The operating agreement sets forth the guidelines for an LLC, it outlines the ownership and operating procedures of your LLC. This document outlines the working relations, including financials, among the members of the LLC.
The details vary depending on several factors: number of members, the structure itself, tax considerations, and sharing of profits, among others. If there is more than one member in your LLC then it becomes a binding legal contract.
Beware that an Operating Agreement might be required
In some states having an Operating Agreement is required, therefore if you are forming an LLC in California, Delaware, Maine, Missouri, Nebraska, and New York make sure you get one, they are required in those states.
Do I Need an Operating Agreement?
If you are not forming an LLC in the states mentioned above we highly recommend drafting one. In the case of a multi-member LLC, an operating agreement will set expectations above all of the member’s roles and responsibilities.
On the other hand, if you are forming a single-member LLC, then an operating agreement will ensure courts respect your limited liability status.
Any basic operating agreement for LLC contains the following provisions:
- Identifying Information
- Statement of Intent
- Business Purpose
- Tax Treatment
- Admission of New Members
IncFile can help you draft an operating agreement for your LLC online quickly and affordably.
Knowing where articles of organization are filed helps you get one step closer to actually getting your LLC incorporated. This is exactly why we have provided an in-depth article below.
So where are articles of organization filed?
Articles of organization are filed with the Secretary of State’s office, in the state where you intend to form your new LLC. This can either be done in person, online or through the mail.
It should be noted, though, that some states have different requirements in this regard. We go over these nuances and other equally important aspects of identifying where articles of organization should be filed in the sections below.
State-wise Differences in Articles of Organization
As mentioned above, articles of organization are ideally filed with the Secretary of State’s office in whatever state you desire to have your LLC formed in.
Depending on the states, sometimes you will be able to locate the appropriate forms for filing the articles of organization easily on the Secretary of State’s website.
Most states also offer in-person and mail-in options, while some are carried out with a different office or government agency entirely. Examples of the latter are Florida, Arizona, and New Jersey.
It is also worth noting that some states do not refer to “articles of organization” — the document required for the appropriate registration of an LLC – as “articles of organization.” They instead refer to them as “certificate of formation”, or “certificate of organization”, among others.
However, regardless of the phrase they choose to go by, the principle behind these documents remains the same – they are required to officially register your company and help you become a full-fledged limited liability company.
Filing articles of organization can be a tedious task for some people, in certain cases. As mentioned earlier, carrying out this process in some states is a lot easier than in others, thanks to the difference in availability and requirements.
This is why, generally, there are two broad paths you can choose to follow when filing your articles of organization – these are personal filing, and making use of a third-party service.
Personal filing involves going through the steps mentioned above all on your own. The advantage here, obviously, is that you get to save up on associated costs that come with hiring a third party.
The drawback, though, is that you may end up being exhausted by the process, or worse, make costly mistakes thanks to a lack of prior experience.
The next available option, and the best choice in the scheme of things, is to make use of a third-party service. Luckily, there are a good number of LLC filing services out there who basically take the stress out of your hand and go through the entire process on your behalf.
They carry out the name availability search, paperwork processes, and offer professional guidance which greatly limits the possibility of errors.
In the end, whichever option you choose to go by is all dependent on you, but given the ease and guarantee that comes with going with a filing service, and the relative affordability of the prices, we strongly advise that you go with this option.
Important Information Provided in Articles of Organization
Information required in articles of organization varies by state. Generally, though, the requirements almost follow a similar pattern with certain entries guaranteed to be mandatory. Below are some of this mandatory information:
The very first, and of course most important, entry in articles of organization is the name of the company itself. To choose a name you must first carry out an availability search to ensure that your desired name is indeed available.
The chosen name must also end with an LLC designation, among which are “LLC”, “Limited Liability Company”, or “L.L.C.”
Statement of Purpose
The statement of purpose spells out what your purpose is for creating a limited liability company. This doesn’t necessarily need to be overly descriptive, and sometimes going with a short, generic description is the norm.
The duration of your LLC can either be perpetual or short-term. Perpetual LLCs last, well, perpetually, while short-term LLCs can ask for a specific amount of time, depending on your duration of choice.
It is also worth noting that many states do not even require a specific duration.
Another required entry is the registered agent information, where you specify the name and address of your designated registered agent.
The job of a registered agent is to receive important legal documents on behalf of your LLC.
Your registered agent can be a third-party individual or an LLC member. Some filing companies also offer registered agent services.
This field requires you to state how your LLC will be managed. Generally, it can either be managed by a manager or group of managers or managed by members who share the responsibility.
Primary Place of Business
Lastly, another common information required in articles of organizations is the primary location of your business.
For those who run their company from home, you can simply choose to list your home address as the principal place of business.
Do You Need Articles of Organization for an LLC?
Yes, absolutely. There can never be a certified LLC without articles of organization. This, along with the operating agreement and other documents, will form the basis of your company’s legal standing with the states.
Why Do I Need Articles of Organization?
The very first reason why articles of organization are important is that, well, the official establishment of your limited liability company can not be possible without them.
Apart from this, however, there are also certain benefits to be acquired from them. These include:
- Tax Benefits: Depending on state and other nuances, filing articles of organization may help you enjoy some tax benefits and maximize your tax returns.
- Legitimization: Thanks to the fact that your business is now a legitimate LLC, you can also enjoy some indirectly related benefits such as higher authority and higher customer trust.
- Rights and Liabilities – Articles of organization can also help your LLC take the first steps in setting the rights of each member, and shielding the individuals from liabilities they may have been subjected to as a sole proprietor of a business.
Do Articles of Organization Show Ownership?
As mentioned above, depending on the state, some articles of organization are expected to outline ownership and structure of the LLC. Generally, this can either be managed by a manager or by a group of managers, or by a member-managed strategy, i.e. managed by members who share the responsibility.
Is Certificate of Organization the Same as Articles of Organization?
Yes, generally certificates of organization refer to the same thing as articles of organization. The only difference here is that some states refer to this document as a certificate of organization while others refer to it as “articles of organization.” In the end, though, they all mean the same thing.
How do I Get a Copy of My Articles of Organization in CT?
If you happened to file your Connecticut Articles of Organization online, you will receive an email copy of your approved certificate. If you happened to file through mail, however, you will not get an email copy, but may receive your certificate by filing a fax request, or by downloading and completing a request form here, and preparing a check of $55 payable to the “Secretary of State”.
Your mail request should be forward to the address below:
Business Services Division
CT Secretary of State
PO BOX 150470
Hartford, CT 06115-0460
Please note that since the year 2017, articles of organization in Connecticut are now referred to as “Certificate of Organization.”
What are Filed Articles of Organization?
Articles of organization are documents that provide important information about a limited liability company (LLC). An article of organization is considered filed when all the appropriate fields have been filled and documents approved by the state.
This involves not only locating the appropriate bodies with which the articles are to be filed, and deciding which filing option you prefer, but also actually filling out the required information and submitting it to the state for review and, hopefully, confirmation.
Articles of organization are considered successful when all of these steps have been fulfilled and finally approved by the State.
Articles of Organization are filed with the appropriate states in which your business is going to operate, specifically with the secretary of state’s office. Some states, however, operate as an exception to this rule and have their articles of organization filed either with a different office or agency entirely.
To make these steps easier, you may choose to outsource your filing to any one of the LLC filing services out there. These are companies whose sole function is to help you through the sometimes cumbersome journey of establishing your company and registering as a legal entity with the appropriate bodies.
Of course, you can also choose to go at it alone, depending on how knowledgeable you are on the matter. Regardless of which you choose to go with, though, you will be required to provide information such as business name, place of principal operation, management, statement of purpose (for some state), duration (if you’re not going to be operating perpetually), and finally, a registered agent to receive important tax documents on your behalf.
