Free Operating Agreement Template - Start an LLC in 2023 (2023)


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Free Operating Agreement Template - Start an LLC in 2023 (1)

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1. Organisation.

2. Definitions.

3. Activation and financing.

4. Distribution of net profit and net loss.

5. Giveaways.

6. The company's expenses.

7. Members' powers and responsibilities.

8. Transfer of members' interests.

9. Records, Audits and Reports.

(Video) Operating Agreement for LLC (Free Template and Walkthrough)

10. Dissolution and termination of the Company.

11. Diverse.


This Employment Agreement (as it may be amended, restated or otherwise modified from time to time, this "Agreement"), as of the Effective Date, is entered into by Insert Names of all parties ("Members"), as members of Company Name LLC ( "Company"), in accordance with the Law (as such term is defined below) subject to the following terms and conditions:

1. Organisation.

1.1 Formation. On the Incorporation Date, the Company's Articles of Incorporation ("Articles of Incorporation") were filed with the Office of the Secretary of State in accordance with law.

1.2 Name and place of business. The company name must be the name of the company LLC and its principal place of business must be the address. Members may change such name in accordance with the requirements of law, change such place of business or establish additional places of business for the Company as the Members determine to be necessary or desirable.

1.3 The company and the purpose of the company. The purpose of the company is to participate in any legal proceeding or activity for which a limited liability company may be organized under the law.

1.4 Duration. The duration of this Agreement will be until the Company is dissolved as stated in this Agreement.

1.5 Mandatory documentation. Members shall execute, acknowledge, file, register and/or publish such certificates and documents as may be required under this Agreement or by law in connection with the establishment and operation of the Company.

1.6 Registered office and registered agent. The company's original registered office and initial registered agent must be as stated in the company's articles of association. Headquarters and Registered Representative Members may change from time to time by entering the address of the new headquarters and/or the name of the new registered representative in accordance with the law.

2. Definitions.

The following capitalized terms have the following meaning:

"Act" means the Government Limited Companies Act as it may be amended from time to time.

"Affiliate" means (i) any Person that directly or indirectly controls, controls or is under common control with another Person; (ii) a person who owns or controls 10% or more of the voting securities of such other person; (iii) any officer, director or partner of such other person; and (iv) if such person is an officer, director or partner, any corporation for which such person acts in any capacity. The term "person" includes any individual, corporation, partnership, trust, unincorporated association or other legal entity.

"Code" means the Taxation Act of 1986, as amended from time to time, and the promulgated rules and rulings issued thereunder.

"Member's Interest" means a Member's ownership interest in the Company.

3. Activation and financing.

Members will make an initial capital contribution of $. Members may, but are not obliged to, make additional capital contributions

4. Distribution of net profit and net loss.

For each financial year, the company's net income and net loss must be allocated to the members in proportion to each member's membership share, as described in Schedule A.

(Video) How To Write An LLC Operating Agreement 2023

5. Giveaways.

The distribution is made to the members at the time and in the total amounts that the members decide

6. The company's expenses.

The Company will directly pay or reimburse the Members, as the case may be, for all costs and expenses for the Company's operations.

7. Members' powers and responsibilities.

7.1 Management. The company's affairs and affairs are handled by the members. Members shall have full and complete authority, power and discretion to manage and control the business, affairs and property of the Company, to make all decisions relating to those matters and to perform all other acts or activities customary or incidental to the management of the ​​the company's business. . Members can trade with written consent.

7.2 Members' powers. The Members shall have all powers, rights and authorities conferred by law and such as are necessary or proper to manage the business of the Company, which shall include, by way of illustration but not limitation, the right, powers and authorities to cause the Company to :

7.2.1 Acquire, hold, develop, rent, lease, manage, sell, exchange, share and otherwise dispose of the Company's assets;

7.2.2 To lend money under such conditions and in such amounts as the members consider to be in the best interests of the company;

7.2.3 Pledge or mortgage or subject the company's property to any form of security, obtain replacement of a mortgage or other security and advance, in whole or in part, refinance, increase, change, consolidate or extend any mortgage or other security device, all under conditions that the Members considers to be in the best interest of the Company;

