A certificate of formation is the legal document filed with a state government to create a limited liability company, or LLC. Once the state accepts the filing, the LLC legally exists under that state's law.
The document may be called Articles of Organization or Certificate of Organization, depending on the state. Delaware and Texas use "Certificate of Formation," while New York uses "Articles of Organization."
State filing fees vary. The examples discussed in this guide are $110 in Delaware, $300 in Texas and $200 in New York.
Certificate of Formation at a Glance
| Question | Answer |
|---|---|
| What is it? | The state filing that legally creates an LLC |
| Who receives it? | Usually the Secretary of State or another state business agency |
| What is it also called? | Articles of Organization or Certificate of Organization |
| What does it usually include? | The LLC name, registered agent, registered office and organizer information |
| Does it list ownership percentages? | Usually not |
| Is it the same as an operating agreement? | No |
| Does every state use this exact name? | No |
| What proves the LLC was formed? | The state-approved or file-stamped formation document, and sometimes a filing receipt |
What Does a Certificate of Formation Do?
A certificate of formation officially creates the LLC as a separate legal entity under state law. Under Delaware law, an LLC is formed when its initial certificate of formation is filed, or on a later effective date stated in the filing.
The filing establishes the company's basic public record. It does not set out every rule for running the LLC. Ownership percentages, voting rights, profit distributions and other internal matters are generally covered in the operating agreement.
What Information Is Included in a Certificate of Formation?
The required information varies by state. A certificate of formation or equivalent LLC filing commonly includes:
- The LLC's legal name
- The registered agent's name
- The registered office address
- The organizer's name and signature
- The LLC's principal business address
- Whether the LLC is member-managed or manager-managed
- The business purpose, if the state requires or permits one
- The effective date of formation
- The LLC's duration, if the state requires it
Delaware requires the LLC name, registered office address and registered agent information. Texas also requires the filing to state whether the LLC is managed by its members or by managers.
The organizer is the person or entity that signs and submits the formation document. The organizer does not automatically become an LLC owner. New York, for example, allows an organizer to form an LLC without becoming a member.
Is a Certificate of Formation the Same as Articles of Organization?
Usually, yes. Certificate of Formation and Articles of Organization generally refer to the state filing that creates an LLC.
| State | Common document name |
|---|---|
| Delaware | Certificate of Formation |
| Texas | Certificate of Formation |
| New York | Articles of Organization |
| Other states | Articles of Organization, Certificate of Organization or another similar term |
The name depends on the state. The IRS recognizes that states may call an LLC's organizing document Articles of Organization, Certificate of Organization or Certificate of Formation.
In some states, "certificate of formation" can also refer to a state-issued copy or certificate showing that the filing was accepted. Use the terminology and document options provided by the state where the LLC was formed.
Certificate of Formation vs. Operating Agreement
A certificate of formation is a state filing that creates the LLC. An operating agreement is an internal agreement that sets out how the LLC will operate.
| Certificate of formation | Operating agreement |
|---|---|
| Filed with the state | Usually kept with the LLC's internal records |
| Creates the LLC | Sets out internal rules |
| Identifies basic company information | Explains ownership, management and decision-making |
| May be available through state records | Usually not filed with the state |
| Needed to form the LLC | Required or recommended depending on state law |
An operating agreement commonly addresses:
- Member ownership percentages
- Capital contributions
- Voting rights
- Manager and member authority
- Profit and loss allocations
- Distributions
- Adding or removing members
- Transfers of ownership
- Procedures for resolving disputes
New York describes the operating agreement as an internal document that is not filed with the Department of State. The U.S. Small Business Administration also describes operating agreements as documents that govern an LLC's internal operations.
Certificate of Formation vs. Certificate of Good Standing
These documents have different jobs:
- A certificate of formation creates the LLC.
- A certificate of good standing confirms that an existing LLC is active and meets certain state requirements when the certificate is issued.
A certificate of good standing does not replace the certificate of formation. Banks, investors, lenders and other states may request a certificate of good standing after the LLC has been formed.
Certificate of Formation vs. EIN
A certificate of formation comes from the state. An Employer Identification Number, or EIN, comes from the Internal Revenue Service.
The certificate of formation creates the legal entity under state law. The EIN identifies the business for federal tax administration, hiring employees, opening certain business accounts and other federal purposes. The two documents are separate and usually come from different government agencies.
How Do You File a Certificate of Formation?
The usual process is:
Choose the formation state. The filing state is often where the business is located or primarily operates. Forming an LLC in another state can create additional registration, tax and compliance obligations.
Choose an available LLC name. The name generally must be distinguishable from existing entities in that state and may need to include an LLC designation.
Appoint a registered agent. The registered agent receives legal notices and other government documents for the LLC. The agent generally must have a physical address in the formation state.
Complete the state's formation form. Provide the required company name, registered agent details, organizer information and management details.
Pay the filing fee. Fees vary by state. Official state materials list examples of $110 in Delaware, $300 in Texas and $200 in New York. Expedited processing and certified-copy fees may cost more, and fees can change. Check the relevant state agency before filing.
Save the approved filing. Keep the state-approved, file-stamped or electronically certified copy with the LLC's permanent records. New York describes its filing receipt as proof of filing, while Texas explains how filers can request a file-stamped copy.
Complete post-formation requirements. Depending on the state and business, the LLC may need an operating agreement, initial report, annual report, business license, tax registration, publication notice or EIN.
Do You Need a Certificate of Formation to Create an LLC?
Yes. To create a domestic LLC, you generally must file the state's equivalent formation document. The document may have a different title, but it performs the same legal function.
Use the official form and instructions for the state where the LLC will be formed. State rules, filing fees and post-formation requirements differ. The SBA directs business owners to their state registration office for the applicable filing rules and fees.