Lastly, there are a host of benefits that come with successfully filing your articles of organization, and this includes business authority, tax benefits, and protection from certain liabilities.
A Limited Liability Company, or an LLC, is the simplest business structure in the United States. Forming an LLC is easy, and brings lots of benefits. When you compare an LLC to an S Corporation or a C Corporation you will find that LLC’s structure is quite flexible.
As its name suggests, LLC gives you protection from personal liability. This means your personal assets are protected in the case that your business goes into legal hardship and ends up in a courtroom.
When you decide to form an LLC, your business will become its own legal entity.
The company will be responsible for lawsuits and debts, not the owners. While forming an LLC you can pick between being a “single-member LLC” or “multi-member LLC”, meaning you have either one owner or multiple owners, respectively.
Advantages of an LLC
There are many advantages of forming an LLC, for example:
The profits of an LLC go directly to its members. These profits are then reported on their own individual tax returns. With this all of the profits gets taxed once. There is no need to file a corporate tax return. However, if in your case it is more beneficial to be taxed as a corporation, then LLCs gives you that flexibility as well. Contrary to a C Corporation where profits are subject to “double taxation”, first they are taxed at the corporation level, and then taxed again when the owner report them in their personal tax return.
One of the biggest benefits of an LLC is that your assets are always protected as long as there is no criminal activity, including fraud. The members of an LLC are not responsible for debts and obligations, including lawsuits.
LLC Residency Requirement
Members of an LLC are not required to be United States citizens or permanent residents.
Simple and Flexible
LLCs are very easy to form. Paperwork is minimal as well. In comparison to C-Corporations and S-Corporations where they need to assign formal roles, hold annual meetings, and record company minutes. An LLC can be structured in several ways, it can be single or multi-member. LLCs can be managed directly by their members or by managers who members appoint. When electing to have a multi-member structure, make sure you draft an operating agreement. An operating agreement will protect all the members from legal disputes.
Forming your own LLC gives you credibility as a serious business owner.
Once you start an LLC you can create bank accounts and build up credit under the LLC and have access to get loans to start or fund your business.
Disadvantages of an LLC
As with everything, there are some disadvantages to an LLC.
- You cannot become a public company and get listed in the stock market. This will prevent you from issuing shares or obtain funding via Venture Capital investors.
- Depending on where you form your LLC it can be treated differently. Regulations change from state to state.
- Profits from an LLC can be subject to self-employment tax.
Types of LLC
There are three types of LLCs you should be aware of:
Most likely every time someone mentions LLC they mean “Domestic LLC”, this means that the LLC is doing business in the state it was formed under. Most LLCs are formed in the state where the members are located, for example, if you are forming an LLC in Florida, why would you form an LLC in New York? It doesn’t make much sense in the beginning, however as your business grows you might want to expand into other states in which you might open an office or hire employees, in that case, then you need to form a “foreign LLC” in the other state.
When an already formed LLC decides to expand into another state and conduct business, then you need to register your LLC as a “foreign LLC” in the new state. From our example above, you’d set up your LLC as a foreign LLC in New York. Remember you can always check how to form an LLC in your state here.
If you are doing a professional service such as a legal practice, or medical services then you’d need to form your LLC as a “Professional LLC”. In this case some members of the organization needs to have special license to proof their professional qualification. Always talk to an attorney when opening a professional LLC, there are some special regulations that you need to be aware of, for example, professional LLC cannot pass the limitation of personal liability in case of professional malpractice claims.
How to Form an LLC (Limited Liability Company):
After you pick your state:
- Complete the ‘Articles of Organization’ forms.
- Choose a registered agent
- Mail the form along with the mandatory State Filing Fee to your state’s Secretary of State Office.
- Get an EIN by filling out the form and mailing it to the IRS.
A registered agent is a third party in your state who will become responsible and designated to receive notices, correspondence, and other official matters, including government notifications, tax forms, a notice of lawsuits on behalf of your LLC. Business entities are required to have a registered agent, some states might not have this requirement, but regardless you should consider having one.
Do I Need a Registered Agent?
Yes, most likely. Nowadays lots of newly formed LLC don’t have physical addresses, if this is the case then you need to select a registered agent who can receive documents. Basically, the state needs to know who the point of contact is. Keep in mind, PO boxes are not allowed.
What If I Don’t Designate a Registered Agent?
There are penalties involved if you don’t register an agent, including fines, inability to enter legal contracts, etc. As usual, check with your attorney for any further questions.
Can You Be Your Own Registered Agent?
Yes, however, it is recommended to use a third party, this way you can leave the office or go on vacation without having to worry about who is going to receive the documents.
What Does a Registered Agent Do?
The registered agent will accept all tax and legal documents on behalf of your company. The registered agent can be a member of your LLC, including yourself.
Any Benefits of Having a Registered Agent?
Peace of mind is one, also in case of legal mishap you won’t need to go through the embarrassment of being served in front of your clients. Also, if moving the physical location of your office, for example, you don’t need to file extra paperwork to change your address.
Selling a profitable website can be a quick way to get the value out of your asset (the website) in order to use that money for something else – usually to invest in other projects you have, or to diversify into other investments.
I get asked “how do I sell a website” quite often, and for something that seems so simple on the surface, the process can be a little tricky if you’ve never done it before.
In this guide, I’ll give you the steps on how to sell your website in the best possible way.
How to sell a website: the short version
This is going to be a long article, but if you’re in a hurry and just want to find out how to sell a website quickly, here are the basic steps you need to follow:
- Make sure your website is “sellable” and as attractive to a buyer as possible.
- Make sure your site is maximizing its revenue to get the best sale price
- Prepare your revenue, costs, and profit numbers for the last two (or more years).
- Figure out the value of your website before you sell
- Create a list of the tasks you work on for the website, and how long those tasks take you per week.
- Make sure you have a breakdown of your revenue sources and your biggest costs (writers, developers, hosting)
- Create a handover document for the new owner so they can hit the ground running if they buy your site
- Find your buyer (either using a marketplace like Flippa/Empire Flippers, a website broker or a private buyer if possible)
- Use a safe escrow payment service to ensure buyer and seller are both protected
The complete guide to selling a website
Okay, “complete” gets used a lot online to try and make the content seem like it’s the best. I’ll try to be as comprehensive as possible using my own process for selling a website but there is no such thing as a complete guide.
So, you’ve got a successful website, it’s making money and getting visitors, and you want to sell it so that you can use the funds elsewhere.
Whatever the reason for selling your website, cashing out allows you to take advantage of the time value of money – a principle that basically means that $1 in your hand today is better than $2 in your hand next month.
By leveraging your website as an asset to sell you have the advantage of a lump sum of capital in your hand, which you can then use to invest and grow your net worth.
Make your site as valuable as possible before you sell
The first step in selling a website is to make sure your site is as attractive and “sellable” to a buyer as possible.
Maximizing your website before you sell is the best way to ensure you get the biggest sale price possible.
Ideally, you want to be sure you’ve taken the site as far as you can at least three months before you sell. This gives your changes time to have an impact on conversions, and ultimately revenue and profits.
A buyer will be much more interested in a website that is relatively passive than a “fixer-upper” that requires work and investment to realize the potential.
Your website needs to be well designed and user-friendly
Design is a subjective thing, but it’s very easy to land on a website and notice that it doesn’t “feel” quite right.
A poor design can make your website appear unprofessional, or worse, spammy.
Luckily, it’s easy to make very simple design changes to your website so that it’s easy to use and engaging for the users:
- Have a clear message. Make sure your marketing copy and messaging are very clear and simple so that your visitors know exactly what it is you’re offering.
- Mobile-friendly site. This should go without saying but more and more people are browsing and buying on their mobile phones – up to 50% or more of your visitors could be on phones.
- Simple layout. Less is more when it comes to web design. Your users rarely care about fancy fonts, animations, or scrolling slider images. Keep your layout as simple as possible so that your main call to action links (CTA) are easily visible.