7.2.4 Enter into such contracts and agreements as the Members deem reasonably necessary or appropriate in connection with the operation and purposes of the Company (including contracts with the Members' Affiliated Companies), and any insurance agreement that the Members deem necessary or appropriate for the protection of the Company and members, including insurance against errors and omissions, to preserve the assets of the company or for any purpose convenient or useful to the company;

7.2.5 Employs persons, who may be members of the Members, in the operation and management of the Company's operations;

7.2.6 Prepare or have reports, statements and other relevant information prepared for distribution to members;

7.2.7 Open accounts and deposits and maintain funds on behalf of the Company in banks, savings and credit companies, "money market" investment trusts and other instruments that the Members in their sole discretion deem necessary or desirable;

7.2.8 Exercise or revoke any of the choices set out in the Code;

7.2.9 Choose as your financial year a calendar or financial year that can be approved by the Tax Administration;

7.2.10 Determine the appropriate accounting method(s) to be used by the Company;

7.2.11 Require in any contract with the Company that the Members have no personal liability, but that the person or entity entering into the contract with the Company looks solely to the Company and its assets for satisfaction;

7.2.12 Renting personal property for use by the company;

7.2.13 Establish reserves from income in amounts deemed appropriate by the members;

(Video) LLC Operating Agreement: Free Template + Video Walkthrough

7.2.14 Initiation of legal proceedings, resolution of legal disputes and defense of legal proceedings;

7.2.15 Recognize themselves as members; and

7.2.16 To execute, confirm and deliver any and all instruments for the performance of the foregoing and to take all such actions in connection therewith as the Members may deem necessary or proper. All documents or instruments may be signed in the name of the company and on behalf of the members.

7.3 Member for tax matters. The name is hereby appointed to act as "tax partner" in accordance with the Code.

7.4 Indemnification of members. Members, their shareholders, affiliates, officers, directors, partners, employees, representatives and agents (collectively, "Covered Persons") shall not be liable for, indemnify and hold harmless (to the extent of the Company's assets) from any loss or damage suffered by them, the Company or the Members in connection with the Company's business, including costs and reasonable attorneys' fees and all amounts used to settle any claim for loss or damage arising out of any act or omission made or omitted.

8. Transfer of members' interests.

Members may sell, transfer, mortgage, encumber or otherwise transfer all or part of their interests in the company only with the written consent of the majority of members.

9. Records, Audits and Reports.

At its head office, the Company will keep the Company's records and accounts of all the Company's business and expenses, including the following:

9.1 Full name and last known address of the members' business or residence, together with the members' capital share;

9.2 A copy of the articles of association and any amendments thereto, together with all powers of attorney under which the articles of association or any amendments were signed;

9.3 Copies of the Company's federal, state and local tax returns or income tax returns, if any, for the six most recent tax years;

9.4 Copies of this Agreement and any amendments thereto together with any power of attorney under which a written account or any amendments have been executed;

9.5 Copies of the company's accounts, if any, for the last six years; and

9.6 The company's books and records relating to the company's internal affairs for at least the current and last four financial years.

10. Dissolution and termination of the Company.

10.1 Termination and Termination. The Company will be dissolved, it will cease and its assets will be disposed of and its affairs will be liquidated upon the resolution of the majority of member interests on the termination of the Company.

10.2 Confirmation of Termination and Cancellation. As soon as practicable after the resolution of the members to dissolve the corporation, the members shall issue a certificate of dissolution in such form as is prescribed by the Secretary of State of California and file the certificate of dissolution as required by law. After the completion of the liquidation of the company, the members submit the certificate of cancellation of the articles of association in accordance with the law.

