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Whether you run a small market in the French Quarter or give airboat tours on the bayou, you can shield your personal assets from the liabilities of your business by forming a Louisiana LLC.
4 SIMPLE STEPS TO START YOUR BUSINESS AS A LOUISIANA LLC
- 1) Name Your LLC
Louisiana code sets forth a few requirements for an LLC name. First, the name must include “limited liability company,” “L.L.C.,” or “L.C.” The name must also be distinguishable from all other business entity names on file with the Louisiana government. Finally, the name cannot imply that the LLC is engaged in business that it is unauthorized for, that the LLC is a charity if it is not a charity, or that the LLC is affiliated with any government entity.
- 2) Filing Articles of Organization and an Original Report
Louisiana is unique in that it has LLCs file two formation documents: articles of organization and an original report. The charge for this filing is $60.
Articles of organization: Articles of organization can be executed by any person, and must include the LLC name and purpose, as well as any other provisions the organizer wants.
Original Report: The Original Report is signed by the same organizer, and contains the address of the registered office, the name and address of the registered agent, a notarized, signed acceptance of the registered agent position, and the names and addresses of managers or members (if there are no managers).
- 3) Execute Your Operating Agreement
Louisiana does not require that LLCs have operating agreements to regulate their internal affairs and conduct, although it does allow them to be written or verbal. There are very few restrictions on operating agreements in Louisiana law, and we recommend having a written operating agreement executed by all members of your LLC.
- 4) Keep Your LLC Alive
FEIN: If your Louisiana LLC will be employing people or has multiple members, you will need to contact the I.R.S., either directly or through an incorporation service, to obtain a Federal Employer Identification Number (FEIN).
Annual Report: Louisiana requires that LLCs file an annual report with a $25 filing fee to maintain their status. This annual report must contain the address of the registered office, the name and address of the registered agent, and the name and address of each manager or member (if there are no managers).
WHY FORM AN LLC IN LOUISIANA?
The Benefits and Advantages of Creating a Louisiana LLC
The Louisiana LLC Law gives LLC members contractual freedom to customize their contributions, rights, duties, and distributions of profits and losses. In addition, it gives members contractual freedom to customize the duties each party to the LLC agreement owes to the other parties, and it allows members to protect their control of an LLC.
Louisiana Has a Growing Economy
Each year, Louisiana forms over 28,000 new LLCs. Louisiana has over 153,000 active LLCs. The U.S. Chamber of Commerce ranks Louisiana first in exports, describing it as “the top export state.” More than 25% of U.S. waterborne exports are shipped through Louisiana’s ports. In addition, Louisiana ranks second in per capita income growth, as the second best tax environment for new firms, seventh in short-term job growth, ninth in job placement efficiency, and as the tenth best tax environment for mature firms.
- Advantages of Forming a Louisiana LLC
Section 1367 of the Louisiana LLC Law gives “maximum effect to the principle of freedom of contract.” The Law gives members contractual freedom to create voting and non-voting classes of membership and customize their capital contributions and shares of profits and losses. Section 1318 provides that the articles of organization or an LLC agreement may govern the voting relationship among members, and section 1323 provides “[t]he profits and losses of a limited liability company shall be allocated among the members and among classes of members in the manner provided in a written operating agreement.” Members can use this flexibility to tailor their income streams and risks of loss and facilitate everything from complex, high-dollar-volume transactions to succession planning in family businesses and estate planning by gifts of non-voting interests.
The Law does not require filing of members’ names. Under section 1305, a “person” may form an LLC by filing its articles of organization with the Louisiana Secretary of State. The definition of “person” is not just a natural person, but includes almost any kind of business or legal entity. An LLC’s members may therefore have an entity or person who is not a member file the LLC’s articles of organization.
The Law provides for an LLC’s unlimited life. Section 1303 states “every limited liability company shall have perpetual existence, unless a limited period of duration is stated in the articles of organization.” An LLC’s existence can therefore outlive its members’ lifetimes.