- Calls to action. Again, these need to be clear and consistent across your website, so your visitors know exactly what to do.
If your website is content-based, then it’s very likely that you’re using WordPress.
For WordPress, the only theme I have found that allows you to build a website that matches all of the above criteria (and more) and quickly build beautiful, mobile-responsive, websites, is GeneratePress.
Once you have your site design looking attractive to a buyer, the next step is to focus on how much it’s earning you.
Make sure your website is earning as much as possible
The most common way to value a website is through a multiple of your annual earnings. This means that more earnings will lead to a higher sale price.
If your site is making $10,000 a year and you sell it for a 3x multiple, your sale price is $30,000.
This means that if you can increase the yearly earnings to $12,000, your sale price jumps to $36,000!
Here are some ways you can increase your website earnings before you sell it:
- Try a different ad network. Are you using AdSense? If so, you can switch to Ezoic or Mediavine and earn more from your ads with the exact same traffic.
- Sell direct advertising. You can add an “advertise” page to your site to attract advertisers, and you can also email the companies that you see in your AdSense ads to see if they’d be interested to broker a direct deal.
- Improve your affiliate marketing links. Do an audit of your affiliate marketing links. Get your links in very early in the article, include them through the article, maybe even add a button CTA or popup to try and get more clicks on them. More clicks = more sales.
- Sell products. Can you create an ebook, audiobook, online course, or guide to sell your visitors? This is usually much more lucrative than any other monetization method.
- Test different ad placements. With Ezoic, you can easily test different locations and there are WordPress plugins that can do this for AdSense as well.
- Experiment with CTA link text. Instead of “Click Here” you can try “I want this” or “Give me access”. Try making the CTA more personal.
- Get an email newsletter and promote it. Getting an email list means you can market to them many times over even after they leave your website.
Optimizing your website earnings before selling can take a while, so I’d recommend focusing on this at least 3-6 months before you want to sell if possible.
If you’re looking for a quicker sale, you may not have time to do this, but it’s the best way to increase your asking price so if you can put the time in, it’s worth it.
How to value your website before you sell it
Learning how to sell a website without first valuing it is a bit like trying to learn to drive without getting behind the wheel.
There are many ways to value your website to get the best price possible, and valuation can depend on a number of factors, including:
- How old the website is
- How much traffic the website receives
- How much money the website makes
- The monetization strategies of the website
- The size of the website email list
- The quality of the backlinks to your website
Note: I read in an article on another blog that “most” websites sell for 6-10x their monthly profit. For established websites, this is completely wrong.
The multiple is often 2-4x your annual profit, depending on the factors above.
If you sell a subscription that is recurring every month/year, this is more valuable than a one-time product, an affiliate sale, or simple ads, and the multiple to sell your website could be higher.
The most common issue I see when people want to sell their website is that they overvalue it – often by a lot!
If your site is making $10,000 a year, it’s very unlikely you’ll be able to sell it for $100,000+ but this is what many sellers do!
You obviously want to list the high end of the multiple to encourage bids and negotiations, but if you list too high you will price yourself out of the site before it’s even begun.
If you end up using a website broker to help you sell your website, they will most likely do a lot of this work for you and their team will analyze your site, traffic, revenue, etc to give you a suggested sale price.
Once you have a ballpark number you’d be willing to sell your site for you can put together the due diligence pieces that a serious buyer is likely to ask for, and save you time later on.
Due diligence when selling your website
No matter how you sell your site, the prospective buyer is going to do their due diligence and ask you for proof that this is a website they want to buy.
The below list should cover most of the common due diligence questions you may get from a buyer:
- Proof of your website traffic. If you’re using Google Analytics, the easiest option here is to give the buyer read-only access to your profile so that they can dig into the traffic themselves. If you don’t have Google Analytics, you’ll need to provide screenshots or video evidence.
- Proof of earnings. Similarly, you’ll need to prove that the website is making the money that you claim. For AdSense/Ezoic this could be screenshots or videos of your earnings reports, or screenshots of your affiliate earnings reports. For product sales, you could provide read-only access to Stripe or provide PayPal sales reports.
- Complete P&L for the last 2 years. If your site is larger, a buyer might want to see a profit and loss statement for your business. This allows them to see your revenue streams, costs, and net profit over time. It’s a good idea to keep a P&L up-to-date anyway as those numbers are useful even when you’re not selling your site.
- Information on freelancers/employers. If you employ writers, developers etc the buyer will most likely want their details in case they decide to continue a relationship with this post-purchase.
- What, specifically, is included in the sale. Here, you can list out the assets of the business and this could include the domain name, the email list, the social media accounts, any patents or copyright you hold etc.
- Whether you have had legal issues with the site. If there have been any copyright issues, or your domain infringes on a trademark, a seller will need to know this before purchase.
- How much time do you put into the business? This gives an idea of ongoing management for the website after you sell and it’s useful to list out the tasks you do, and the time it takes you to do them.
- What are the unique selling points of your website? A great way to show the buyer value in your site is by highlighting the unique parts of your business and why you differ from the competition.
- Why you are selling the business. Usually, people sell their websites because they have other projects or interests they want to invest in.
- How you would grow the business if you weren’t selling. It’s likely that know the business and the market better than the buyer. Breaking down the improvements you think would have the biggest impact will show them the future potential of buying your site.
- What skills the new owner will need. Listing out the skills needed to run the business will let the buyer decide what resources they will need in order to run it successfully.
- Is the website fully compliant with Google terms of service? For websites, any kind of bad search engine optimization (SEO) can increase the risk of a buyer purchasing your site. If you have purchased links, received a manual penalty or warning from Google, these need to be disclosed.
- Handover documents for the buyer. If the website requires, a great way to make it easy for the buyer to put an offer in is to have detailed handover and training documentation ready to go. This means they can hit the ground running and following your standard operating procedures (SOP) to run the website efficiently.
Again, a good website broker can help to answer all of these questions and more, but be aware that they will charge 15% of the sale fee to do so (I only charge 5% 😉).
It’s good practice to think about the due diligence required because, in the future, you might want to deal directly with a buyer to avoid the broker fees and it pays to know what due diligence will be needed.
Once you have everything in order for a prospective buyer, the next step is to find yourself someone to sell your website to.
Selling your website to the right buyer
There are many places to sell your website but not all of them are made equal. For lower-priced websites, an open marketplace might be okay, but if you have a larger website you might want to consider hiring a professional website broker to sell the website on your behalf.
Selling your website on Flippa
Flippa is one of the most popular and well-known website marketplaces on the web. They were one of the first marketplaces of their kind and, as a result, have a huge audience of buyers.
Flippa is really the eBay of selling websites. Mass market, easy to list, and lots of potential buyers.
The problem with Flippa is that because it is so accessible, selling your website with them can be tiresome and painful. In particular:
- You’ll get a lot of messages from tire kickers
- You’ll get fake bids
- You’ll get scammers and spammers wasting your time
Selling your website with Empire Flippers
Empire Flippers is more of a curated marketplace and to sell your site here you need to go through a fairly comprehensive vetting process.
The benefit of this is that once you have provided all of the information on your website, they handle the rest.
Buyers need to pay a deposit to even see your website URL so it completely removes the time wasters that you would get on marketplaces like Flippa.
In order to sell with Empire Flippers you need close to $1,000 a month in net profit and they do list at a pretty good multiple for sellers.
If your website makes enough to qualify, this is a much better option than Flippa.
Selling with FE International
FE International is the biggest website broker and the most well-known in the industry. They are much more business-focused than Empire Flippers.
You might notice they use more business terms like Seller Discretionary Earnings (SDE) and this is because their client list is typically higher quality than that of Empire Flippers.