10.3 Liquidation of assets. After the company's dissolution and termination, the members shall take full account of the company's assets and liabilities, liquidate the assets as soon as possible in accordance with the achievement of their fair market value, and shall apply and distribute the proceeds thereof. for the following orders:

10.3.1 To pay the Company's creditors, including Members but excluding secured creditors whose obligations will be assumed or otherwise assigned during the liquidation of the Company's assets;

(Video) Single Member LLC Operating Agreement Template- How To Fill Single Member LLC Operating Agreement

10.3.2 Establishing reserves as required by law for all potential liabilities or obligations of the Company; provided, however, that said reserves shall be deposited with a bank or trust company bearing interest for the purpose of disbursing such reserves to pay any of the foregoing contingencies and, at the expiration of a reasonable period, for the purpose of distributing the remaining amount in compliance with the remaining provisions hereof, Section 10.3; and

10.3.3 Any remaining amount for members.

11. Diverse.

11.1 Heirs and assigns. The terms and conditions of this agreement are binding and inure to the benefit of the members' successors, assigns and assigns.

11.2 Separation. In the event that any sentence or section of this Agreement is held invalid by a court of competent jurisdiction, such sentence or section shall be deemed severable from the remainder of this Agreement and the remainder of this Agreement shall survive full force and effect.

11.3 Notices. All notices under this Agreement shall be in writing and shall be given to the Members in person or by mail, per post to the address that the company has for members, or to another address that the members may specify in writing.

11.4 Choice of law. This Agreement shall be governed by and construed in accordance with the laws of the State.

11.5 Meeting place. All actions, suits or proceedings relating to or arising out of this Agreement may be brought only in a court of competent state.

11.6 Integrated and binding contract. This agreement contains the members' full understanding and acceptance.

IN WITNESS WHEREOF, the undersigned has accepted this Agreement as of the date first stated in the preamble.




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(Video) What is An Operating Agreement for an LLC? [2023]


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Can I create my own operating agreement for LLC? ›

Get together with your co-owners and a lawyer, if you think you should (it's never a bad idea), and figure out what you want to cover in your agreement. Then, to create an LLC operating agreement yourself, all you need to do is answer a few simple questions and make sure everyone signs it to make it legal.

How do I make a simple operating agreement for an LLC? ›

What Should be Included in an Operating Agreement?
  1. Names, addresses, and titles of each member.
  2. Ownership percentages.
  3. Member rights and responsibilities.
  4. Responsibility, liability, and powers of members and/or managers.
  5. Profit and loss distribution.
  6. Buying and selling rules.
  7. Dissolution instructions.
  8. Meeting guidelines.

What should be contained in an operating agreement for an LLC? ›

The LLC operating agreement should show what each owner has contributed to the business and the value of each contribution. Some members might contribute money, while others contribute property, skills, labor, intellectual property or other resources.

What is an operating agreement template for LLC? ›

An operating agreement, also known in some states as a limited liability company (LLC) agreement, is a contract that describes how a business plans to operate. Think of it as a legal business plan that reads like a prenup.

Should I write my own operating agreement? ›

Most states do not require LLCs to have this document, so many LLCs choose not to draft one. While it may not be a requirement to have an operating agreement, it's actually in the best interest of an LLC to draft one.

What is the difference between an LLC agreement and an operating agreement? ›

The LLC operating agreement, also known as an LLC agreement, establishes the rules and structure for the LLC and can help address any issues that arise during business operations. Most states have default provisions that address many of these difficulties, but the operating agreement can override these presumptions.

How important is operating agreement for single member LLC? ›

An operating agreement is a key business document that shows your business operates like a legit company. Without the operating agreement, your state might not acknowledge you as an LLC, which means someone could sue you without there being any shield to protect your personal assets.

What are the key terms of the operating agreement? ›

The key parts of a limited liability company ( LLC) operating agreement include provisions relating to ownership structure, contributions, capital accounts, how profit will be distributed, how the company will be managed and who will manage it, how the books and records will be kept, what happens if the company has to ...

What are the six types of contract that by law have to be in writing? ›

Which contracts or agreements are required to be in writing?
  • The sale of land, or a home, or an interest in land. ...
  • Goods or services being sold for more than $500.00 (this amount may vary from state to state).
  • Contracts that may last more than one year. ...
  • Agreements to take on another person or business's debt.
Mar 28, 2022

Does an LLC require members to split profits equally? ›

Members will split profits and losses equally in most cases, but this is not always required. If one member contributes more money or assets to the LLC, they may be granted a more significant member's ownership interest or percentage ownership.