Dealing with Business Partners
The Louisiana LLC Law gives members contractual freedom to customize the duties each party to the LLC agreement owes to the other parties. Section 1314 has a default rule that members in member-managed LLCs and managers in manager-managed LLCs have “a fiduciary relationship to the limited liability company and its members and shall discharge [his or her] duties in good faith, with the diligence, care, judgment, and skill which an ordinary prudent person in a like position would exercise under similar circumstances.” In addition, members and managers must act as trustees of the LLC’s property and account to the LLC for “interested” transactions, which are transactions between an LLC and one or more of its members or managers that do not have “the informed consent of a majority of the uninterested members.”
A member or manager cannot be personally liable for money damages for breaching a duty, however, unless (1) regarding the duty of care, he or she acts with gross negligence, which is “a reckless disregard of or a carelessness amounting to indifference to the best interests of the limited liability company or the members thereof”; (2) regarding the duty of loyalty, he or she intentionally breaches his or her duty of loyalty; or (3) he or she intentionally commits tortious conduct.
The Law gives members and mangers contractual freedom to “opt out” of most of the default rules by including provisions in the articles of organization or a written LLC agreement that eliminate or limit personal liability for monetary damages for breach of any duty in section 1314.
Preventing Unwanted Business Partners
The Louisiana LLC Law allows members to protect their control of an LLC. The articles of organization or an LLC agreement may prohibit members from assigning their membership interests. But if they do not prohibit it, an assignment does not dissolve the LLC or entitle the assignee to participate in management or to become a member. Instead, the assignment “shall entitle the assignee only to receive such distribution or distributions, to share in such profits and losses, and to receive such allocation of income, gain, loss, deduction, credit, or similar item to which the assignor was entitled.” The non-assigning members must unanimously consent in writing to the assignee becoming a member. If a judgment creditor of a member obtains a charging order against the member’s membership interest, “the judgment creditor shall have only the rights of an assignee of the membership interest.”
- Louisiana Registered Agent
A Louisiana LLC must continuously maintain an agent for service of process in the state. A commercial registered agent service may act as a Louisiana registered agent.
Because of the advantages of forming an LLC in Louisiana, over 28,000 new LLCs are formed in the state each year.
Should you wish to have more flexibility and protection, you may instead form a Delaware LLC even if you operate in Louisiana. What are the advantages of a Delaware LLC? (Delaware LLC Advantages). We can then help you file an application for registration to do business in Louisiana with your Delaware LLC (Form Delaware LLC).
- Louisiana LLC Law Statutory References
§ 1301 “Definitions” § 1303 “Powers” § 1305 “Articles of Organization; Initial Report” § 1308 “Registered Office and Registered Agent” § 1308.1 “Annual Report” § 1314 “Duties of Members and Managers” § 1315 “Limitation of Liability and Indemnification of Members and Managers” § 1318 “Voting Rights of Members” § 1323 “Sharing of Profits and Losses” § 1324 “Interim Distributions” § 1330 “Assignment of Membership Interest” § 1331 “Rights of Judgment Creditor” § 1332 “Right of Assignee To Become a Member” § 1342 “Admission of Foreign Limited Liability Company” § 1345 “Application for Certificate of Authority” § 1350 “Registered Agent; Registered Office and Principal Business Establishment; Keeping of Records by Foreign Limited Liability Company” § 1350.1 “Annual Report” § 1354 “Transacting Business Without Authority” § 1356 “Penalties” § 1367 “Rules of Construction”
Louisiana vs. Delaware LLC's: Which State Is Better?
|States||LLC Filing Fee||Required to Name Members or Managers||Report Frequency||Annual Fee?||Reduce Fiduciary Duties?||Series?||Charging Order as Exclusive Remedy||Maximum Freedom of Contract||Separate Equity Court?|