Buyers must complete a non-disclosure agreement (NDA) before they get access to your website prospectus and they need to provide their legal name and address – which is another great way to deter time wasters.
In my experience, websites sold on Empire Flippers are slightly lower quality than those sold on FE International (although there are exceptions).
FE also has an incredible sale rate and a proven track record over many years in the website brokering business.
Selling your website to a private buyer
When starting out on the journey to sell your website, you’ll probably choose a marketplace or a broker – it’s just the easiest option.
But if you have a number of websites, and you buy and sell a lot of them, you’ll probably gain a pretty good contact list of website buyers to sell to.
This is invaluable because you then have a direct line of communication with qualified buyers.
This is beneficial because:
- You won’t have to pay a listing fee
- You won’t have to pay 15% or more brokers fees
- The buyer is already warm to you if they have purchased before
You can do deals much quicker and make more money if you’re dealing directly with a buyer you’ve dealt with before.
Even if it’s a new buyer that you found by outreaching competitors of your website, the process can still be quicker and just as secure if you use a safe payment method (as discussed below).
This is my preferred method for selling a website – but I have built up a list of buyers over the years.
Payment methods for selling your website
If you’ve got this far into the article, well done! The final step on how to sell your website is the most exciting of all – getting paid!
Once the negotiations and due diligence and handover documents and back and forth is said and done, taking payment is a relatively easy process.
Use Escrow.com to sell your website
Unless you’re selling for a low amount (less than $1k) or to a previous buyer – using Escrow.com is an absolute no-brainer.
Here’s how it works:
- Set up the transaction
- Buyer and seller agree to the terms of the deal
- The buyer deposits the money for the sale
- Escrow.com confirms receipt of funds
- Seller (you) begins the transfer of all assets to the buyer
- Seller confirms transfer has been completed
- Buyer confirms transfer has been completed
- The inspection period for the buyer begins (usually 14-30 days)
- Once a buyer is satisfied, they accept the transaction
- The funds are released to the seller
Since the money is held in escrow by a third party, it’s a very secure process that protects you as the seller, as well as the buyer.
The inspection period allows the buyer time to take control of the website on their own hosting and to change any advertising, affiliate links, product sales accounts so that they can verify the earnings in real-time.
There is a fee for Escrow.com but it’s so low that it’s worth it for any transaction over $1,000 in my opinion.
Again, if you have a history with the buyer, they may trust you enough to wire you the funds straight to your bank account and then you transfer the assets but, for most website sellers, Escrow.com is the ticket.
Now you know how to sell your website
This article is the result of 10 years of knowledge I have buying and selling websites.
There are plenty of other ways you could sell your website, other avenues to explore, and new ideas I haven’t used.
However, this method has worked for me time and time again. I like to keep my website selling process simple and easy to follow.
Good luck on your journey to sell your website and you have any questions or advice, feel free to get in touch.
Buying a profitable website can be a great investment and allows you to own and operate a revenue-producing asset that can often outperform alternative investments.
The honest truth is that starting a brand new website from scratch is hard.
It takes a lot of time, effort, and perseverance before you start to see an increase in traffic and earnings.
This is why many savvy entrepreneurs and small business owners are asking “how do I buy a profitable website?”.
In this guide, I’ll show you how I’ve been buying profitable websites and internet businesses for the last 10 years, and how you can do the same.
How to buy a website: the short version
This article is going to be a long one, so if you’re in a hurry and just want to know the absolute basic steps on how to buy a profitable website quickly, here are the steps you need to know:
- Make sure you only invest the money you can afford to. Investing in websites, like all investments, is a risk.
- Spend the time to decide what type of website you’d like to buy so that you don’t waste time on the wrong ones
- Learn where to find websites for sale and start to make a shortlist. This could be auction websites or reaching out to website owners directly.
- Brush up on your website valuation knowledge so you know what price to offer the seller.
- Make sure you do your due diligence and fully research the website you want to buy, highlighting strengths, weaknesses, opportunities, and threats.
- Use a safe escrow payment service to make the purchase, ensuring both you the buyer, and the seller are protected
Need more information on buying a website? Keep reading for the full version which breaks down each step.
The complete guide to buying a website
I always put a disclaimer here that I will try to be as comprehensive as possible and outline my own process for buying a website, but there is no “one size fits all” approach to website buying. This is the most complete guide I can write, and it’s worked for me for 10 years.
So you want to invest in an established website?
Buying an existing website can be a great investment opportunity if you do it correctly and it offers many benefits compared to starting a brand new website from scratch:
- You get web traffic to your site from day one
- The site will most likely already be profitable from day one
- Established websites already have links and SEO value to them, which means you get to focus on the site and not backlinks
- If you buy an “evergreen” website on a topic that never goes out of date, you’ll generate revenue for many years.
- You even have the opportunity to “flip your website” and sell it for a bigger profit later.
The very first step in deciding you want to buy a website is figuring out your budget and how much you want to invest.
Only buy a website in your price range
It should go without saying that whenever you invest money into something, there is a risk that you won’t get that money back.
The first rule in buying websites is only to invest what you can afford to lose.
If you buy many websites you will slowly learn the skills needed to be confident in your investment and at that point you’ll be able to “invest up” by acquiring bigger and bigger websites.
When I was starting out I set myself a few rules before I went looking to buy a website so that I didn’t over-invest:
- Decide right off the bat how much money I want to invest. If you have $5,000 allocated, make a conscious decision to only buy a website up to this price. It’s very easy in negotiations to see this creep it to $5,500 or $6,000 but if you over-invest you may come to resent the purchase and add stress to your life as you try to get a return on investment (ROI).
- Set limits on the level of traffic a website has. I use SEMrush to find profitable websites (more details below) and it’s quite easy to predict how much traffic a site has based on the SEMrush score. Starting out, I focused on websites with a SEMrush score of 1,000-2,000 as I knew these were likely getting enough traffic to make a small amount of money, but I wasn’t wasting my time emailing sites that I could not afford.
- Work out a valuation for the website before trying to buy it. I’ll cover valuation a bit later in the article, but it’s important to know what a potential website is worth before you make an offer to the owner. For me, this meant getting very rough earnings and traffic numbers and then working out what a decent sale price would be for both me and the seller.
- Offer lower than your maximum. Let’s say you found a site that is making $1,000 a year in profit and you have $3,500 budgeted to buy it. Instead of offering your full budget upfront, start lower (maybe around $2,500) so that you have room and opportunity to negotiate up to somewhere in the middle that works for you both.
It can take some practice when starting out but, over time, you’ll be able to quickly run through these steps in your head to avoid time wasted on the wrong websites.
Deciding what type of website you want to buy
It can be really helpful when you start the process of buying a site to first figure out exactly what kind of website you actually want to buy.
There are lots of different types of sites out there, including:
- E-commerce websites selling physical or digital goods
- Content-based websites (usually monetized with advertising)
- SaaS websites selling a software product or service
- Membership websites (these are similar to content sites but the visitor must pay for access)
- Forum based websites (these typically can get a lot of traffic but are hard to run and monetize)
- Affiliate websites built to review products and services that pay commission
It really depends on what type of investment you’re looking for as to which type of website you want to buy.
For me, I’m not interested in buying web forums, SaaS websites, or e-commerce websites as they require a level of time investment that I don’t want.
Content-based websites, whether monetized by ads, affiliate products, membership, or your own products, are much more passive in nature and these are the type of websites that I’m interested in purchasing.
Once you know what type of website you’re interested to buy, you can begin research niches and topics to find some potential candidates.
Where to find profitable websites for sale
A quick search online will lead you to most of the common marketplaces you can use to buy a website. Each of them has its advantages and disadvantages for you as the buyer.
Buying a website on Flippa
Flippa is one of the most popular and well-known website marketplaces on the web. They were one of the first marketplaces of their kind and, as a result, have a huge audience of sellers.
