A limited liability company (LLC for short) is a way to legally structure a business. It combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Any business owner who seeks to limit his or her personal liability for business debts and lawsuits should consider forming an LLC.

Here are the steps you need to take to form an LLC in Vermont. For more information on how to form an LLC in any state, see Nolo's article How to Form an LLC.

1. Choose a Name for Your LLC

Under Vermont law, an LLC name must contain the words "Limited Liability Company" or "Limited Company," or the abbreviations "LLC," "LC," "L.L.C.," or "L.C." The word "Limited" may be abbreviated as "Ltd." and the word "Company" may be abbreviated as "Co."

Your LLC's name must be distinguishable from the names of other business entities already on file with the Vermont Secretary of State. Names may be checked for availability at the Vermont Secretary of State business name database.

You may reserve a name for 120 days by filing an Application to Reserve a Specified Business Name with the Vermont Secretary of State. The application may be filed online or by postal mail. To file by postal mail with a traditional paper check, you must complete the online filing process and select this option at the end as a method of payment.

2. Appoint a Registered Agent

Every Vermont LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC's behalf if it is sued. The registered agent may be a Vermont resident, or a corporation or LLC registered do business in Vermont. The registered agent must have a physical street address in Vermont.

3. File Articles of Organization

A Vermont LLC is created by filing Articles of Organization with the Vermont Secretary of State. The filing fee is $125. The articles must include:

• the LLC's name
• the type of LLC--regular LLC, professional LLC, or low-profit LLC
• the LLC's fiscal year end month (usually December)
• the LLC's purpose
• the LLC's street and mailing address
• the name, address, and email of the LLC's registered agent
• whether the LLC has members at the time of filing
• whether the LLC will be member-managed or manager-managed
• the names and addresses of the principal members or managers
• the name and address of the LLC's the organizer, and
• the signature of organizer.

The articles can be filed online or by postal mail. To file by postal mail, you must complete the online filing process and select this option. Online registration is the preferred method and the turnaround time for creating your LLC is quicker. If you create your LLC online, you must provide an email address for your business to which you have regular access.

4. Prepare an Operating Agreement

An LLC operating agreement is not required in Vermont, but is highly advisable. This is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed. It can also help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates. An operating agreement does not need to be filed with the Articles of Organization.

5. Obtain an EIN

If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website. There is no filing fee.

6. File Vermont Annual Reports

All Vermont LLCs and Foreign LLCs authorized to do business in the state must file an annual report with the Vermont Secretary of State Corporations Division. The report is due within three months of the end of the LLC's fiscal year--for example, if your fiscal year matches the calendar year (ends in December), your annual report is due any time between January 1 and March 31. The report may be filed online or by postal mail. To file by postal mail, you must complete the online filing process and select this option. The filing fee is $35 for a Vermont LLC and $140 for a foreign LLC.