What should be included in an ownership business agreement? ›

Enumerate each partner's rights and responsibilities. Decision-making process. Outline how decisions are made and the responsibility of each partner in the decision-making process. Include who has financial control of the company and who must approve the addition of new partners.

What is the document that is filed with the Secretary of State to form an LLC quizlet? ›

To form an LLC, articles of organization, along with an initial report, must be filed with the secretary of state.

How are profits divided in an LLC? ›

By default, LLC profits are split according to ownership percentage—if you own 50% of the LLC, you get 50% of the profits. However, you can override your state's default requirements for splitting LLC profits by making another arrangement in your operating agreement.

Can members of LLC own different percentages? ›

Share of ownership can be split 50/50 or at any percentage, as long as the total adds up to 100%. Partnerships are relatively easy to set up. No paperwork needs to be filed with the state, and a partnership can be formed as soon as the co-owners start the business.

How do you calculate ownership percentage in an LLC? ›

LLC ownership percentage is usually determined by how much equity each owner has contributed. The ownership interest given to each owner can depend on the need of the limited liability company and the rules of the state where the LLC has been formed.

What concerns should be covered in an operating agreement? ›

All operating agreements should address the possible dissolution of the company, including decision-making authority, permissible reasons allowing for a dissolution, and the process by which the dissolution will occur.

What are the advantages of an operating agreement? ›

In addition to protecting against personal liability and State default rules, operating agreements also protect members against one another. While you may not foresee future disagreements with your fellow members, there is a high likelihood that they will occur at some point.

Is the LLC requesting corporate tax treatment from the IRS? ›

If the LLC is a corporation, normal corporate tax rules will apply to the LLC and it should file a Form 1120, U.S. Corporation Income Tax Return.

Is the simplest form of business? ›

A sole proprietorship is the easiest and simplest form of business ownership. It is owned by one person. There is no distinction between the person and the business. The owner shares in the business's profits and losses.

Are articles the same as operating agreement? ›

The articles of organization is the document that the Secretary of State's offices requires for a business formation or when you register a business name. The operating agreement is the business contract that LLC members agree upon for handling disputes or dissolving an organization.

Which of the following is a disadvantage of operating as a partnership? ›

Disadvantages of a partnership include that: the liability of the partners for the debts of the business is unlimited. each partner is 'jointly and severally' liable for the partnership's debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts.

What is a disregarded entity? ›

A disregarded entity is a business entity that (1) has a single owner, (2) is not organized as a corporation, and (3) has not elected to be taxed as a separate entity for federal tax purposes. The owner of a disregarded entity reports the income of the disregarded entity on the owner's return.

What is a single-member LLC capital contribution? ›

In a Single-Member LLC, the sole Member can make Capital Contributions of any amount. No matter how much the Member contributes, they will still have 100% Membership Interest in their Single-Member LLC.

Does a single-member LLC need an operating agreement in California? ›

California does not require an SMLLC to have an operating agreement. However, even though an SMLLC has just one member, an operating agreement is highly recommended. An SMLLC operating agreement does not need to be filed with the state.

What are the three 3 major points of agreement? ›

What you need to know about an agreement is that three essential elements or ingredients must exist, these are offer, acceptance and consideration.

What are the 3 most important parts of an agreement? ›

Contracts are made up of three basic parts – an offer, an acceptance and consideration. The offer and acceptance are what the purpose of the agreement is between the parties.

What are the two major parts required to form an agreement? ›

1. Offer - One of the parties made a promise to do or refrain from doing some specified action in the future. 2. Consideration - Something of value was promised in exchange for the specified action or nonaction.

Who keeps the original copy of a contract? ›

Each party should get an original signed copy of the contract for their files. That means if there are two parties to the contract, two identical contracts must be signed. One original copy of the contract should go to you, and one original copy should go to the other party.

What are the 4 requirements to form a contract? ›

The basic elements required for the agreement to be a legally enforceable contract are: mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality. In some states, elements of consideration can be satisfied by a valid substitute.

What are the 7 requirements of a valid contract? ›

For a contract to be valid and recognized by the common law, it must include certain elements— offer, acceptance, consideration, intention to create legal relations, authority and capacity, and certainty. Without these elements, a contract is not legally binding and may not be enforced by the courts.

