Limited Liability Companies are formed by filing a document, usually called “articles of organization”, with the Secretary of State in the jurisdiction where the LLC will do business. As a rule, the new LLC will come into existence on the date on which the Articles of Organization Filing was filed or approved by the state authorities.
It is not uncommon for business owners to wonder if it is possible to form an LLC for their business retroactively or to delay the formation to a certain point in the future.
The short answer is that you cannot form an LLC in the past (with one exception), however, it is often possible to delay the formation of your LLC into the future – the exact rules will depend on the state you are forming your LLC in.
In this article, we will explain everything you need to know about:
- What an LLC effective date is and how you can delay it
- If it is possible to form an LLC retroactively
- Why you might want to consider delaying the formation of your LLC
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Can I form my LLC retroactively by back-dating my LLC filing?
As mentioned above, it is generally not possible to back-date your LLC filings and thus form an LLC retroactively.
Your only options are to file your Articles of Organization without a delayed effective date, in which case your LLC will come into existence when the filing is filed or approved, or to select an effective date – your LLC will come into existence on that date.
There is, however, one exception to this rule: If you are forming your LLC in Florida, you may back-date your LLC filing and form your LLC in the past.
According to §605.0207 of the Florida Business Statutes, “a prior effective date may be specified in the articles of organization if such date is within 5 business days before the date of filing.”
Note that this rule applies only to Florida – in all other states, your LLC’s effective date will be at some point in the future.
This general principle applies even if you have already been running an active business as a sole proprietor, and have chosen to form a new LLC to run your business through. Your LLC will come into effect at some point in the future, rather than the date when you first started doing business as a sole proprietor.
What is an LLC’s effective date?
Up until now, we’ve used the term “effective date” quite a few times, and you might be wondering about its exact meaning.
The effective date of a Limited Liability Company is the date when the LLC begins to exist as a separate legal entity. Before the effective date, your LLC is nothing but an idea. Once the effective date arrives, your LLC will be able to sign contracts, have a separate bank account, hire employees, and generally conduct business.
It is important to know your LLC’s effective date as this is also the date on which you, as an LLC member, gain the LLC’s limited liability protections. From that point forward, you will not be personally liable for the debts of your LLC, provided you have properly separated your personal assets from those of your business.
This is an important point for those entrepreneurs, who have already been running an active business through a sole proprietorship, as they do not enjoy the same limited liability protections until they shift their business to their new LLC.
Unless you have selected a delayed effective date when filing your Articles of Organization, your LLC’s effective date/start date will usually be either the date when you filed your documents or the date when the document is approved by the Secretary of State.
How can I delay my LLC’s effective date?
For a variety of reasons, you may want your LLC to come into existence at a later point in time, rather than the date of filing your LLC formation documents. In most states, you will have the right to do so.
Choosing a delayed effective date is generally as simple as specifying an effective date when drafting your LLC formation documents. Before choosing a date, you should consult the relevant statutes of your state to ensure that your effective date is not too far into the future, as most states limit how far in advance you can file your documents.
For example, according to California Corp Code § 17702.05, you are allowed to set a delayed effective date that is no later than 90 days after filing your California Articles of Organization.
The exact number of days you can select for your effective date varies between 15 days and unlimited, depending on the specific state. In the majority of states, this number is 90 days. Some states don’t allow delayed effective dates at all.
What is the benefit of choosing a delayed effective date?
You are probably wondering about what benefit one might gain from delaying the formation of an LLC.
It is a fairly popular choice among entrepreneurs to select January 1st as the delayed effective date for their LLC. By starting your LLC in the new year, you can sometimes simplify your tax filing, bookkeeping, and administrative workload.
Since the tax year starts on January 1st, forming your LLC on that date means that you won’t have to file a tax return until the next year. If you were to file your documents just a few weeks earlier without a delayed effective date, you may need to file a separate tax return soon after forming your LLC, particularly if your LLC is taxed as a corporation.
Selecting a delayed effective date can also save you a bit of money in administrative costs. Most states require LLCs to file certain documents, such as annual reports, every year. You will have to pay a fee when you file these documents. The exact due date for annual reports depends on the state, with some having a fixed date and some using the LLCs formation date.
For example, according to the Florida Revised Limited Liability Company Act, your first annual report is due “between January 1 and May 1 of the year following the calendar year in which the limited liability company’s articles of organization became effective”.
If you delay your filing to January 1st, your first annual report would not be due for another year, thus saving you the filing fee for the first year – $138.75 at the time of writing.
Delayed effective date rules by state
If you want to know if your state allows you to set a delayed effective date and how far in the future you can set it, take a look at the below table.
|Alabama||90||Hawaii||0||Massachusetts||90||New Mexico||90||South Dakota||90|
|Delaware||180||Louisiana||0||Nevada||0||Pennsylvania||No Limit||West Virginia||90|
|Florida||90||Maine||90||New Hampshire||90||Rhode Island||90||Wisconsin||90|
|Georgia||90||Maryland||0||New Jersey||No Limit||South Carolina||90||Wyoming||90|