizona
- Georgia
- Nebraska
- Nevada
- New York
- Pennsylvania
Should I be an “S Corp”?
Any tax election questions should be discussed with your tax professional, as they would know the obligations and consequences of such elections.
Should I qualify to do business in another state?
You should consult your accountant when deciding whether or not you should qualify to do business in another state.
What is the difference between authorized, issued, and outstanding shares of stock?
- Authorized is the number of shares the state authorizes you to issue as stated on your Articles of Incorporation.
- Issued shares are the number of authorized shares you have issued to shareholders.
- Outstanding is the difference between authorized and issued.
See this article for more information: What's the difference between authorized, issued, and outstanding shares of stock?
What is the difference between an Operating Agreement and Bylaws?
- An Operating Agreement is the governing document of an LLC.
- Bylaws is the governing document of a Corporation.
How do I determine what entity type I should choose?
Speak with your legal counsel or tax professional about entity selection.
Have any additional questions? Contact Us.