Who keeps the profits in an LLC? ›

The business does not pay entity-level taxes. Instead, the company passes profits and losses through to you and the other members. The LLC allocates profits to members based on their ownership percentage or based on a special percentage allocation as agreed upon by the members.

What is the downside to an LLC? ›

Disadvantages of creating an LLC

Cost: An LLC usually costs more to form and maintain than a sole proprietorship or general partnership. States charge an initial formation fee. Many states also impose ongoing fees, such as annual report and/or franchise tax fees. Check with your Secretary of State's office.

How often should my LLC distribute profits? ›

An LLC's profits must be allocated among its members every year. As long as the operating agreement contains provisions governing how profits are to be allocated, the profit allocation rules as set out in the operating agreement will be followed, rather than the default state rules.

What is it called when 2 people own a business? ›

Partnership. Partnerships are the simplest structure for two or more people to own a business together. There are two common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP).

What is a silent partner? ›

A silent partner is also known as a dormant partner; an investor who becomes a member of a partnership by virtue of capital contribution, but plays an inactive role in the daily operation and management of the business.

What are the three 3 basic forms of business ownership? ›

The three basic forms of business organization that exist in the economy are the sole proprietorship, partnership, and corporation.

What document controls an LLC? ›

An operating agreement, also known as a company agreement, establishes the ground rules for running your LLC and the rights and responsibilities of its members. It also confirms how profits and losses will be distributed among them.

What document creates the LLC? ›

Your articles of organization function as a document and outlines essential information about your LLC. After the form has been registered, the LLC is officially a registered entity in your state. An articles of organization is usually filed at the secretary of state office in your state.

How do you write an LLC in a document? ›

State LLC naming requirements vary across states, but most states require: Your business name must include words or abbreviations like LLC, LC, or Limited Liability Company to show that your business entity is a limited liability company.

What percentage of income should I pay myself from my LLC? ›

Key points. Small business owners should pay themselves a salary when their businesses are profitable. Base your salary on your net business income, after setting aside 30% for taxes. Divide the remaining income into a salary for yourself and your business savings.

How do I pay myself profits from an LLC? ›

4 Ways To Pay Yourself From an LLC
  1. Pay Yourself as a W-2 Employee. For many LLC owners, the most advantageous way to receive payment is to treat yourself as an employee. ...
  2. Earn Profit Distributions. ...
  3. Pay Yourself as a 1099 Independent Contractor. ...
  4. Keep the Money in the Business.
Sep 30, 2022

How do LLC profits avoid taxes? ›

An LLC is considered a pass-through entity—also called a flow-through entity—which means it pays taxes through an individual income tax code rather than through a corporate tax code. In addition to LLCs, sole proprietorships, S Corporations, and partnerships are all pass-through businesses.

Is husband and wife considered single member LLC? ›

Overview. If your LLC has one owner, you're a single member limited liability company (SMLLC). If you are married, you and your spouse are considered one owner and can elect to be treated as an SMLLC.

What can I do with my LLC profits? ›

The excess funds could be used to pay debt or re-invested to expand the business. Or, depending on the circumstances, the profits could be distributed to the business owners. Regardless of the choice, sole proprietors and members of the LLC are required to include the business's profits on their tax returns.

Can LLC keep profits? ›

If you regularly need to keep a substantial amount of profits in your LLC (called “retained earnings”), you might benefit from electing corporate taxation. Any LLC can be treated like a corporation for tax purposes by filing IRS Form 8832 and checking the corporate tax treatment box on the form.

How do you get paid if you own a percentage of a company? ›

There are two ways to make money from owning shares of stock: dividends and capital appreciation. Dividends are cash distributions of company profits.

How should I categorize my LLC? ›

LLCs are classified as “pass-through” entities for tax reasons, meaning the business profits and losses will flow through to the personal tax return of each member. An LLC can also elect to be taxed as an S-Corporation or a C-Corporation. To be taxed as an S-Corporation, the LLC must file IRS form 2553.