Flippa is really the eBay of selling websites. Mass market, easy to list, and lots of potential buyers.
The problem with Flippa is that because it’s so accessible, buying a website with them is littered with potential problems. In particular:
- A lot of the listings are fraudulent. I’ve seen first-hand websites for sale on Flippa where the earnings are completely fabricated by the seller and the traffic has been inflated through spammy means.
- Many sellers price the website too high. Sites making $2,000 a year are listing with Buy It Now prices of $25,000 or more. Do you want to wait a possible 12+ years to get a return on investment?
- Bidding on listings makes it easy to over-commit. Remember the budget you set? It’s very easy to get into bidding wars on Flippa and before you know it you’ve paid way too much for a website.
Buying your website with a broker
Using a website broker to buy a website is often a much, much better option than Flippa. Brokers like FE International or curated marketplaces like Empire Flippers act only sell truly established websites and they do a lot of due diligence before the seller can even list the site for sale.
With FE, you can browse the listings on their website and then fill out a form for the websites that you are interested in. The first time you do that, they send you a non-disclosure agreement (NDA), and once signed, you can request the prospectus for future listings.
With Empire Flippers, you need to place a refundable 5% deposit in order to see the URL of the website. This helps to filter out the buyers who are not serious and, once you have paid a couple of deposits, you’ll be seen as an established buyer and won’t need to do that anymore.
To summarise: buying with a broker is much better than buying on an open marketplace, but you often have to pay the higher end of the valuation for the website.
Buying a website directly from the owner
My preferred method of finding a website to buy is through good old-fashioned email outreach. Finding a buyer directly has many advantages:
- A lot of websites have good traffic but are not well monetized
- They have less expectation of the value of their website
- Many hobby website owners no longer update their sites
- You don’t have to compete with other buyers
- You can negotiate a lower price because the seller won’t need to pay a broker/final sale fee
- You get real websites that were not built with the purpose of selling
Like anything, finding websites to buy directly from the owner is a skill that can be learned. The basic steps I follow when finding websites to approach are:
- Create a list of websites I might want to buy. To do this I can search Google for topics I’m interested in, making notes on possible sites. If it’s a content-based site and the copyright is from years ago, it may no longer be updated.
- Use SEMrush to find related websites. I use SEMrush a lot to find websites to buy. You can enter any URL and then look at their competition to find dozens of similar websites in the same niche – many of them are great examples of websites for possible purchase.
- Add all of the website names to BuzzStream. Buzzstream is an email marketing outreach tool and is usually used to try and get backlinks for your website. I use it to outreach owners of websites. The software finds email addresses and contact forms for the sites and allows you to sync your email address so that you can create outreach emails to try and reach them.
- Set up a sequence of 2-3 emails in Buzzstream. I keep the emails simple and to the point, i.e: “I found your website and really like it. Would you be interested to sell it?”. If they don’t reply to the first email, I set up a short follow-up email just to check they received my first one – just doing this one follow-up increased my reply rate by 50%.
Once you get replies from website owners who might be open to selling, you can then start to negotiate a price with them.
Which leads perfectly onto the next section of this guide on how to buy a website: valuation.
How to value your website before you sell it
There are many ways to value a website as a potential buyer, and it can depend on many different things, like:
- The age of the website
- The number of visitors the website gets
- How much the website earns
- The monetization methods of the website
- If it has an email newsletter or popular social media accounts
- The quality of the content and backlinks to the site
I read a “competitor” blog post recently which said:
most” websites sell for 6-10x their monthly profit
This is completely untrue and you would be very, very lucky to buy a website this cheap. In fact, if I saw a website for sale at 6-10x their monthly profit, I would be very suspicious.
The multiple is often 2-4x your annual profit, depending on the factors above (and more).
Ultimately it comes down to the potential you as a buyer sees on the website. If I already had a number of websites in similar niches and I could see the potential to create another profitable revenue stream, I might pay a higher amount than you would expect.
Similarly, if the site is relatively new and doesn’t have a large number of backlinks, it’s a more risky investment and the offer would reflect that.
The most common issue I see with sellers is that they overvalue their website – often by a lot!
Sometimes you’ll just be too far apart on valuation and in those cases what I like to do is politely thank the seller for their time and end the conversation.
In 6 months’ time, I follow up with them to see if they sold and, if not, whether they would be willing to revisit.
Buying a website can often come down to timing and whether the site owner is in the frame of mind or a place in their life where selling makes sense. Persistence is a very valuable trait for a website investor.
Once you have a ballpark number that you and the seller both agree on, you can start to do your due diligence and research the website to make sure it feels right to invest in it.
Do your due diligence before buying a site
Over the years I’ve developed a natural instinct for assessing websites and knowing what data to look at and what data to ignore has helped me to refine a process that is simple and straightforward.
The below list of questions should cover most of the common due diligence pieces you’ll want to do when you’re looking to buy a website:
- Can you provide proof of your website traffic? If the seller uses Google Analytics, they can give you read-only access to their profile so that you can dig into the traffic. If they don’t have Google Analytics, ask them to provide screenshots or video evidence.
- Can you provide proof of earnings? Similarly, you’ll want to confirm that the website is making the money they claim. For AdSense/Ezoic this could be screenshots or videos of their earnings reports, or screenshots of their affiliate earnings reports. For product sales, you could ask for read-only access to Stripe or for the seller to provide PayPal sales reports.
- Do you have a complete P&L for the last 2 years? This might only be applicable to larger sites, but a profit and loss statement allows you to see the revenue streams, costs, and net profit over time.
- Can you provide information on freelancers/employers? If the seller employs writers, developers, etc you need to know their details in case you decide to continue a relationship with them post-purchase.
- What, specifically, is included in the sale? Here, you can confirm the assets included in the sale. For example, the domain name, the email list, the social media accounts, any patents or copyright they hold, etc.
- Have you had any legal issues with the site? If there have been any copyright issues, or their domain infringes on a trademark, you need to know this before purchase.
- How much time do you put into the business? This gives you an idea of ongoing management for the website after you buy it and it’s useful to ask the seller for a list of the tasks they do, and the time it takes them to do those tasks.
- What are the unique selling points of your website? A great way to see future potential in the business is to ask the seller to highlight the unique parts of their business and why they differ from the competition.
- Why are you selling the business? Usually, people sell their website because they have other projects or interests they want to invest in but it’s good to confirm the reason.
- How you would grow the business if you weren’t selling? It’s likely that the seller knows the business and the market better than you. Asking them to list the improvements they think would have the biggest impact will give you ideas for the future potential of buying their site.
- What skills will I need to run the business? Ask them to list out the skills needed to run the business so that you can decide what resources you will need in order to run it successfully.
- Is the website fully compliant with Google terms of service? For websites, any kind of bad search engine optimization (SEO) can increase the risk to you as a buyer. If the seller purchased links, received a manual penalty or warning from Google, these need to be disclosed.
- Can you provide handover documents? If the website requires it, a great way to make it easy for you to hit the ground running is to have detailed handover and training documentation ready to go. This means you can follow the seller’s standard operating procedures (SOP) to run the website efficiently.
These questions are important when you’re buying directly from a website owner, but a good website broker can help you to perform due diligence properly to make sure your investment is based on good information.
The beauty of using a website broker as a buyer is that the seller is the one who has to pay the broker fees, not you.
It’s good practice to think about the due diligence required because, in the future, you might want to deal directly with a buyer and it pays to know what due diligence will be needed.
Payment methods for buying a website
If you’ve got this far into the article, well done! The final step on how to buy a profitable website is the most exciting of all – making payment and receiving your new asset.
Once the negotiations and due diligence and handover documents and back and forth are said and done, making your payment is a relatively easy process.
Use Escrow.com to buy a website
Unless you’re buying for a low amount (less than $1k) or buying from a seller you’ve worked with before – using Escrow.com is an absolute no-brainer.