What is a 5% owner of company? ›

For determining highly compensated employees: If the employer is a corporation, a 5% owner is any person who owns more than 5% of the outstanding stock of the corporation or possesses more than 5% of the total combined voting power of all stock of the corporation.

Does Ohio require an operating agreement for an LLC? ›

Is an Operating Agreement REQUIRED in Ohio? No. Ohio state law does not mandate that businesses must adopt an operating agreement.

Does Florida require an operating agreement for LLC? ›

Does Florida require an operating agreement for LLCs? No, LLCs formed in Florida are not required to have an operating agreement.

Does Texas require an operating agreement for LLC? ›

In Texas, an operating agreement isn't required to form a limited liability company (LLC). However, business attorneys, accountants and advisors agree that no LLC should form without one. An LLC operating agreement is a legally binding document that defines critical aspects of the LLC.

Does California require an operating agreement for an LLC? ›

Limited Liability Company (LLC)

Domestic LLCs may be managed by one or more managers or one or more members. In addition to filing the applicable documents with the Secretary of State, an operating agreement among the members as to the affairs of the LLC and the conduct of its business is required.

How long does it take for LLC approval in Ohio? ›

Mail filings: In total, mail filing approvals for Ohio LLCs take about 1 week. This accounts for the 1 business day processing time, plus the time your documents are in the mail. Online filings: In total, online filing approvals for Ohio LLCs take 1 business day.

How do I file an operating agreement for an LLC in Ohio? ›

How to File (4 Steps)
  1. Step 1 – Select a Business Name.
  2. Step 2 – Appoint a Statutory Agent.
  3. Step 3 – File Documents with Secretary of State.
  4. Step 4 – Execute an Operating Agreement.
  5. Step 5 – Register Company for Taxation.
Oct 29, 2021

How much does it cost to start an LLC in Ohio? ›

You can form an Ohio LLC online or by submitting Form 610, Articles of Organization for a Domestic Limited Liability Company. The filing fee is $99. To file online, visit the Ohio Secretary of State's business filing portal. Otherwise, you may download the documents and mail them to P.O. Box 670, Columbus, Ohio 43216.

How much does a Florida LLC cost? ›

LLC Fees
Annual Report (& Supplemental Fee)$ 138.75
New Florida/Foreign LLC
Filing Fee (Required)$ 100.00
Registered Agent Fee (Required)$ 25.00
Total Fee For New Florida/Foreign LLC$ 125.00
18 more rows

Do I need a lawyer to form an LLC in Florida? ›

There is no legal requirement to hire an attorney to form an LLC. Most states allow LLC formation by registering the business entity on your secretary of state's website and with the Internal Revenue Service (IRS). LLCs provide advantages over sole proprietorships and general partnerships.

Do you need an operating agreement to open a business bank account in Florida? ›

However, there are a few key pieces of documentation that you will almost certainly need. These include your LLC's articles of organization, certificate formation, your operating agreement (or other records of who is allowed to sign on behalf of the LLC), and your Employer Identification Number (EIN).

Does a Texas LLC need a board of directors? ›

All corporations, regardless of the state, must have a shareholder-elected Board of Directors. An LLC is not required to have a Board of Directors, but can adopt this form of management if the members (the owners of the LLC) choose to do so.

Where do I file an LLC operating agreement in Texas? ›

By mail to the Secretary of State Corporations Section Records Department, P.O. Box 13697, Austin, TX 78711-3697.

What is an operating agreement for an LLC in Texas? ›

A Texas LLC operating agreement is a written document that sets out the rights and obligations of the members of an LLC for its operation, governance, and distribution of economic benefits. The nature and attraction of an operating agreement are that you can basically design it as you like.

Do you have to pay the $800 California LLC fee the first year? ›

Every LLC that is doing business or organized in California must pay an annual tax of $800. This yearly tax will be due, even if you are not conducting business, until you cancel your LLC. You have until the 15th day of the 4th month from the date you file with the SOS to pay your first-year annual tax.

Does a California LLC operating agreement need to be notarized? ›

Does my LLC Operating Agreement need to be notarized? No, your Operating Agreement doesn't need to be notarized. Each Member just needs to sign it. Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legal document.


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