Here’s how it works:
- Set up the transaction
- The buyer (you) and seller agree to the terms of the deal
- You deposit the money for the sale
- Escrow.com confirms receipt of funds
- Seller transfer all assets to you
- Seller confirms transfer has been completed
- You confirm the assets have been received
- Your inspection period to confirm traffic and revenue begins (usually 14-30 days)
- Once you are satisfied, you accept the transaction in Escrow.com
- The funds are then released to the seller
Since the money is held in escrow by a third party, it’s a very secure process that protects you as the buyer, as well as the seller.
The inspection period allows you time to take control of the website on your own hosting and to change any advertising, affiliate links, social media accounts, or other accounts so that you verify the earnings in real-time.
There is a fee for Escrow.com but it’s so low that it’s worth it for any transaction over $1,000 in my opinion. Usually, as the buyer, I offer to pay the escrow fees.
Again, if you have a history with the seller, you may trust them enough to wire the funds straight to their bank account and then they will transfer the assets but, for most website buyers, Escrow.com is the ticket.
Now you know how to buy a website
This article is the result of 10 years of knowledge I have buying and selling websites.
There are plenty of other ways you could buy a website, other avenues to explore, and new ideas I haven’t used.
However, this method has worked for me time and time again. I like to keep my website buying process simple and easy to follow.
Good luck on your journey to buying a website and if you have any questions or advice, feel free to get in touch.
There might come a time when you need to find out exactly who owns an LLC corporation. Is it possible? Can you search and find out who is the owner of an LLC?
The general answer seems to be that yes, you can search the Secretary of State business records for each of the 50 states to find out which state the LLC is formed in and who owns it.
However, a lot of times the members of the LLC are not publicly disclosed. The short answer is to check the registration and see if they are listed.
Let’s pose the question to our community of Start a Business Hub experts and see what they think.
By searching the Secretary of State Business Records for all 50 states, one at a time. Then pull up the annual report, which usually requires that the LLC list a manager or member. Note that even though many states don’t require this info for setting up an LLC, it’s required for the annual report (except in 2 states, which don’t require annual reports to be filed).
Once you’ve found the manager or member, you can contact them at the address given, or go through the registered agent. A simple and painless (for me) way to force the members to reveal themselves is by filing in Small Claims Court, and having the registered agent served. The members will have to answer the complaint, and give their true names and addresses in doing so. At that point, you can just drop the small claims suit.
Lewis De Payne
Most states have an entity search function on the website of the Secretary of State or revenue agency for the state. I would start there and you might get lucky. Every state is different about what information they make public on state entities, but few states publish the ownership information any more due to privacy and identity theft concerns.
You will probably find out who the Registered Agent is for the LLC and that may or may not be one of the owners. More likely it will be an attorney or CPA for the business.
So end result is unless you are another government agency or have a court order to be told the ownership, you probably don’t find out who owns any particular LLC, but you might.
In most cases, the members of an LLC, who own the LLC, are not publicly disclosed. The best you can do is look up the registration and if you are lucky, the members will be disclosed. If not, you have to contact the registered agent and they will or will not disclose the members at their discretion. You may be able to look up the members if there are other filings, such as for business licences or other permits or registrations.
If you are looking to find the details of an owner of an LLC, then you need to figure out which state they are incorporated in and then do a business entity search on the Secretary of State website to find their details – assuming they are publicly disclosed!
It is perfectly reasonable to wonder whether or not articles of organization expire. I wondered the same thing on my first LLC journey. And I found that when it comes to legal filing and compliance, being extra vigilant is always more of a positive than negative.
So do articles of organization expire?
The answer is no, your filed articles of organization do not expire. The LLC Itself, though, may end up being dissolved for a number of reasons, which include failure to comply with annual requirements or exceeding the duration of existence.
There is also the question of yearly renewals, (or bi-yearly depending on the state in which your LLC was established), annual reports, and so on. We take a look at all the conditions necessary for expirations of LLCs and articles of organization below.
Expiration of Articles of Organization
Articles of organization are filed with the appropriate state body to verify the establishment of your limited liability company. The articles of organization consist of important information on your company, including name, location, management method, and so on.
An important date that is also usually included in articles of organization is the duration of your LLC. This will specify how long your LLC is supposed to last. Now depending on the state wherein your articles of organization are filed, you may or may not have to provide a specific duration. For the latter, the state just assumes that your LLC will last perpetually.
In this case, your filed articles of organization can never really “expire.” In cases where specific durations are specified, though, then the LLC, and the articles of organization, can be said to have expired, or more specifically, ended.
Of course, this isn’t the only reason why an LLC may become obsolete or terminated. Depending on the operation of the agreement and specific situations, there can also be pre-specified conditions for the expiration of an LLC.
Finally, there are also a few legal factors, which we will discuss more below.
Does an LLC Last Forever?
As we’ve seen above, LLCs can in fact last forever. In fact, barring any ultra-specific condition, there is nothing that specifies that you have to put a ceiling on how long your LLC is supposed to last when filing articles of organization.
When not indicated, most states automatically assume that your LLC will last forever, either way.
So there really isn’t any reason to pigeonhole a company into a specific duration beforehand. What happens if you want to end your LLC, though, you ask? Well, this can also be easily arranged, both after the fact, once you’ve arrived at the final, immutable conclusion that you do in fact want to end your LLC, or even before the fact, in a safe way that does not include you specifying a duration in your articles of organization.
We’ll get into more details on how to properly dissolve an LLC below, but first, it is important to have in mind that your LLC can, in fact, last forever, and your articles of organization, once filed, can (and should) be optimized to last forever. You can do this by not setting a particular date of expiration, or indicating specifically that the company is intended for perpetual operation.
LLC Annual Requirements
Specifying a date of expiration on your articles of organization is one of the ways to ensure that your LLC is officially terminated at a specific point in time.
Doing this ensures that your company is no longer able to operate as a state-approved LLC from that point onwards. This, however, is not the only reason why an LLC may become expired. The same thing may happen in other cases, one of which is failure to comply with the state’s established annual LLC requirements.
What are state-established annual LLC requirements, you ask? Well, annual requirements for an LLC varies from state to state, and whatever course of action you will follow must be based squarely on a state-to-state basis. Generally, though, some of the annual requirements for an LLC include:
The purpose of a registered agent is to receive important tax documents from the state on your behalf. A registered agent can be pretty much anybody from a member, an external individual, to a representative provided by LLC filing services.
Failure to maintain a registered agent for your LLC, for example, can lead to the company being declared inactive.
Depending on the state, failure to provide detailed annual reports on the company status may lead to the expiration or dissolution of an LLC. Note that this is not necessarily pertinent to every state, and again must be treated on a state-by-state basis.
Other reasons such as bankruptcy, failure to meet state deadlines, failure to pay annual fees, and so on may also be eventual causes of the dissolution of an LLC. Furthermore, there are certain regulations and nuances that are only pertaining to few states that may also lead to the same outcome.
The most important thing is to carry out your due diligence to the fullest and ensure you comply.
What Happens When an LLC “Expires”?
So what happens when one of the conditions above isn’t fulfilled and your LLC eventually runs out of good standing? Well, effective from the date of expiration, the LLC ceases to exist for all intents and purposes. The ramifications of this are endless, and can only be decided on a case-by-case basis.
For instance, what happens when an expired LLC is sued after expiration? This depends on whether the LLC was dissolved voluntarily or involuntarily in the first place. If your LLC meets its expiration date it ceases to exist completely.
If your LLC is voluntarily dissolved, however, a series of processes with the state is initiated, after which a certificate of cancellation is issued, signifying the successful dissolution of the company.
So again, concerning the question of what happens when a dissolved LLC is sued, the answer is that it generally depends on the severity of the case. A wronged customer may be able to recoup his losses from the individual members, particularly in cases where members of the company engage in unlawful conduct.
This is called piercing the corporate veil.
How Do I Know if my LLC is Still Active?
Generally, you can tell whether or not your LLC is still active by checking in with the state. And again this tends to vary on a state-by-state basis.
In California, for example, you can tell if your LLC is still active by making use of the business entity search tool provided by the Secretary of State’s office.
Here you will either see an “active” or “inactive” status displayed on your business page.
What Happens if You Don’t Renew LLC?
As mentioned earlier, LLCs that don’t get renewed become automatically dissolved. Also, depending on the particular state your LLC is registered in, the time set for renewal, and the grace period before final closure, may vary by a large margin.
How Do You Renew an Expired LLC?
LLCs that become inactive due to expiration or lack of compliance may be renewed by filing a renewal application form. Each state has its own requirements, but basically, most renewal forms are available online for a fee.
An example of a place with such a straightforward renewal process is Los Angeles. Here your expired LLC can be renewed online by paying a renewal fee of $26.
How Do I Make an LLC Inactive?
For those who would like to voluntarily make their Limited Liability Companies inactive, you can do this by requesting for a certificate of cancellation from the state.
Of course, all key members must agree to the dissolution and you must also give a cogent reason for requesting cancellation in the first place. This may range from bankruptcy to the loss of a key member, among other reasons.
How Much Does It Cost to Reinstate an LLC?
As mentioned above, this varies from state to state. From the example given above, we see that in Los Angeles it costs $26 to reinstate an LLC. In Florida, however, there is a $100 reinstatement fee and a $138 annual report fee for the duration through which the LLC was dissolved in the first place.
Do Articles of Organization Need to be Notarized?
Yes, some states do require notarization for your articles of organization. However, some states don’t. You can easily find the individual requirements for your specified states online.
Articles of organization, and the LLC as a whole, will expire when the specified duration in your articles of organization is attained. There can also be a dissolution in cases of failure to pay annual fees or meet certain requirements specified by the state.
Apart from involuntary dissolutions, however, an LLC may also be voluntarily dissolved by the owners or managers for a number of reasons. This will involve settling all liabilities and requesting an official certificate of cancellation from the state.
Finally, depending on the state, an expired LLC may also be reinstated for a fee, granted all the conditions for reinstatement are met.
Starting out my first LLC, I wanted to know if I could file my articles of organization online. I mean, why not? It would have been easy and convenient for me. So I did some research to see if it was possible.
So, can you file articles of organization online?
Yes, you absolutely can file articles of organization online. The appropriate forms for filing your articles of organization online can be found on the Secretary of State website in whichever state you choose to establish your company.
Also, depending on your state of choice, the requirements may vary. Below we go over the individual requirements, instructions, and other methods of filing articles of organization.
About Articles of Organization
Articles of organization are legal documents required from the state to confirm the official establishment of a limited liability company. The purpose of articles of organization is to get a hold of some important information regarding your company’s structure and organization.
Furthermore, as with most legal requirements in the United States, the required information tends to vary from state to state, although there are a few unwavering entries that we will take a look at below.
Also when it comes to the actual filing of the articles of organization, there are a couple of options available in that regard. The first is to go with personal filing, where you take care of all the requirements yourself, while the other option involves going with an LLC filling company, whose job is to take over the tedious tasks from your hand and handle everything from name research to filing, and even registered agent services.
Should you choose to do it yourself, though, there are three general options – filing online, mail-in filing, and in-person filing. We take a look at all three below.
Filing Articles of Organization Online
Filing your articles of organization online is quite an easy and straightforward process. All you need is a working internet connection and a detailed knowledge of the process and requirements.
It is also worth noting that while online filing is available and even encouraged by a lot of states, there are a few exceptions that don’t offer this option, and in this case, it will be best to go with the other options highlighted below.
Without a doubt, though, the first step in your LLC journey is to check whether or not your preferred state offers online filing options or not. It is only after this that you can consider which option to go with, or whether to go with a filing company altogether.
Other Methods of Filing Articles of Organization
For the few states where there is no option of online filing, and even for those who have this option, there are usually two more options, which are in-person and mail-in filing.
These two are also quite straightforward, although maybe not as much as online filing. In the case of mail-in filing, all you have to do is get a hold of the appropriate forms, and have it mailed into the appropriate state office – which is usually the Secretary of State’s office for most states (although it may, in fact, be a different one for others.)
For the in-person option, the steps involve going to the appropriate office in person and getting the filing done on-site. Both the instructions to follow, and the information required, stay constant in all options.
Instructions for Filing Articles of Organization
Should you choose to file your articles of organization on your own, it certainly does not hurt to get as familiar with the instructions and requirements as much as possible.
Concerning the instructions, the objective is quite simple – provide honest information about your business.
While this sounds quite easy in writing, it is usually advisable that you get everything as clear in your mind as possible.
This involves being able to describe the purpose of your LLC, the management structure, and even the name and address of your founding members.
Of course, depending on the state, some of these may not even be required, but it never hurts to have them in mind.
Important Information Provided in Articles of Organization
Below are some of the most commonly required information when filing your articles of organization.
- Company Name – The company name is the first obvious requirement. It must also be unique, and as such you will have to perform a name availability search to confirm that your desired name has not been taken already. This is quite easy to carry out and is usually available on the official website and a host of other places online.
- Primary Place of Business – Your primary location of business will also be stated in your articles on organization. Usually, for most states, one address should do. Some states, however, also require the address of each manager. Furthermore, for those whose LLCs are run from their homes, the home address can indeed serve as the primary place of business.
- Duration – The duration indicates how long your LLC is intended to last. This can either be perpetual or short-term. Perpetual LLCs last forever, while short-term LLCs can last for a specific amount of time, depending on the duration of choice. It is also worth noting that many states do not even require a specific duration, and automatically assume perpetual status.
- Registered Agent: Another required entry is the registered agent information, where you specify the name and address of your designated registered agent, whose job it is to receive important legal documents on behalf of your LLC. Your registered agent can be a third-party individual or an LLC member. Some filing companies also offer registered agent services.
- Statement of Purpose: The statement of purpose of your LLC is sometimes required in your articles of organization. This is usually a single, specific sentence that gives a general overview of what you set to achieve. For instance, a law firm may describe its statement of purpose as being “the practice of law,” and so on.
- Management: Finally, most states also require that you specify your management structure. This can either be a member-managed option, which indicates management by founding member, or manager-managed, which indicates management by a group of managers.
Once the articles of organization have been successfully filed, the next things to worry about are the operating agreement, EIN, business account, licenses, and permits.
- Operating Agreement: The operating agreement is a document that highlights in detail the organizational structure and blueprint of the company. Sometimes mistaken with the articles of organization, the operating agreement is quite different in two important aspects: one, it is not mandated by the state, and secondly, it is usually far more detailed than the articles of organization. It drills down to the specifics, including information about rights, responsibilities, and assets, among others.
- EIN: For federal tax purposes, you will have to acquire an Employer Identification Number. Applying for this is free and not so tedious. Single-member LLCs without employees may be okay without an EIN.
- Business Account: Getting a business account for your business should be a priority after filing your articles of organization. Not only does a business account give you the much-needed separation of your finances, but also helps you qualify for certain benefits such as business credits, tax benefits, and of course reducing liability.
- Licenses and Permits: Most businesses require certain licenses and permits to operate, even after articles of organization are successfully filed. This should be one of your next steps after obtaining your certificate. Business licenses vary on local and state levels based on particular state laws.
- Branding: Now this is the point where you literally get down to business. Branding involves carving out a cogent identity for your business. Having an identifiable brand ensures you get more trust and more reach for your business. It also helps a lot when you get to the point of serious promotions and advertisements.
Articles of Organization FAQ
Are Articles of Organization Meant to Last Forever?
Yes, articles of organization are meant to last forever. Your LLC, however, may end up being dissolved for any of these reasons:
- Your specified date of expiration is reached
- Failure to comply with annual requirements
- Bankruptcy or other financial challenges
Are Articles of Organization the Same as Certificate of Organization?
Yes, articles of organization are the same as certificates of organization. The only difference is the name by which each state prefers to refer to these documents. For all intents and purposes, though, they are the same.
Both of them, however, are different from Articles of Incorporation, which applies to C corporations or S corporations, and not limited liability companies.
Articles of organization are filed online, in-person, or mailed into the appropriate state office. The general instructions and information required remain the same in all instances. These include filling in the business name, primary place of operation, duration, management structure, registered agent, and statement of purpose.
The question of whether or not an LLC can be a nonprofit in Tennessee, as well as any other state for that matter, is a quite popular one. We come across a lot of people wanting more information on the topic, and gladly, thanks to a lot of research, we have finally provided comprehensive information on the topic.
So can an LLC be a nonprofit in Tennessee?
Yes, absolutely. Tennessee is one of the states where an LLC can be run as a nonprofit and enjoy all the perks that come with such. It is also one of the most conducive states for such and provides certain benefits that others don’t.
Below, we’ll take a further look at the various laws guiding such a company in Tennessee. We’ll also look at how to establish a nonprofit LLC in Tennessee, and how to qualify for both federal and state tax exemption. But first here’s a quick overview of nonprofit LLCs.
What are Nonprofit LLCs?
A limited liability company that is formed and operated for charitable purposes is generally referred to as a “nonprofit LLC.” While this is the general overview of the topic, the nuances and technicalities can vary from state to state.
For instance, while, generally, nonprofit LLCs are tax-exempt on the federal level, the state’s income or property tax status may vary depending on the particular state.
One of the reasons why an LLC may choose to operate as a non-profit is so that it may operate a joint venture with other business entities. Or in some cases, this may be done so that the company can establish an unrelated business that will generate more revenue to add to the one already generated by the nonprofit via donations and grants.
These are quite complicated structures, though, and again the operation depends highly on individual state rules. Luckily, however, for those who wish to open a nonprofit LLC in Tennessee, the state happens to be one of the least tedious and most favorable in this case.
We take a deeper look at the nuances of running LLCs as a nonprofit in Tennessee in the sections below.
Nonprofit LLC in Tennessee
Most states recognize and allow limited liability companies to be run as nonprofits, and Tennessee, as specified in the code below, is one of them.
Part 8 of the Tennessee Revised Nonprofit Limited Liability Company Act states that:
A nonprofit corporation may form a domestic nonprofit LLC that meets the requirements of § 48-101-805, by filing articles of organization with the secretary of state that prominently designate it as a nonprofit LLC and that comply with the Tennessee Revised Limited Liability Company Act, compiled in chapter 249 of this title. A foreign nonprofit LLC may obtain a certificate of authority to transact business in this state under the Tennessee Revised Limited Liability Company Act and thereby become subject to and governed by this part as a nonprofit LLC, only if the foreign nonprofit LLC meets the requirements of § 48-101-805.”
[Acts 2006, ch. 620, § 5.]
The summary of the above article simply boils down to the fact that, yes an LLC can in fact be a nonprofit in Tennessee. Starting the process and successfully establishing your nonprofit LLC, however, requires comprehensive steps, which we outline below.
How to Start a Nonprofit LLC in Tennessee
To start a nonprofit LLC in Tennessee and qualify for the tax-exempt status under 501(c)(3) laws, you must first file the necessary documents indicated below and then apply for a 501(c)(3) status with the IRS.
Here are the steps outlined in detail:
Name Your Nonprofit
The very first step in registering any business is to first pick a name and register with the state. You should also ensure to choose a unique name, and search on the appropriate platforms to ensure that your desired name is indeed available.
Choose a Registered Agent
A registered agent is a person or company that you appoint to act as a point of contact between your nonprofit LLC and the state. It is the job of a registered agent to receive important state and legal documents on your behalf.
While you can officially select yourself as your own registered agent, it isn’t advisable seeing as you will ideally be tied down by other administrative tasks, and may not be able to give the position the attention it deserves.
Choose Directors for Your Nonprofit
The next step in setting up your nonprofit LLC is to choose a set of directors for the company. The state of Tennessee requires that you appoint no less than three directors to serve on the board. Along with your three directors, you should also have a president and a secretary.
File the Articles of Incorporation
You officially set up your nonprofit as a recognized legal entity by filing an article of corporation with the Tennessee Secretary of State. Generally, articles of incorporation must include your organization name, registered agent, address, duration, and asset distribution statements.
Prepare Bylaws and Policies
Bylaws and conflict of interest policy are important criteria to qualify for tax-exempt status. The purpose of having specified bylaws is to guide the operation of the organization, while a conflict of interest policy is there to ensure that decisions are made with the benefits of the nonprofit in mind, and not to serve individual members.
Hold Your First Meeting of the Board of Directors
The first meeting of the board of directors is important, not just to establish a solid vision and direction for the organization, but also because the minutes and other documents created during that meeting will come into great use in the future.
Get an EIN
An EIN, also known as an employer identification number, is needed for a nonprofit corporation just as it is for a limited liability company. The process of obtaining an EIN is very easy and can be completed on the IRS website in no time, free of charge.
Open a Bank Account
Another important step is obtaining a business bank account for your newly established corporation. You will need a copy of your corporation charter, company bylaws, and your nonprofit’s Employer Identification Number for this.
You should also always ensure that you call in with your bank ahead of time to see if they have other requirements, seeing as the required documents and information vary from bank to bank.
Obtain Necessary Permits and Licenses
The state of Tennessee requires that your nonprofit LLC obtains a business license, depending on the kind of activities you intend to carry out.
The county where your business is located also matters, and you may need to check in with the county officers for their requirements too.
File Annual Report
To remain in good standing with the state, a nonprofit corporation must file an annual report with the state, before the first day of the 4th month of the following fiscal year.
You are also required to pay a $20 filing fee. Annual reports can be filed easily online or by mail.
Apply For Federal Tax-Exempt Status According to 501(c)(3) laws
IRS form 1023 is the official application for tax exemption under section 501(c)(3) of the IRS code. The form is quite long and detailed and requires a lot of information that will help the IRS decide whether or not you qualify for tax-exempt status.
There is also, however, a shorter version of the form for smaller corporations with annual gross receipts that is less than $50,000.
Apply For State Tax-Exempt Status
As mentioned earlier not all states offer tax exemption for nonprofit LLCs. Luckily, though, the state of Tennessee is one of the few that do. All you have to do is file an application with the Department of Revenue, and you automatically qualify.
Consult the Tennessee Sales and Use Tax Guide for more information.
Starting a Nonprofit in Tennessee FAQ
How Much Does it Cost to Start a Nonprofit LLC in Tennessee?
The state of Tennessee charges $100 for filing a nonprofit corporation charter. You will also have to pay a service fee of 2.35% for those who file online and pay with credit/debit cards.
As mentioned earlier, you’re also required to pay a fee of $20 for your annual report filing.
How Long Does it Take to Start a Nonprofit LLC in Tennessee?
This depends on which filing method you choose to go with. Generally, you can either choose to mail in, file your articles online, or deliver them in person. Printing and mailing takes about 5 days to complete, while online filing is much faster and can be completed in no more than 2 business days.
The fastest method, though, is filing in person. This can be completed in a matter of hours on the same day.
Do I Need a Registered Agent for a Nonprofit LLC in Tennessee?
Yes, as mentioned earlier, you do need a registered agent for your nonprofit just as you need one for a regular limited liability company. Going with a company that offers registered agent service is a great choice to consider, as it alleviates the burden of constant checking, and ensures a high level of efficiency and professionalism in handling the task that you may not get with friends.